Happy New Year! If you are reading this, 2021 is now a footnote, the Amazon boxes are broken down and awaiting delayed pickup, and many of your decisions have already been broken. Wow, that did not take long!
I took a look back at my predictions for 2021. My column was published after Thanksgiving and before Christmas 2020. About 13 months ago. So how did I do that? Spoiler alarm. I was a crazy Nostradamus!
From December 2020: What can we expect from the commercial property next year? A famous once thought – “well, they are only predictions, but they are all mine.” So carry on with me while I get my Nostradamus on.
Bullish industrial owners
We represent an importer. In stock are goods they distribute. He has slammed for space – hence our commitment to finding more. Recently, our offer at full price was met with a reluctance on the part of the owner to provide a financing contingency. I have seen this with investment real estate, but never with owner-occupied housing.
You see, time is needed for a lender to nod yay or no. Very few residents have available cash sitting in an account awaiting a purchase. Today we did it! The same resident is still on the market. Prices have risen 50% in 2021!
Shorter leases. Until the aroma of financial uncertainty ceases to hover, expect residents to seek commitments in fewer years than before. Ten-year leases turn into five and so on. Today. This is certainly the case for office suites. Expect more of this in 2022.
Clarity in the office market
I suspect that at this point next year, the runway will be clear and the office residents will have a direction – up or down. As mentioned earlier, insecurity is a killer for any business trying to measure a need for space. But as we see in retail stores with their downward trajectory, we can at least plan.
This year, the office landscape has seen itself. In the middle of the year, when the state reopened completely, it was derailed by the delta variant. And now that omicron is sweeping the caseload, it’s everyone’s guessing when companies will return to the office.
Low interest rates
The Biden administration will most likely be hit by a Republican Senate. With Parliament almost in balance, a Democrat in the White House and a Red Senate, the Federal Reserve expects to keep interest rates low. Our 10-year government bonds – a bell for loans to commercial real estate agents – are also expected to tumble into historic lows.
So what about today? Exactly! Even if those storm clouds are massaging? Yes Mr. There are higher rates on the horizon.
If the Buchanan household is any indication, internet ordering and “just in time shipments” to your door will continue in revenge. We recently purchased a new mattress online. The next day, two meaty gentlemen led it into our master suite upstairs.
Would anyone be so kind as to develop a box compressor for home use? Anything between the kitchen trash can and those in Albertson’s storage room would be great. There’s your million-dollar business idea for 2021! You’re welcome.
Today? Boom times!
Continued security protocols
When the pandemic blossomed in March, temperature control points, masks, wash stations and distancing were predicted. In fact, it was not terribly futuristic. What was observed was what other countries employed. However, I am amazed at how quickly we adapted. Similar to airline changes after 9/11, we can not just attend a concert, eat at a restaurant or shop without face cover. Shocking. Expect more in 2021.
Today: A new mask mandate, proof of vaxxing, 2020 redux? Maybe.
An innovative technological offer?
Commercial properties are rarely disturbed 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 were able to see a more robust platform to trade from. Available on the site are now available inventory, what has been sold recently, and an auction template. Hmmm, so where do brokers fit in?
Look no further than our housing counterparts for an insight. Matterport tours, available inventory to consumers and accurate processing of internet loans reduce the need for “buy side” representatives.
Today: Well, I missed this one. Unless, of course, it’s popping up in 2022. Tick please?
Get an industrial vacancy
I see nothing in our immediate horizon that would cause industrial availability to increase.
The driving force behind increased square meters may be new construction. Nix! There is not enough vacant land in OC to curb demand. In addition, it takes an eternity to get a new development justified. Business error? Probably not. We have just endured the biggest health crises in 100 years and many industries thrived.
Emigration out of the state? Maybe. We have definitely seen some movements. However, our local businesses are largely private. They are your neighbors with a rich history and deeply rooted stay in SoCal.
A financial meltdown? Yes. It could do that. 2009 again. I certainly do not hope so.
Today? Again, it reached! Honestly, something catastrophic is needed to get us back to a normal vacancy of 5%. Between you and me – I prefer the meager vacancy!
Allen C. Buchanan, SIOR, is the principal at Lee & Associates Commercial Real Estate Services in Orange. He can be contacted at email@example.com or 714.564.7104.