With the many "For Sale" and "For Lease" signs adorning commercial buildings in all parts of Carson City, it's not news that the market for these properties has lost steam.
The question is, when will it turn around?
"I would like to think we have hit the bottom," said Bruce Robertson of Sperry Van Ness, who has been working in commercial real estate in the area for 14 years. "I don't know if there is going to be a wave of foreclosures in commercial real estate, but if it does, it will probably happen in the next six months. Hopefully we are near or at the bottom."
Andie Wilson with Coldwell Banker Commercial is afraid that a flood of commercial foreclosures might be just around the corner.
"There is the looming problem on the horizon with financing," Wilson said. "When you buy an investment property, you typically have a five- or seven-year call. Those are all coming due, and you can't get financing."
"It's like a tsunami, like the subprime loans," said Brian Wallace of Nevada State Development Corporation.
John Uhart, a commercial real estate broker with 30 years experience in Northern Nevada, said this is the slowest market he's ever seen.
"I think that with (the properties) we have available, this is probably going to take us a good four or five years to absorb what we have," Uhart said.
But he is more optimistic when it comes to commercial foreclosures.
"We might see some of that," Uhart said. "But I would hope that the lenders, whose portfolios have so many repossessed properties, would work with the people who are a little slow in paying or whatever, adjust interest rates or term, so we don't have more defaults. That's what we are hoping for."
When it comes to the retail side of the commercial market, Robertson said recovery will depend on how residential real estate rebounds.
"Retail follows rooftops, it always does," Robertson said. "If there aren't new houses being built, big retailers will hold off on new development. If you look at Dayton, there are a number of retail developments out there that are on hold right now, along with the 9,000 homes that are approved for development. You have to have the population to drive retail."
On the positive side, Robertson said the exit of Gottschalks and Mervyn's - because of corporate bankruptcies and not their profitability in this market - opens up opportunities for another clothing retailer to move in.
"The number of businesses that sell clothing here is not a lot," Robertson said, noting that there are four vacant buildings where clothing stores used to exist. "I would think ... we could get a couple of them filled up pretty quickly, just because of the retailers seeing the opportunity."
Another opportunity is for existing businesses to negotiate better lease rates with landlords.
"We are going to see the commercial values coming down a little bit, and it's a tenant's market right now, not landlord driven," Uhart said. "Tenants are pretty much writing their own deals, renegotiations, rent reductions, incentives, tenant improvements."
"It is definitely time to buy, and go shopping for space to lease," Wilson added. "It is a good time, if your lease is coming due, to renegotiate for your current space. There are some great opportunities out there."
While business is slow, Robertson said his firm closed a sale of a 15,000 square foot industrial property last week, and that he has four or five lease deals in the works. And the problems in neighboring California are causing Robertson's phone to ring.
"What I think is encouraging is that when California has financial problems, their industrial base starts looking for different options," Robertson said. "If they can go somewhere and get taxed less, and be in the California market without being in California, this is a great place to be. We are halfway between Seattle and San Diego. Geographically, we are in the perfect location."
But Wilson said the problems with California real estate price declines create barriers to relocation.
"They can't make the move," Wilson said. "If you are a large manufacturer with 200 employees and you want to move here from California because we have a more friendly business climate, you can't sell your home, you can't sell your industrial property. And you have 200 employees who can't move because they can't sell their homes."
But Uhart said the attraction of this region will win out in the end.
"We live in a great area in Northern Nevada, and I'm very optimistic that it will come back," Uhart said. "It may not come back to where it was, but it will come back. Where we are right now didn't happen overnight. It will take time."