The amount of commercial property available for lease in Bend and Redmond shrank again in 2015, leaving landlords and property owners wanting to sell with the upper hand, according to the quarterly survey by Compass Commercial Real Estate Services.

The outlook for this year is more of the same, according to Howard Friedman, a principal broker and partner with the firm. He expects new commercial building projects to come slowly online in Bend but lease rates to continue tracking higher, he wrote in an analysis accompanying the survey. Redmond may be slow to add new space for lease, but Prineville and Redmond will continue to attract cost-conscious tenants, he wrote.

For the two years that ended in December, building owners continually leased more industrial space than tenants vacated, according to Compass Points, the quarterly survey.

The vacancy rate for industrial property in Bend dropped to 5.9 percent at the end of 2015, down from 6.3 percent in the third quarter. About 250,000 square feet is available to lease, according to the survey of 304 buildings. That rate peaked at 20 percent in third quarter 2010.

Conversely, lease rates for all commercial property are climbing as space becomes harder to find, according to Friedman.

“Lease rates during the recession, which can dictate property values, plunged by 40 percent or more,” he wrote. “Today, those rates have recovered and in some sectors even surpassed the highs of the mid-2000s prosperity.”

Rates of 55 to 65 cents per square foot are the norm for industrial space in Bend, with some buildings leasing for as much as 85 cents to $1 per square foot, he wrote. Office space, with a 6.8 percent vacancy rate, in Bend leases for between $1.20 and $1.50 per square foot, with some new projects leasing for $2.25 per square foot. Friedman wrote he expects lease rates for retail space, with a 5.2 percent vacancy rate citywide at the end of 2015, to surpass $2 per square foot.

Friedman said in an interview Thursday tenants expect higher lease rates in an area where vacant space is drying up and the economy is expanding.

“It definitely presents a challenge for tenants and buyers seeing values go up,” he said. Nonetheless, “we’re very busy with new lease tenants absorbing space and sales values going up with buyers in 1031 exchanges.” A 1031 exchange allows an owner to sell a property, reinvest the proceeds in a new property and defer taxes on capital gains from the original property sale.

In the industrial market, Compass Commercial surveyed a total of 4.2 million square feet. In 2015, tenants leased nearly 95,000 square feet of previously vacant space, according to Compass Points. In 2014, tenants leased more than 170,000 square feet.

In Redmond, tenants occupied another 87,650 square feet in 2015, leaving 5.4 percent of industrial space vacant, according to Compass Points.

Office tenants leased 86,345 square feet in Bend during 2015, leaving 168,000 square feet available out of 2.48 million total at the end of year. The west side of Bend recorded the lowest office vacancy rate, 4 percent, and the U.S. Route 97-Third Street corridor saw the highest, 10.3 percent.

Retail tenants in Bend leased 64,273 square feet in 2015, leaving about 225,000 square feet available of a total 4.5 million square feet. The central area of the U.S. Route 97-Third Street corridor saw the lowest retail vacancy in the fourth quarter, 2.4 percent, followed by downtown Bend, at 3.1 percent.

— Reporter: 541-617-7815, jditzler@bendbulletin.com