My Commercial Real Estate Holiday Wish List
With Thanksgiving a recent memory, Chanukah in full swing, and Christmas fewer than 30 days away – it’s time for some holiday spirit! Sure. Costco has had holiday decorations since October 1 – but I digress. Countless kiddos around the globe – including our five grandkids – are assembling their lists. I thought it would be fun to pencil my 5 hopes for the 2022 commercial real estate market, AKA my shopping list for this year. So, with no further ado, here goes.
A more balanced market.Industrial real estate – buildings where folks make, store, and ship things, has been on a tear for the past six years. Currently, fewer than one in every one hundred structures are without an occupant! With demand outstripping supply, lack of new construction, a shift in the way consumers shop, and a hyper appetite for stuff – we find ourselves with an acute imbalance. Pricing for offerings has skyrocketed as a result and many wonder if rents are sustainable. So next year, I’m wishing for a bit more sanity.
Disappearing office uncertainty. I’ve often opined, transactions occur when activity is waxing or waning. But uncertainty is a killer for a business reliant upon movement. Our office market has witnessed some big office deals – the sale of the former OC Register site and purchase of the campus previously occupied by Bank of America in Brea – by Amazon alike. But, a repurpose is in store for both. Gone are the former suites housing executives to middle management to clerical staffs. Replaced by worker sedans are countless blue delivery vans. Pandemic pressures shifted the office paradigm as companies countered with “hybrid” approaches – smaller footprints, virtual workplaces, less collaborative layouts. Wishing here for some long term leases on big blocks of offices.
Solving the port issue. Talk about a perfect storm! Akin to an anaconda consuming a Thanksgiving meal or six – the bulge of e-commerce containers is slowly moving through. Many much more informed than I have waxed about the causes. Simply, all points of the supply chain are crimped – causing massive delays, shortages, and escalating price tags. Certainly, some reduction in regulation would help. A bit more warehouse space could counter. Asking America to pause its purchasing for a period? I’m wishing for a stable flow by July 4th.
Continued low interest rates.Rising interest rates might be the best for us – like ripping off a bandaid. But, wow! How incredibly painful for an economy reliant upon cheap money. Our ten year treasuries – the benchmark for commercial real estate lending – has hovered in the low 1% range for a few years. Great for borrowers, but awful for savers. As our population ages and more of us are on fixed incomes – a bump in returns would be welcome. However, don’t forget that $1.2 trillion bag of goodies that must be repaid. Rising rates would make the payback more costly. All in all, my wish is for more of the same.
A more diverse industry.Commercial real estate brokerage has historically been male dominated. However, two fall conferences we attended, evidenced change. I was thrilled to see over 40% women and minorities at the Commercial Real Estate Influencers Summit and Society of Industrial and Office Realtors Global event. My wish is for the face of commercial real estate to reflect our world.
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.