Is Bend’s commercial real estate market on the mend?

A pair of recent office building purchases has some local real estate officials saying the market is continuing on a path to recovery, after real estate here began its tumble in late 2008.

But, with about 20 percent of Bend’s commercial buildings still sitting vacant, the market has a long way to go, others say. Still, the level of interest that brokers say they are seeing is an encouraging departure from the past several years.

The building at 301 N.E. Franklin Ave. in Bend sat empty for six years, following the arrival and departure of several restaurants there, including Mexicali Rose, Healy’s and, most recently, Bella Cucina, which left in 2006.

That changed in mid-February,when Compass Commercial Real Estate sold the 3,600-square-foot building for $569,420.

“We’re very happy to see that building sell,” said Howard Friedman, a principal broker with Compass and the agent who closed the deal.

Documents filed with the Oregon Secretary of State Business Registry list the buyer’s identity as JHEM LLC. The company’s address is listed as 2698 N.E. Courtney Drive, Suite 100, which is the location of Central Oregon Audiology and Hearing Aid Clinic in Bend. A message left Tuesday with the company’s manager, Jeanette Van Kessel, was not immediately returned.

Old Mill sale

Compass sold another big commercial property in March. That building, the 4,420-square-foot former Wells Fargo building, at 807 S.W. Industrial Way near the Old Mill District, was bought by Sunshine Retirement Living, a California-based senior retirement living provider whose corporate office is in Bend. Sunshine purchased the building for $774,200, according to Compass.

Sunshine corporate secretary Jim Matthews said the company would move its Bend office from its current 550 N.W. Franklin Ave. building into the Industrial Way property in the coming months.

The two sales add $1.34 million to Compass’ commercial sales portfolio. They also offer some hopeful signs that buyers are once more looking into property acquisition, and that building sale prices could rise, said Pat Kesgard, a principal broker with Compass Commercial, who sold the Wells Fargo building to the senior living provider company.

Commercial real estate companies list prices for their properties in terms of the cost per square foot. Buildings that Compass had sold in the past several years were priced in the range of $100 to $115 per square foot, Kesgard said.

But the Wells Fargo building sold for $175 per square foot.

“This tops the market,” Kesgard said. A property selling for $60 to $70 per square foot higher than the market had been dictating could mean “we’re looking at a significant change in the marketplace,” he said.

Still, he was reluctant to say the market is on strong footing. With Bend’s commercial vacancy rate having been in the 20 to 22 percent range for more than three years, Kesgard said, interest from potential buyers needs to translate to closed sales on a more regular basis before the market is truly back on solid ground.

“When we get down to 7 or 8 percent, that’s a very healthy vacancy rate,” he said.

Compass Commercial is notthe only real estate company in Bend seeing an uptick in activity.

At The Wicklund Group, principal broker Scott Wicklund has seen a renewed interest in leasing, especially in the downtown area. He leased the building space at 1051 N.W. Bond Street, formerly occupied by Decoy Bar and Grill, to Brother Jon’s Alehouse earlier this year, and he said he has seen several other businesses showing interest in relocating to the area.

“It started last fall, and in the first three months of this year there’s been very strong activity for lease space downtown,” Wicklund said.

Still, a sizable gap remains between the amount of interest and discussion held between real estate agents and prospective buyers and lessees, and the sales and lease transactions that are being finalized.

But the fact that conversations are being had at all gives Kesgard and Wicklund hope. It’s a far cry from 2009 and 2010, when vacancy soared and more tenants were worried about making current payments than looking to move their workplaces or expand their businesses.

“The activity level has picked up,” Wicklund said. “That’s encouraging.”