Dear Readers,

Will the recent turmoil and shutdown of several oranges county mortgage originators cause a glut of office space and slow the appreciation of commercial rental rates?

Since rents are driven by demand, if demand cools the rental rate appreciation will slow. For many firms this will be welcomed as they will be better able to grow. This will offset some of the inventory increases caused by the company closures.

It may also make the commercial space market more sustainable. In recent years it has taken on some traits of an unsustainable market so a moderate slow down should not be viewed as a negative.

However, this market bears close watching. If demand for office space drops suddenly or precipitously then employment may due so as well.  And if  employment falls, then the forecast for both the residential and commercial marks will darken considerably.

Presently, as reported in the Financial Express Stuart Shiff, founder of Divco West, a San Francisco-based real estate firm says ``There is no sign of an end of capital flows into real estate, and they know how to use financial tools to squeeze the margin out of deals.’‘

Thus, while the effect of the widespread company closures bear watching, there is nothing to suggest that this will snowball.