2022 Commercial Real Estate Predictions
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I know, I know. You’re weary of yet another prediction column. By the time you read this, we are well into January, I’ve celebrated another sun orbit, and the Super Bowl has been moved to Texas – now there is a prediction! But I digress. I’m a bit leary to prognosticate as my crystal ball was quite clear last year. But I’ll hop out there and make a few.
Industrial rents. They’ll increase. Next bullet point. However, I’ve a few more words, so stay with me. We track Class A inventory for an upcoming assignment. What’s that, you may ask? We describe Class A inventory as buildings constructed since 2000. In this way we are able to weed out functionally obsolete structures that may exist in the market. In Orange County, there are eight new developments proposed or under construction totaling over 2,700,000. A staggering number until you factor in what’s available today. Ummm. That would be one. That’s correct! One available. Demand is still strong so nowhere for rents to go but up.
Developer appetite. With industrial rents increasing, interest rates still low – that will change this year – plentiful capital seeking a place to reside, and an acute shortage of land from which to produce concrete caverns – a conundrum continues. An industrial development at your neighborhood Sear’s store? A campus built for industries who’ve left the area? All will be targets this year.
The office. No, not the series – the market. Recently, I read this with interest in these pages – “A new report from Ladders, a career site for high-paying jobs, says things will likely stay that way. In fact, Ladders predicts that 25% of all professional jobs that pay $80,000 or more will be remote by the end of 2022.” Wow! My suspicion is it will be greater than that. Anecdotally, take our office as an example. We own a 21,700 square foot, two story location. We occupy the upstairs and a portion of the down for about 13,000 square feet. When locked and loaded – 49-52 folks commuted in each day. Now? Probably half regularly attend. My team works remotely as do others. Adjusting to this change will be smaller footprints and more multi-use spaces.
Retail slowdown? We all know that, big fella. How’s that prescient? Actually, what slowed during our two year pandemic fueled sabbatical were trips to the store. Retail sales actually increased as we bought tons of stuff from our home keyboards. But, one of our clients, corporately based in NYC, is a tremendous gauge on the brick and mortar retail business. By that I mean, destinations such as Wal-Mart, Costco, Burlington, and the like. He’s sensed a REAL dip and predicts more to come. So we’ll see.
Stagflation. What on Earth is that? According to Wikipedia -“In economics, stagflationor recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.” Hmmm. Inflation rates, high – check. Economic growth slowing – check. Unemployment high – check. By the way, you may be thinking – I thought unemployment was low, currently. Actually, the percent of the workforce NOT working is high. The statistics reported are only those who’ve filed claims – quite misleading.
So, there they are – my 2022 predictions. Stay tuned this time next year to see how I did.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at firstname.lastname@example.org or 714.564.7104. His website is allencbuchanan.blogspot.com.