Random Commercial Real Estate Thoughts
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As someone famous once opined - they’re only opinions, but they’re all mine! Today, I embark on the first “random thoughts” column of the year. It’s been awhile and clearing your inbox is cathartic - so here goes!
Forecast for 2022. Annually, our chapter of the Society of Industrial and Office Realtors convenes for a backward and forward look at commercial real estate happenings. Last night was the first meet-up since February 2020. Yeah, the pandemic crimped face-to-face gatherings, but I digress. It was great to see the gang. But, what must have seemed like a good idea when planning the event - eating outdoors - morphed into a bunch of shivering brokers huddled around too few heaters. Outdoor event in February? What a good idea. Yeah. A bit of a weather gamble. Reviewed were the office and industrial markets for Orange County and the Inland Empire. Below are the highlights.
Industrial - OC. Robust activity, lease and sale price increases in the 30% range, little to no available inventory. Expect to see older office buildings purchased and razed for new industrial developments - think former OC Register campus, B of A data center, 2929 Imperial in Brea, etc. More of this to come in 2022.
Office - OC. The office market remains mired in uncertainty as big employers are fearful of a return to the office. However, studies have indicated productivity wanes with a remote work force. Therefore, CEOs are attempting to balance safety and productivity. Expect to see hybrid models prevail - flexible hours and days when an office is fully staffed. Brokering during this uncertainty is a challenge.
Office - Inland Empire.Inland vacancies are lower than the OC. OC has 13 spaces of 100 vacant whereas Inland has 10. We saw a mass exodus of population from the coastal areas to inland areas during the last two years. Why pay the exorbitant coastal prices if you don’t need to commute to an office? When all the uncertainty settles - predicted is more corporate headquarters located Inland. After all, employers follow the people. Especially if you’ve a workforce reluctant to commute.
Industrial - Inland.Mic drop! Ecom, 3PLs, storing and shipping the massive on-line ordering volume that boomers have adopted. The industrial activity Inland is off the charts! Insiders believe we’re headed for $500 per square foot industrial buildings and rents of $2.00 in the IE. Just last year they were $125 and $.65. Those that can’t pay the higher pricing will be forced east, chased out of state, or out of business.
Ukraine. Interestingly, there was little to no conversation of the Russian invasion. It could be the recaps were prepared prior or it could be everyone is taking a wait and see. Regardless, we should experience increased energy prices - especially oil and gas. Aside from larger spikes at the pump, petroleum products fuel - sorry - all manner of raw materials that make stuff. This iPad’s plastic case, that foam in your pillow, and the soles of your shoes - yep. All made from petroleum products. So. A further shortage of said raw materials could really hit us in the wallet. Not to mention. Natural gas is used to generate electricity. You get the idea.
So, there you go. More space than you knew existed.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at email@example.com or 714.564.7104. His website is allencbuchanan.blogspot.com.