Commercial real estate market remains flat, area real estate agents say

While other sectors of the economy are showing signs of recovery, commercial real estate sales are still lagging behind.

Spending on commercial real estate saw its seventh straight quarter of decline in the first quarter of 2010, according to the U.S. Commerce Department. It dropped 14 percent from the previous quarter.

Local commercial real estate agents aren't seeing this decline and instead say their market has been flat over the past two years.

"It's almost become unfashionable to be out looking at any kind of real estate," said Tom Kelsey, broker & president of Lorimont Place Ltd. "There's been a lack of people in the marketplace, but that's changing."

Property leasing is becoming more popular as many would-be buyers just aren't willing to take the risk and make that purchase.

"There's been many people that would normally have bought but are leasing instead right now with plans to later buy or build," Kelsey said.

Tom Meyer of Thomas L. Meyer Commercial Realty said he's also been handling several lease-purchase agreements. Some businesses are negotiating all-inclusive lease payments that incorporate utility and maintenance fees.

"They want a flat figure they can budget and not worry about the ups and downs," Meyer said.

Filling Cape Girardeau's empty retail spaces like the former Plaza Galleria, Barnes & Noble, Goody's and downtown storefronts continues to be a challenge.

"Retailers were probably hit the hardest in this recession," Kelsey said.

West Park Mall lost three national chain tenants earlier this year, including the Pasta House Co., EB Games and Pac Sun. The Pasta House Co. relocated outside the mall to 2406 William St, but the other two stores closed permanently.

Their two spaces at the mall were re-leased to locally owned businesses, said Susan Godorov, vice president of marketing with Centro Properties Group, which manages the mall.

"As the national chains are shutting down stores, we're looking to more regional operators and nontraditional mall users to fill those spaces," Godorov said.

The company in still looking for a tenant for the former Pasta House location as well as the former Steve and Barry's anchor spot.

According to Kelsey and Meyer, Cape Girardeau is fortunate that it remains a conservative community and doesn't see the boom-and-bust cycles that occur in other areas.

"We don't have the huge amount of vacancies that some areas have, like Florida, or what they have on the East and West coasts," Kelsey said.

As consumer spending struggles to recover, it's not an ideal climate for retail expansions.

"We do have a good draw from around the area on our retail businesses, but at some point you become maxed out for your population," said Bob Hahn, vice president of development at MidAmerica Hotels Corp., which owns several commercial sites.

Consumer spending rose only 3.6 percent in the first quarter, according to the U.S. Commerce Department. But the increase was the third straight quarterly gain, indicating a slow recovery is in progress.

For many offices and manufacturers, putting off moving to new locations for the past few years has created pent-up demand, Kelsey said.

"We're working with some clients that need to grow and have to move forward because it's affecting their business," he said.

Meyer, whose company has been in business since 1946, predicts it will be another two to three years before the commercial real estate market recovers here.

"We see these trends every 10 to 12 years, but this has been a different animal than we've experienced in the past," Meyer said.

The Associated Press contributed to this report.

mmiller@semissourian.com

388-3646

Pertinent addresses:

3049 William St., Cape Girardeau, MO

276 S. Mount Auburn Road, Cape Girardeau MO

105 S. Mount Auburn Road, Cape Girardeau MO