Population growth and return of Canadian shoppers aiding this Bellingham real estate sector

Rising interest rates are not only slowing down home sales in Bellingham, but they are also impacting commercial properties as well.

Broker Ryan Martin, co-owner of Pacific Continental Realty in Bellingham, said in a new report that people who invest in commercial real estate took a wait-and-see approach last spring for the first time in years.

“The result was a dead stop on commercial investment real estate sales,” said Martin in a news release accompanying the data. “Time will tell if sellers are willing to reduce their valuations or eager investors are willing to experience lower returns. Most likely we will continue to see sellers and buyers of commercial real estate sit on the sidelines and wait for stability before making adjustments.”

In a follow-up telephone interview, Martin said that while investors are on the sidelines, other aspects of local commercial real estate are fairly stable. Vacancy rates for retail, office and industrial properties remain low, while the asking prices for rent have not significantly changed. He added that while many investors have stopped buying property, the rise in interest rates hasn’t slowed down plans for companies buying buildings to expand or move.

According to the report, the retail vacancy rate was 3.6% in the second quarter, up slightly from 3.5% in the previous quarter. The asking lease rate per square foot was $17.59 at the end of June, down from $18.30 at the end of March. The asking price per square foot is also 10% lower than it was during the first quarter of 2021.

Martin said the change in the retail space asking price can bounce around quarter-to-quarter because it’s a small sample size compared to metro areas like Seattle. Overall he’s optimistic the retail sector will remain fairly stable.

“We continue to have strong population growth and the return of Canadians shopping here will help,” Martin said, adding that national retailers continue to look at this market.

When it comes to office space, demand remains fairly strong even as companies continue to adjust to work-from-home options brought on by the COVID-19 pandemic. The office vacancy rate in Bellingham was 3.6% in the second quarter, down from 3.8% a year earlier but slightly higher than the previous quarter.

The industrial space vacancy rate in Bellingham rose to a still-tight 1.4% in the second quarter. One factor in the vacancy rise is the decision by Janicki Industries to make around 90,000 square feet of the property available as the company grows into the 251,000-square-foot former Safran building on Woburn Street that it bought in January.