Speakers at the 2024 Fresno County Real Estate Forecast included, from left, Robin Kane, Sullivan Grosz, Annie Forman and Tyrone Roderick Williams. Photo by Gabriel Dillard

Across all sectors, Fresno County real estate has been marked by rising costs (insurance, particularly), a difficult lending environment and low inventory.  

The near-term forecast predicts much of the same, though there are reasons to be optimistic since Fresno continues to act as an island against some of the worst national trends, particularly in the office market.

That was the gist from the 2024 Real Estate Forecast, hosted Thursday by the Fresno County Economic Development Corp. Fresno Mayor Jerry Dyer helped open the festivities, highlighting the sector’s importance to the local economy. 

Property taxes represent about 36% of revenue for the city, Dyer said. Sales tax is about 22% – a figure that is expected to dip.

“We need our real estate market in a bad way,” Dyer said.

A new addition to the forecast this year was affordable housing.

“In our eyes affordable housing is workforce housing,” said Will Oliver, president and CEO of the Fresno County Economic Development Corp., hosting the event for the 19th year.

Here’s the good, the bad and the ugly from this year’s real estate forecast.

The Good

Retail

The U.S. retail vacancy rate is 4.6%. Fresno is 4.8%, with vacancies filling fast, said Rachel Orlando with Retail California. And vacancies are there, she said, noting box closures including Rite Aid and 99 Cents Only Stores as well as restaurant spaces such as TGI Fridays.

New retail space is also coming online. One example cited by Orlando was the Loma Vista Marketplace in Clovis. At 130,000 square feet of retail, 40,000 square feet of office and multi-family, it is one of the largest mixed use projects under construction in Fresno County. It is about 70% pre-leased.

The top three headwinds retail developers are facing today include the high cost of construction, delays and interest rates. The top challenges facing tenants are finding quality employees, the rising cost of doing business and shaky consumer confidence.

Industrial

Nick Audino with Newmark Pearson Commercial is bullish on Fresno as an industrial/warehouse market. This is the place site selectors want to be, but with less than 3% vacancy, lack of new construction and growing opposition to e-commerce centers, market velocity has trended downward since the beginning of Q3 2023.

Vacancy is expected to increase slightly as existing space returns to the market, but will remain low compared to the national average. 

Affordable housing

In a first for the Real Estate Forecast, affordable housing was included as a topic of discussion. Tyrone Roderick Williams, CEO of Fresno Housing, highlighted recent projects developed by the organizaion, such as the 57-unit Monarch in Chinatown, which received 3,000 applications.

As opposed to the common view that affordable housing hurts neighborhoods, Williams pointed to the modern finishes of the Monarch as proof to the contrary.

“When we show up, we increase your values,” Williams said.

The biggest need, Williams said, is funding, which makes it easier to compete for federal tax credits that make affordable housing — costing no more than 30% of household income — viable.

Asked about what value-added looks like in the affordable housing world, Williams pointed out that properties remain affordable for 55 years. He said Fresno Housing has been successful in expanding its base of landlords who accept housing assistance vouchers — guaranteed income for them, he added.

Residential

Annie Forman with Guarantee Real Estate shared that she doesn’t forecast a residential foreclosure crisis, noting that 95% of homeowners possess 20% equity or more in their homes today. 

She sees a 2024 similar to last year, with a continuing lack of housing inventory available.

In opening remarks, Fresno Mayor Jerry Dyer shared some facts about the local housing market. He said about 11,000 housing units have been built in Fresno, meeting only about 26% of demand.

 

The Bad

Office

While office rents have mostly stagnated in the Central Valley for the past year, the local market has been mostly immune to the doom and gloom being experienced in urban office markets, said Tony Cortopassi with Cushman & Wakefield.

The current vacancy rate in the area is around 7%

“Steady, slow progress of where we have already been,” Cortopassi said.

Investments

Brett Visintainer, principal of the Visintainer Group in Fresno, shared some of the ways the investment market for commercial property has changed in the current interest rate environment. Investors have little appetite for financing, electing for cash deals. The result is 50% less volume in the last year and instead of deals upwards of $6 million per property, it’s closer to $3.5 million cash.

Capitalization rates — the annual rate of return on a property compared to its price — are trending higher, Visintainer said, reflecting a higher amount of risk for investors.

Multifamily

2023 wasn’t as bad as we thought, and 2024 isn’t going to be as good as we think.

Robin Kane with Northmarq noted drastic increases in rent in the last few years, which he said reflected the increased costs of maintaining mutli-family buildings.

California’s insurance markets have been particularly treacherous, with those seeking coverage having to really shop around to get the lowest prices. For apartment owners, liabilities include galvanized plumbing, roofing and even a certain kind of electrical breaker that has been deemed unsafe.

From homeowners to casualty insurance, representatives of most of the sectors noted increased costs associated with coverage.

Williams, CEO of Fresno Housing, said the affordable housing developer had to go to none other than Lloyds of London for some of their projects.

The Ugly

Agriculture

Low commodity prices, tighter lending and increased scrutiny of underground water supplies due to the Sustainable Groundwater Management Act have commingled to depress farmland values, said Sullivan Grosz with Pearson Realty.

For “low risk” areas with more than one source of irrigation water, prices have dipped 10-15% in the last year. For “high-risk” areas, such as those with a single irrigation option, prices are down 25-30%.

“There’s going to be fewer Escalades purchased by farmers this year,” joked Grosz.

But underscoring the position the ag industry is in, he forecast more bankruptcies and forced land sales to come.