Wow! December. With Christmas lights festooning the neighborhood, we are reminded that 2020 is almost history!
2021 is a mere 25 days hence. What can we expect of the commercial real estate landscape next year? Someone famous once opined, “Well, they’re only predictions, but they’re all mine.”
So, please bear with me as I get my Nostradamus on.
Bullish industrial owners. We represent an importer. Warehoused are goods they distribute. He’s slammed for space, thus our engagement to find more. Recently our full-priced offer was met with a reluctance — by the property owner — to grant a financing contingency. I’ve seen this with investment properties but never with owner-occupied real estate. You see, time is needed for a lender to nod yay or nay. Very few occupants have idle cash sitting in an account awaiting a purchase.
Shorter leases. Until the aroma of economic uncertainly ceases to waft, expect occupants to seek commitments of fewer years than before. Ten-year leases will become five and so on.
Clarity in the office market. I suspect by this time next year the runway will be clear and office occupants will have a direction — up or down. As previously mentioned, uncertainty is a killer for any business trying to gauge a need for space. But, as we are seeing in retail storefronts with their downward trajectory, at least we can plan.
Low interest rates. The Biden administration will most likely be gridlocked by a Republican Senate. With the House near balanced, a Democrat in the White House and a red Senate, expect the Federal Reserve to keep interest rates low. Our 10-year treasuries – a bellwether for commercial real estate loans – are expected to wallow at historic bottoms as well.
Burgeoning e-commerce. If the Buchanan household is any indication, Internet ordering and “just in time shipments” to your door will continue with a vengeance. Recently, we bought a new mattress online. The next day, two beefy gentlemen ushered it into our master suite.
By the way, will someone kindly develop a box compactor for home use? Something between the kitchen trash masher and the ones in Albertson’s storeroom would be awesome. There’s your million-dollar business idea for 2021! You’re welcome.
Continued safety protocols. As the pandemic blossomed in March, predicted were temperature checkpoints, masks, hand washing stations and distancing. Actually, it was not terribly futuristic. Observed was what other countries were employing. I am startled by how quickly we adapted, however. Akin to airline changes post 9/11, we can’t simply attend a concert, eat in a restaurant or shop without a face covering. Shocking. Although, expect more in 2021.
An innovative technological offering? Commercial real estate is rarely disrupted by something shiny and new. CoStar – in the mid-1990s was probably the last big thing. With CoStar’s acquisition of Ten-X this year, we could see a more robust platform from which to transact.
At the site’s disposal now is available inventory, what’s recently sold and an auction template. Hmmm. Where do brokers fit in? But, look no further than our residential counterparts to get a glimpse. Matterport tours, consumer-facing available inventory and accurate Internet loan processing lessen the need for “buy-side” representatives.
Scant industrial vacancy. I see nothing on our immediate horizon that would cause industrial availability to rise. The drivers of increased square footage could be new construction. Nope. Not enough vacant land in the OC to stem demand. Plus, it takes an eternity to get a new development entitled.
Business failures – probably not. We’ve just endured the greatest health crises in 100 years and many industries thrived.
Exodus out of state. Maybe. We’ve definitely seen some movement. However, our local businesses are largely private. They’re your neighbors with a rich history and deep-rooted residency in SoCal.
A financial meltdown. Yeah. That could do it. 2009 again. I certainly hope not.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.
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