We remain in the midst of a leasing environment that can clearly be labeled as a tenants market. While we have seen more activity in the past year, good quality tenants looking for space knock on landlords’ doors infrequently.

The construction industry has been in a free fall for the past three years. We are all growing weary of cost-cutting and low to non-existent margins. And many subcontractors, vendors and general contractors are simply going out of business. We seem to spend a lot of time looking over our shoulders, wondering what next round of bad news will overtake us. 

However, there is another option. Every industry has a clear business cycle. An economist that I hold in high regard is Brian Beaulieu. Based on his work at the Institute for Trend Research (ITR), Beaulieu suggests that there are four phases to a business cycle – recovery, growth, prosperity and recession. Each phase has corresponding actionable items that CEOs should execute to best react to economic conditions. By reviewing leading indicators, Beaulieu can determine which phase various segments of the construction industry are in. 

Since 1948, Beaulieu’s company has been looking at national and international data to create its forecasts. Over the past few years, his projections have been 95 percent accurate. This sort of accuracy is generally not feasible from local economists. It takes a world view, collecting a massive amount of data and connecting seemingly unrelated bits of information to make predictions with such high accuracy.

Understanding the fact that local economic indicators are important in the short-run, national and global indicators have an inescapable impact on all economies – big and small.

The non-residential construction industry in the United States is in the late recovery stage. Beaulieu is projecting that commercial building construction will increase 5.4 percent in 2012. Office building construction will increase 4.6 percent. Residential building is in the early growth phase and will increase 1.5 percent. 

Although this growth is good news, it is important to remember that the construction industry is only a fraction of the size it was at its peak. It will be a long, slow slog before it regains prior levels of health and prosperity.

In order to prepare your business while in the late recovery/early growth stages, Beaulieu recommends executives focus on company culture, making sure that behaviors reflect that positive culture. Business leaders should go about making change now in order to increase efficiencies and leverage strengths. There are areas where management can begin the process of change. A few of the basics include:

• Establish goals and accountability measurements

• Review and uncover competitive advantages

• Implement training programs

• Recruit and hire top people

• Focus business development efforts around core competencies and competitive advantages

• Watch ROI and identify high- and low-profitability transactions

• Maintain and pursue quality

It’s no secret that construction is a tough business. Not sharing information is the order of the day. Often it seems contractors behave like a bunch of circling sharks in an indoor tank, all thinking they are in the lead, about to pass up the guy in front of them.

I know from personal experience that following Beaulieu’s recommendations while “swimming with the sharks” is very hard work. But it has been and continues to be vital to the success of my company. 

The good news is that Beaulieu is coming back to Vancouver on Friday, March 2nd. The details of the event are being finalized, but it will be an opportunity for the Vancouver business community to hear from a guy that is the “rock star” of economists. 

Early in my career, an industry mentor told me “Contractors don’t go broke from lack of work; contractors go broke from excessive optimism.”  Being a glass-half-full sort of guy is great, but you must acknowledge the reality of your situation and take action, not just wish it were different.  

My wife often says I am the Billy Graham of small business. I love our community and the great businesses that are here. I am committed to helping business owners be more successful, so they can build their personal wealth. I know that Brian Beaulieu’s presentation will be a great contributor to those efforts. 

Ron Frederiksen is president of RSV Building Solutions. He can be reached at (360) 693-8830 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

National retail sales have been improving throughout 2011, and sales in Clark County are in step with this trend. With improving sales comes a better environment for owners and investors in retail shopping centers and properties in Clark County. At the end of the third quarter of 2011, the retail vacancy rate in the county stood at 8.20 percent – the lowest rate since the first quarter of 2009, according to NAI Norris, Beggs and Simpson’s reports. The vacancy rate was 8.20 percent during the first quarter, as well, but the closure of Borders Books at Mill Plain Plaza pushed vacancy up in the second quarter.

One market segment that has seen some activity in the past year is grocery stores, since grocery sales have grown during the recession as people dined out less and cooked in more. With little new construction in the previous several years, Chuck’s Produce opened in late 2010 on Mill Plain and the first New Seasons Market north of the Columbia River opened in November. And all three Target stores in the county were remodeled to create expanded grocery sections. The county also has seen the opening of a second Costco store on 192nd Avenue and adjacent retail shop space which is experiencing good leasing activity.

The recession has created strain on retail property owners for the past two years. As retailers’ sales declined, stores closed, pushing vacancy up and creating greater competition for tenants. New business startups have dramatically declined because aspiring store owners have not had access to home equity, the historic source of business funds. Landlords have grown weary of current tenants asking for reduced rents or “blend and extend” lease revisions. But landlords have been motivated to keep current tenants, so providing the tenant could substantiate their claims of lower sales, many landlords reluctantly revised rents to lower levels. If the landlord wants to retain the tenant badly enough, the rent reduction may come with an extended lease term in an effort to secure a quality tenant for a longer period. Tenants benefit from this arrangement by locking in lower lease rates
and assuring themselves of the right to remain at their store location longer.

Lower lease rates have allowed tenants to take advantage of the current leasing market by relocating to retail properties they could not previously afford, and sometimes even expanding. Lease rates have been pushed down in a dramatic way since the beginning of the recession. A CoStar report shows that the average retail lease rate in mid-2008 was just under $23.00 per square foot per year. Today, the average is 20 percent lower at $18.42. The lease rate has finally started to stabilize and actually increased very slightly at mid-year. If retail sales figures continue to improve, even slightly, consumer confidence will lead to more spending and a stronger retail market.

Landlords who feel they have bled enough during the past three years are ready to see higher rates. Though it is still a tenant’s market for the time being, with new construction bringing less than 50,000 square feet of retail space to the market this year, landlords could soon find the pendulum swinging in their direction. Tenants who have been considering relocations or expansion would be well advised to consider making moves by the middle
of 2012.

The economy should continue its gradual expansion in 2012, with the highest likelihood of a healthy retail market occurring again in 2013 or 2014. Retail developers are anxious to see improvement and have projects in their pipelines which will wait until the right time. As vacant retail space is absorbed, retail lease rates will again push upward, creating a profitable development environment.

Pam Lindloff is an Associate Vice President in NAI Norris, Beggs & Simpson’s Vancouver office. She specializes in retail leasing and sales, and can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .