"Everyone's waiting for the bubble to burst," says Kunisch, assistant VP and director of Commercial Industrial Sales for First American Title Insurance Co. "Everyone's kind of moving forward, but not with the optimism and vigor we had in the past couple of years."
Still, things have looked like business as usual so far this year. First American has already closed a number of large development deals of office and industrial product that will be built out this year.
"The deals are a lot fewer and bigger, $500,000 to $150-million transactions. The work involved is more intensive, and the time span from open to close is a lot longer. We open an escrow and open title, and then it's anywhere from three months to three years trying to get it closed. It's a long process," he says.
Most importantly, the income derived from commercial transactions is not as attractive as residential deals, especially now with the Federal Reserve's lowering of interest rates earlier this month, causing a flurry of refinances in the residential sector. In all, the commercial side of the business accounts for roughly 10% of First American's total income, Kunisch says.
His sources are also telling him that confidence in the local office market this year is waning. The Irvine Company, which has built a lot of office product in the past, is staying away from it right now, choosing to concentrate on the concrete tilt-up R&D buildings it has been building and the multifamily market, where it has found much recent success. Also, the financial side of the business is becoming more selective, especially as to what office projects they will fund.
"The office market may not be as strong and may be more vulnerable than industrial, R&D and flex product. It's too chancy right now to build office product," he says.
On the retail side of the business, Kunisch remains confident in the product type, which has experienced a very strong market in Orange County for the past 10 years. In fact his office has one salesperson who is dedicated to working with cities and their redevelopment agencies looking for potential retail projects.
As for the future of the market, Kunisch says he is keeping an eye on Alan Greenspan and the national economy. However, there doesn't seem to be much of an economic downturn in the local market yet, he says
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