What’s in store for commercial real estate in 2021? – Orange County Register
Impressive! December. With Christmas lights in the neighborhood, we’re reminded that 2020 is almost history!
2021 are only 25 days left. What can we expect from the commercial real estate landscape next year? Someone who was once famous said, “Well, it’s just predictions, but they’re all mine.”
So please take it with me when I put my nostradamus on.
Bullish industrial owners. We represent an importer. Warehouses are goods that they sell. He was looking for space, hence our commitment to find more. Recently, our full price offer met with reluctance on the part of the owner to provide a financing option. I’ve seen this with investment property, but never with condominiums. You see, it takes time for a lender to nod yes or no. Very few inmates have cash in an account waiting to be purchased.
Shorter leases. Expect residents to make commitments fewer years than before until the economic aroma no longer fades. Ten-year leases become five, and so on.
Clarity in the office market. I suspect that by then next year the runway will be clear and office users will have one direction – up or down. As mentioned earlier, uncertainty is a killer for any business trying to estimate space requirements. But as we see in retail stores with their downtrend, we can at least plan.
Low interest rates. The Biden government will most likely be blocked by a Republican Senate. With the House close to equilibrium, a White House Democrat and a Red Senate expect the Federal Reserve to keep interest rates low. Our 10-year government bonds – a pioneer in commercial real estate lending – are also expected to wallow at historic lows.
Burgeoning e-commerce. When the Buchanan household is on the move, internet ordering and just-in-time deliveries to your door will continue with a vengeance. We recently bought a new mattress online. The next day two beefy gentlemen took it to our master suite.
By the way, will someone kindly develop a box compressor for home use? Something between the kitchen trash rammer and the one in Albertson’s storage room would be fantastic. There is your million dollar business idea for 2021! You’re welcome.
Continuation of the security protocols. As the pandemic bloomed in March, temperature checkpoints, masks, hand-washing stations and distancing were all predicted. Actually, it wasn’t particularly futuristic. What other countries were concerned with was observed. I’m surprised how quickly we have adapted. Similar to airline changes after 9/11, we can’t just go to a concert, dine in a restaurant or shop without having a face covering. Shocking. However, expect more in 2021.
An innovative technological offer? Commercial properties are rarely disrupted by something shiny and new. CoStar – The mid-1990s was probably the last big deal. With CoStar’s acquisition of Ten-X earlier this year, we saw a more robust platform for transactions.
Inventory, recently sold products, and an auction template are now available. Hmmm. Where do brokers fit in? But look no further than our roommates to take a look. Matterport tours, available inventory for consumers, and accurate internet credit processing reduce the need for buyers’ representatives.
Little industrial blank. I don’t see anything on our immediate horizon that would lead to an increase in industrial availability. The drivers for a larger area could be new buildings. No Not enough empty land in the OK to contain demand. In addition, it takes ages before a new development is justified.
Business failures – probably not. We have just experienced the biggest health crisis in 100 years and many industries have succeeded.
Exodus from the state. Could be. We definitely saw movement. However, our local businesses are largely private. They are your neighbors with a rich history and ingrained residency in SoCal.
A financial collapse. Yes. That could do it. 2009 again. I certainly hope not.
Allen C. Buchanan, SIOR, is a Principal at Lee & Associates Commercial Real Estate Services, Orange. He can be reached at [email protected] or 714.564.7104.