With Thanksgiving a recent memory, Hanukkah in full swing and Christmas less than 30 days away…it’s time for the holiday spirit!
Countless children around the world – including our five grandchildren – are putting together their lists. So I thought it would be fun to write down my five hopes for the commercial real estate market in 2022 – that is, my gift list for the year ahead.
So, without further ado, here you go.
A more balanced market. Industrial real estate — buildings where people make, store and ship things — has been booming for six years. Currently, less than 1 structure out of 100 is without an occupant!
With demand exceeding supply, a lack of new construction, changes in the way consumers shop and a hyper-appetite for things, we are seeing an acute imbalance. As a result, bid prices have skyrocketed and many people wonder if rents are sustainable.
So I would like a little more common sense.
Disappearance of office uncertainty. IAs I have often said, transactions occur when activity increases or decreases. But uncertainty is a killer for a business that depends on movement.
The market has witnessed big desktop deals by Amazon – such as purchase of the former site of the Orange County Register printing plant 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 office paradigm. Companies have responded with “hybrid” approaches requiring smaller footprints, virtual workplaces and less collaborative layouts.
Wishing here some long term leases on large office blocks.
Fixed port issue. Talk about a perfect anaconda-like storm consuming a Thanksgiving meal or six: The bulge of e-commerce containers moving slowly through the supply chain.
A lot of people much more knowledgeable than me have waxed off on the causes. Simply, all points in the supply chain are crimped, leading to massive delays, shortages, and price increases. Certainly, some reduction in regulation would be helpful. A little more storage space might also help. Asking America to suspend purchases for a while?
I want a stable flow of goods by July 4th.
Interest rates still low. Rising interest rates might be the best thing for us – like ripping off a bandage. But, wow! It’s incredibly painful for an economy that depends on cheap money.
Our 10-year treasury bill rate – the benchmark for commercial real estate loans – has been hovering in the low 1% range for the past few years. Great for borrowers, but terrible for savers. As our population ages and more of us are on fixed incomes, an increase in returns would be welcome. However, don’t forget about that $1.2 trillion bag of stimulus gifts that needs to be paid back. Rising rates would make repayment more expensive.
All in all, 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 highlighted changes.
I was thrilled to see over 40% women and minorities at the Commercial Real Estate Influencer Summit and Society of Industrial and Office Realtors Global Event.
My wish is that the face of commercial real estate reflect our world.
Allen C. Buchanan, SIOR, is a principal at Lee & Associates Commercial Real Estate Services in Orange. He can be reached at [email protected] or 714.564.7104.