Every now and then we drift slightly away from housing and take a peek at commercial real estate. Retail not only “follows rooftops”, but often tells us a lot about the potential for the housing market.
This morning L sent me an article from the Arizona Republic about profits at Salt River Project. (SRP) SRP provides most of the power in the Phoenix area, and their profits were down 6.3% from last year. This was almost entirely a result of a drop in usage by commercial customers. SRP also reported this surprising statistic: (Thanks L!)
During the last two years of the recession, SRP has seen a significant increase in “inactive” commercial customers – those that are still paying bills but using very little energy.
Most of those customers represent vacant storefronts and offices where the landlord is maintaining the premise only with emergency lights and an alarm.
Nearly one in four business customers in SRP territory fell into that category last year, Bonsall said, and that doesn’t include properties that are vacant and shut off from power.
“We all see that driving around the Valley,” he said. “There are a lot of premises just not being used.”
This level of vacancy can be attributed to two factors. One was massive overbuilding of commercial real estate. When residential cooled off, building switched to commercial which was still considered “hot”. The other is that consumers have cut back, forcing businesses to cut back or shutter their doors.
What does this tell us about housing? A poor employment picture means a poor prospect for housing. The claim is that the recession is over in Arizona. Don’t believe it.