How Commercial Real Estate Fared in 2014

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National economic indicators related directly to commercial real estate point to a strengthening market this year. However, markets can vary greatly based on even slight changes in geographic location. Here is a look at how Western Nevada County fared in 2014, which will hopefully shed some light on the outlook for 2015. The following information is based on analysis of approximately 6.9 million total square feet of office, industrial and retail space in Grass Valley, Nevada City and surrounding unincorporated areas. Below is a summary of how commercial real estate fared in 2014.



After years of generally increasing office vacancy stretching back to the start of the Great Recession, Western Nevada County finally had some positive office absorption in 2014. However, the office market still remains the softest of the three product types and further upcoming consolidation of one of our largest private employers looms. The largest contributors to office absorption have been the government and non-profit sectors. Although the recession technically ended over 5 years ago, significant job growth remained elusive for Nevada County’s private sector in 2014.

The industrial market has seen slightly increasing vacancy over 2014. This is not necessarily surprising in light of California EDD figures showing a 10% loss in manufacturing jobs in Nevada County from 2013 to 2014. However, if our level of recent property inquiries is any indication, 2015 should see a positive reversal of this trend.

The retail market remains the strongest of all commercial product types, with Class A retail locations/buildings in huge demand. Nevada County is now on the radar of national & regional retailers, but prime retail spots are extremely hard to come by due to topography and existing zoning limitations. This will likely lead to more infill redevelopment projects where older retail buildings are razed and immediately replaced by new construction (ex. Dollar General). On the other hand, online shopping continues to grow thereby increasing competition for “brick and mortar” retailers. Class B & C retail locations will need to offer very competitive rental rates in order to maintain tenancy.

xxOffice Vacancy

Industrial Vacancy

Retail Vacancy

Start of 2014




End of 2014





The following figures represent median gross “asking” rents for the various product types.

Office Lease Rates

Industrial Lease Rates

Retail Lease Rates

Start of 2014


$  .58


End of 2014


$  .59




Commercial property sale transactions declined by approximately 20% year-over-year from 2013 to 2014.However, with Bay Area tech employment booming and commercial and residential real estate prices continuing to skyrocket in that area,we expect this growth to ripple and spread into more reasonably priced outlying regions such as Sacramento, which will in turn have a positive effect on tertiary areas like Nevada County. The following chart represents median prices per square foot for “closed” property sale transactions.

Office Sale Prices/SF

Industrial Sale Prices/SF

Retail Sale Prices/SF



$  90




$  89



Moving forward, I expect 2015 to be the most active commercial real estate market in Nevada County since the start of the Great Recession (barring any macro-economic calamities). We are now starting to see developers renew permits for projects stalled during the recession. Commercial banks remain flush with money to lend at extremely attractive rates. And with the inflation outlook projected to be moderate for the next 1-2 years, it is a very good time to consider investing in commercial real estate.

 Lock specializes in acquisitions, dispositions and leasing of commercial and investment properties. He has over 25 years of experience in the field, including over 15 years in the Grass Valley/Nevada City area. His “Commercial Property Review” newsletter,  full of current Nevada County market trends and specific property details related to industrial, office and retail properties, is available at or by calling Lock at 530-470-1740.


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