An issue with CRE is liquidity. There are a fair number of CRE listings out there below $3 million, but they are mostly very overpriced. As in, more than 50% overpriced compared to breakeven on an 80% mortgage despite being developed.
Typically broker fees are also higher than residential. And many pay broker fees again to get them rented.
One sign of there being too much CRE inventory is that at least on the greater peninsula area, PPSF rents are a lot higher for residential than commercial. You will regularly see commercial for $1 to $1.5sf, good luck finding a house or apartment that rents that low. Likewise, CRE vacancy is much higher. Getting the old Cabrillo hospital rented, vacant for a decade, involved in being converted to student HOUSING.
How many empty offices and stores can you find on Midway, Sports Arena Blvd, Rosecrans, Morena? Likely more than 10%, going up to 25% in some buildings. By contrast market-priced apartments go off the market in less than a week and overall vacancy is very low. I cannot think of a single house in all of OB that has been visibly empty outside of active renovations, but lots of CREs have been empty forever.
