My Vacation Wish List for Commercial Real Estate – Orange County Register
With Thanksgiving as a recent memory, Hanukkah is in full swing and Christmas is less than 30 days away… it’s time for the holiday spirit!
Countless kids around the world, including our five grandchildren, are making their lists. So I thought it would be fun to draw my five hopes for the commercial real estate market in 2022, that is, my list of gifts for this coming year.
So, without further ado, there you go.
A more balanced market. Industrial real estate – buildings where people make, store and ship things – has been in tatters for six years. Currently, less than one structure in 100 is without occupant!
With demand exceeding supply, a lack of new construction, changes in the way consumers shop and an over-appetite for things, we are seeing an acute imbalance. As a result, bid prices have skyrocketed and many people are wondering if the rents are sustainable.
So I wish a little more reason.
No more uncertainty in the office. IAs we have often said, transactions occur when activity increases or decreases. But the uncertainty is a killing for a business that depends on movement.
The market has seen a few large desktop transactions by Amazon, such as the purchase of the former Orange County Register printing plant site in Santa Ana and the Bank of America campus in Brea. But, reuse is in store for both. The old suites housing executives, middle managers and office workers will be gone, replaced by countless blue delivery vans.
Pandemic pressures have changed the paradigm of the office. Companies have responded with “hybrid” approaches requiring smaller footprints, virtual workplaces, and less collaborative layouts.
Wishing here long term leases on large office blocks.
Solved the port problem. Talk about a perfect storm that looks like an anaconda eating a Thanksgiving meal or six: the explosion of e-commerce containers slowly moving through the supply chain.
A lot of people who are much more informed than me have shaved their hair on the causes. Simply, all points in the supply chain are crimped, resulting in massive delays, shortages and rising prices. Certainly, some reduction in regulation would help. A little more warehouse space might also help. Ask America to suspend its purchases for a period?
I want a stable flow of goods by July 4th.
Still low interest rates. Rising interest rates might be the best for us, like ripping off a bandage. But, wow! How incredibly painful for an economy that depends on cheap money.
Our 10-year Treasury bill rate – the benchmark for commercial real estate loans – has hovered in the low range of 1% for a few years. Great for borrowers, but terrible for savers. As our population ages and more of us have fixed incomes, an increase in yields would be welcome. However, don’t forget that $ 1.2 trillion bag of stimulus giveaways that must be paid back. Rising rates would make repayment more expensive.
Overall my wish is for more of the same.
A more diverse industry. Commercial real estate brokerage has always been dominated by men. However, two fall conferences we attended witnessed a 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 that the face of commercial real estate reflects our world.
Allen C. Buchanan, SIOR, is Principal at Lee & Associates Commercial Real Estate Services at Orange. He can be reached at [email protected] or 714.564.7104.