2025 Predictions

Happy new year dear readers and welcome to 2025! Yes.  It’s that time of year when I get to prognosticate on what this year might bring in the world of commercial real estate. I have a high bar to reach since my 2024 crystal ball was in fact, crystal. 
 
So what might 2025 bring? Let’s get our Nostradamus on, shall we?
 
The State of the Market
As we step into 2025, it’s clear that the ripples of 2024’s market conditions are still making waves. The industrial sector remains a mixed bag—demand for large logistics spaces has softened compared to its pandemic-era peak, but there’s still steady activity in the smaller spaces under 200,000 square feet. Many owners entered this year holding their breath as vacancy rates ticked up in certain submarkets.
 
Interest rates, the ever-present elephant in the room, continue to dampen transaction activity. The cost of financing has sidelined some buyers and made leasing a more attractive option for others. Meanwhile, sellers are navigating the gap between the prices they want and the reality of what the market will bear.
 
Prediction #1: The Return of Creativity
Necessity is the mother of invention, and in 2025, we’ll see more creativity in deal structures. Sale-leasebacks, options to buy, seller financing, and joint ventures will gain prominence as market participants find ways to make deals pencil. Sellers who resist adjusting to the current pricing environment will need to meet buyers halfway through innovative terms.
 
For tenants, expect landlords to sweeten the pot. More free rent, tenant improvement allowances, and flexible lease terms will be offered as owners vie for occupancy in a more tenant-favorable environment.
 
Prediction #2: Resilient Submarkets
While some industrial hubs will see softer demand, others will shine. In 2025, we’ll see heightened activity in submarkets that offer strategic advantages—whether it’s proximity to major ports, affordable labor, or access to large consumer bases. The Inland Empire in California and areas in the Midwest and Southeast will likely see continued attention from both owners and occupants. 
 
What’s interesting is the “flight to quality” within these markets. Class A properties with modern amenities, ample parking, and high clear heights will see increased demand because the price gap has narrowed between older, less functional spaces. 
 
Prediction #3: The Rise of Reshoring
Last year, we started to see the effects of reshoring—companies bringing manufacturing and distribution closer to home. In 2025, this trend will accelerate as the new administration takes office - especially in the industrial sector. Proximity to end users, reduced reliance on overseas suppliers, and geopolitical stability are driving this shift.
 
What does this mean for commercial real estate? 
Secondary and tertiary markets will shine as companies seek affordable land and labor. Don’t be surprised if you hear about booming activity in places you’ve never associated with industrial growth before.
 
Prediction #4: AI Steps Into the Spotlight
Artificial intelligence will play a bigger role in commercial real estate in 2025. From automating lease management and analyzing market trends to predicting tenant behavior, AI tools are becoming indispensable. Brokers, landlords, and investors who embrace AI will gain an edge in efficiency and decision-making.
 
One area poised for disruption is site selection. AI-driven platforms will help occupants analyze logistics networks, labor availability, and even local energy costs to identify the best locations. On the transactional side, expect faster due diligence as AI speeds up property evaluations, financial modeling, and risk assessments. Those who adapt quickly will find themselves ahead of the curve.
 
Prediction #5: Caution, Not Panic
If 2024 taught us anything, it’s that this market rewards patience. In 2025, investors will remain cautious but opportunistic. Those with cash will find opportunities to acquire properties at more reasonable valuations. Expect a slow-but-steady transactional pace as everyone waits for interest rates to stabilize and inflation to ease.
 
Occupants, meanwhile, will be strategic, leveraging market conditions to secure favorable terms while keeping a close eye on operating costs. Gone are the days of hasty decisions; this year, it’s all about deliberate, informed choices.
 
Looking Ahead
If I’ve learned anything from years in this business, it’s that predicting the future is equal parts art and science. The trends we see now—creativity in deals, resilient submarkets, reshoring, the rise of AI, and cautious optimism—are the best indicators of what’s to come.
 
So, dear readers, here’s to a year filled with resilience, adaptability, and maybe even a few surprises. Let’s revisit these predictions in 12 months to see just how clear my crystal ball was this time.
 
Cheers to a prosperous 2025!
 
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. His website is allencbuchanan.blogspot.com.
 
 

A Review of My 2024 Predictions

Seasons greetings dear readers as we eye Christmas in the rear view mirror, and Kwanzaa and Hanukkah as they’re  proceeding! It’s truly the season of giving and from all of ours to all of yours - best wishes!
 
Two of my favorite columns to write each year occur during this time - my previous year scorecard and my predictions for the year to come. Last year, I wrote my 2024 prognostications on the heels of an Alabama football defeat - which as a native Arkansan - warmed my heart. We’ll have to wait much longer this year as the NCAA football champ will be crowned in a few weeks. But I digress. On to how I did in 2024. 
 
In 2024, I wrote: Industrial lease rates will soften. This time last year, a client of ours was facing an expiring lease. We tried to find a suitable alternative to move his operation. Nothing was ideal. We advised him to stay put, negotiate a short term fix - 6-12 months and continue our search. His owner would only agree to six months so we had a new deadline - June of 2023. We nearly struck pay dirt in March but jettisoned the opportunity due to its size - just not quite big enough. Once again, we approached his owner asking for some more time. He agreed to extend through December. Our gamble paid off as we secured a suitable building at a 15% discount! Why, you may wonder? Simple economics. We tracked new avails and ones leaving the market and noticed an imbalance. Yep. More was coming than going. We knew someone would drop their rate to secure a great tenant. Expect more of the same this year - especially with Class-A buildings above 100,000 square feet. At last count in the OC - eleven were open for business and seeking a resident. Two left the market last year. Hmmm. Someone will get motivated and make a deal, comps will reset to the new level and the frenzy will begin.  BOOM! Nostradamus take note. In the IE where big boxes prevail, a precipitous increase in concessions has occurred - free rent, tenant improvements, beneficial occupancy, etc. Rates have dropped another 15%. Expect more of this as we absorb the remaining spaces. 
 
In 2024, I wrote: Expect sales volume to increase. The forces outlined in the paragraph above will trickle into the sales world. By that, I mean  an owner awaiting a tenant may choose to sell. A further catalyst could be the underlying debt on the asset. Imagine you’ve originated a short term construction loan to build a class A structure. You considered construction costs, time to build and lease. Your calculus was based upon conditions in early 2022. You’ve delivered a new building into an entirely different market - longer vacancy and lower rates. Your lender might be getting a bit nervous. When will the maturing debt be repaid?Thus pressure to dispose of the new build. YES! Selling in the beginning of 2024 was a pipe dream - no one was a seller. Now, sales are happening at a higher clip. 
 
In 2024, I wrote: Recession or no? I say no. Last year I took a contrarian approach and predicted we would avoid a recession in 2023. Recall, recession is a decline in gross national product for at least two quarters. I believed in the resiliency of the United States economy, especially the consumer, and we skated by a recession in 2023. As I write these predictions today, the only storm clouds I see on our horizon, are global uncertainty in the Middle East. Specifically, will the Red Sea shipping lane disruption cause inflationary pressures on goods delivered? If this proves to be the case, the federal reserve may be persuaded to delay cuts in interest rates, which are predicted for this year. However, I’m reminded of our status in January 2020. We were rocking along when a microscopic foe sent us to our spare bedrooms. Therefore, beware of the Black Swan event. WOW! Three for three. In fairness, I did walk this back a bit in my mid year adjustments, but alas, we avoided a recession and stuck the landing. J Powell in da house. But will he be there next year?
 
In 2024, I wrote: Interest rates. Last year, for the first time in a couple of decades, you could actually make money on idle cash. We saw a peak in Treasuries occur last year when the 10 year T-note eclipsed 5%. The rate this morning is slightly above 3.8%. This is good news for borrowers, bad news for savers and could cause an uptick in institutional buying activity. These behemoth money managers are constantly seeking return and might view commercial real estate as a safe haven to earn some additional juice. I believe the 10 year notes will level at around 4 to 4.25% percent this year. MIC DROP! OK. We’re a bit above the 4.25% level but significantly below the 5% we eclipsed this time last year. Plus the yield curve has flattened so that short term rates are below long term rates - a good thing for lenders. 
 
So? I’ll give myself a 3.5 out of 4. Not bad for a rookie. Stay tuned for next week when I’ll see what’s in store for 2025. 
 
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. His website is allencbuchanan.blogspot.com.

Common Lease Terms

We are embroiled in a lease negotiation currently. Discussions can vary depending upon the size of the building being leased, the complexity of the terms, and the sophistication of the parties.
 
Sometimes known as the “second negotiation,” the process can be mind-numbing. What is the first negotiation, you may be wondering? Typically, it’s the agreement upon business points such as the amount of rent that the tenant will pay, how the rent will escalate throughout the lease, abated rent, the length of commitment, and the condition in which the premises will be when the lease commences and expires. As brokers, we do this first negotiation work.
 
These business points are generally debated, and an agreement is forged. From there, a non-binding letter of intent forms the basis from which a binding lease document is crafted. And let the games—or in this case, the second negotiation—begin!
 
You’ll witness both sides lawyer up and “turns” will be swapped. Normally, the landlord will submit a draft document to the tenant and tenant’s counsel. The first turn occurs when the lawyer representing the tenant presents her proposed edits, changes, and language insertions to the draft. The turns continue until one side says uncle or until the parties agree upon a satisfactory compromise. 
 
As commercial real estate professionals, we sit by idly as the fate of our carefully authored business deal gets scrutinized.
 
So what are some of the most common sticking points for counsel to volley?
 
1. Operating Expenses (CAM Charges)
One of the most contentious areas of negotiation is who pays for what when it comes to common area maintenance (CAM). Tenants want predictability and often request a cap on controllable expenses or exclusions for certain costs, like capital improvements or management fees. Landlords, however, prefer flexibility, leaving expenses broadly defined to ensure full cost recovery.
 
2. Repairs and Maintenance
The question of who repairs the roof, maintains the HVAC system, or resurfaces the parking lot can lead to significant back-and-forth. Tenants naturally prefer landlords to shoulder the burden of major repairs, while landlords aim to push as much responsibility as possible onto the tenant. In multi-tenant buildings, this can be especially complex.
 
3. Tenant Improvements (TIs)
When tenant improvements come into play, the scope of work, completion deadlines, and cost overruns are often debated. Additionally, tenants and landlords may spar over whether improvements become the landlord’s property upon lease expiration or if the tenant has the right to remove them.
 
4. Assignment and Subletting
Businesses evolve, and tenants often seek the ability to assign their lease or sublet the space if needed. Landlords, however, want assurance that the financial strength and operational nature of any new occupant won’t negatively impact the property. Negotiations can revolve around the conditions under which these transfers are permitted.
 
5. Default Remedies
Default clauses are where things can get tense. Landlords seek broad definitions of tenant default and swift remedies, while tenants want narrowly defined defaults with ample notice and grace periods before penalties kick in. Finding the middle ground here can take time—and creativity.
 
6. Casualty and Insurance
Recent natural disasters have made casualty clauses a critical focus. Who pays for repairs after a fire, flood, or earthquake? How much insurance is required? Landlords may push for expansive tenant obligations, while tenants demand clarity to avoid unexpected liabilities.
 
7. Option Terms
Options to renew, purchase, or expand are like mini-negotiations within the lease. While tenants value flexibility, landlords worry about limiting their future rental or sale opportunities. Every word in these clauses matters, which is why lawyers scrutinize them so heavily.
 
A Broker’s Perspective
As brokers, our role during the second negotiation is both limited and crucial. While we’re not in the room debating legalese, we can act as interpreters—helping our clients understand the practical implications of proposed changes. Often, our experience allows us to suggest creative compromises that bring both sides back to the table when they’re at an impasse.
I’ve seen deals stall for weeks over seemingly minor details. One tenant once insisted on two reserved parking spaces, a request that cost the landlord almost nothing but became a symbolic sticking point. It took some gentle nudging to remind both sides of the bigger picture.
 
Tips for Navigating the Second Negotiation
If you’re heading into lease negotiations, here are a few tips to keep in mind:
1.       Hire experienced counsel. A seasoned real estate attorney understands the nuances and can save you time and money.
2.       Pick your battles. Focus on clauses that directly impact your business operations and bottom line.
3.       Stay flexible. Compromise is the name of the game. A deal where both sides win a little often lasts longer than one where one side feels steamrolled.
4.        
In the end, a well-negotiated lease sets the foundation for a successful landlord-tenant relationship. And for brokers, there’s no better feeling than seeing a deal come together—twice.
 
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. His website is allencbuchanan.blogspot.com.
 
 

AI Tools To Assist Commercial Real Estate Professionals

Last week we celebrated ChatGPT’s second year birthday with a review of how Chat can be used in commercial real estate. Today, I’d like to zero in on some specific tools that we as commercial real estate professionals are using to make the day to day easier and more efficient. 
 
For industrial real estate, AI tools and technology solutions are tailored to address the unique challenges and opportunities in logistics, warehousing, manufacturing, and distribution. Here’s a breakdown of recommended tools specifically for the industrial real estate sector:
 
1.       Market Analysis and Site Selection
·        CoStar/LoopNet: Industry-standard platforms offering market analytics, property listings, and comparable data for industrial real estate.
·        Reonomy: Uses AI to analyze industrial property data, including ownership records, zoning, and historical trends, helping identify off-market opportunities.
·        Crexi PRO: Provides industrial market insights, listing exposure, and data analytics to identify emerging opportunities.
1.       Predictive Analytics for Industrial Trends
·        Placer.ai: Analyzes foot traffic, demographic patterns, and market shifts, helping assess industrial site viability based on logistics trends.
·        Orbital Insight: Uses satellite imagery and AI to track industrial activity such as construction progress, inventory levels, or logistics hub demand.
 
1.       Workflow Automation and Property Management
·        Yardi Breeze: Tailored for industrial property management, offering lease tracking, expense monitoring, and automated workflows.
·        Building Engines: Provides tools to streamline maintenance requests, tenant communications, and operational efficiency for industrial portfolios.
·        Prologis Essentials Marketplace: Offers asset management solutions specific to industrial spaces, such as energy monitoring and warehouse optimization.
 
1.       Supply Chain and Logistics Optimization
·        JDA Software (Blue Yonder): Uses AI for supply chain management, optimizing warehouse operations and logistics hubs.
·        Flexe: Facilitates on-demand warehouse solutions, using AI to match available industrial space with logistics needs.
·        FourKites: Real-time AI-powered tracking and visibility for freight and supply chain logistics, crucial for industrial occupiers.
 
1.       Lease Management and Financial Analysis
·        VTS Rise: Integrates industrial property leasing workflows with AI-driven insights, including tenant demand and market trends.
·        Argus Enterprise: Advanced modeling and valuation for industrial real estate portfolios, including lease comparisons and pro forma analyses.
 
1.       Tenant/Occupant Management
·        EliseAI: Automates tenant communications, lease renewals, and occupancy tracking, enhancing tenant relationships in industrial spaces.
·        Basking.io: Monitors warehouse occupancy and operational patterns, helping optimize space usage and reduce costs.
 
1.       Marketing and Outreach
·        Matterport for Industrial: Creates immersive 3D virtual tours of warehouses and manufacturing facilities, enhancing marketing efforts and reducing time spent on physical site visits.
·        Brokermint: Provides industrial property marketing tools, including proposal generation and automated deal tracking.
 
1.       Drone Technology and Inspection
·        DroneDeploy: Integrates drones with AI to inspect industrial properties, track construction progress, and map large industrial sites.
·        Skycatch: Provides high-resolution site imaging and 3D modeling for industrial property evaluation and planning.
 
Each of these tools addresses specific aspects of industrial real estate, from acquisition and management to logistics and sustainability. By incorporating these technologies, you can streamline operations, improve decision-making, and enhance client service in this specialized sector. 
 
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. His website is allencbuchanan.blogspot.com.

AI’s Impact Upon Commercial Real Estate

Chat GPT, Open Source’s artificial intelligence model, broke onto the mass market approximately two years ago. When Microsoft invested billions of dollars into an unproven technology, you knew this was a big deal.  
 
You can’t talk about the future of commercial real estate without recognizing the massive impact artificial intelligence is already having. ChatGPT, OpenAI’s groundbreaking model, burst onto the scene just two years ago, and the ripples have been impossible to ignore. When Microsoft poured billions into OpenAI, it became clear this wasn’t just another passing tech trend.
 
I wrote one of the preceding paragraphs. Can you guess which one? Exactly! 
 
So. There is one example. Using AI to draft long form narratives - blogs, stories, property descriptions, case studies and the like. 
 
But to only highlight this function would be to dramatically understate its capabilities. 
 
Recently, our office of Lee & Associates selected a new President. A committee was formed of which I was a member. We used AI to craft a job description for the position. We asked each candidate to prepare a business plan. These plans were poured into the engine and asked to compare and contrast each candidate based upon their plans vs the job description. Created from Chat were ten interview questions and a scoring system based upon each response. Chat even chose the most likely to win the ratifying vote. How’d it do, you may ask? Well, the candidate it chose wasn’t the candidate selected by the vote. Suffice it to say - we humans still reign. 
 
To explore how AI will impact the eight key steps of brokerage, let’s break it down step by step. AI isn’t just a buzzword—it’s a tool that can enhance every phase of the process, making agents more efficient and effective while providing deeper insights. Here’s how:
 
1. Sourcing. AI excels at combing through massive datasets, from public records to online listings, to identify properties or clients that align with specific criteria. Machine learning models can analyze market trends, demographic shifts, and historical data to pinpoint opportunities agents might otherwise overlook. Tools like predictive analytics can even forecast areas primed for development or investment.
 
2. Finding. AI-powered platforms streamline the property search process by matching client needs with available options. Imagine entering a set of requirements—location, size, zoning, budget—and having an AI return a tailored list of properties in seconds. Virtual tours enhanced by AI can also give clients a more immersive understanding of spaces without setting foot on-site.
 
3. Qualifying. AI can automate the process of qualifying leads, saving agents time and energy. Chatbots and CRM integrations can engage with prospects, ask key qualifying questions, and prioritize leads based on their likelihood to close. AI tools also analyze creditworthiness, tenant histories, or business viability to ensure prospects meet necessary criteria.
 
4. Controlling. Managing the flow of information and timelines is critical. AI tools like project management software can keep deals organized, automate follow-ups, and provide reminders for critical deadlines. Natural language processing can even analyze communication patterns to detect when a deal might be at risk, giving agents the chance to course-correct.
 
5. Execution. During the negotiation and documentation phase, AI can analyze lease terms, purchase agreements, and market comps to provide insights or identify red flags. Smart contracts, driven by AI and blockchain, can automate parts of the execution process, ensuring compliance and accuracy while reducing the time spent on back-and-forth negotiations.
 
6. Closing. AI can improve the closing process by streamlining workflows, automating document generation, and ensuring all compliance requirements are met. It can also track progress on escrow, title searches, and financing approvals, reducing the likelihood of delays. Digital signature platforms with AI integration further simplify the closing process.
 
7. Compensation. AI can help ensure compensation agreements are tracked accurately and fairly. Systems integrated with AI can calculate commissions, track payments, and generate transparent reports for all parties involved. Additionally, predictive analytics might help agents model future compensation scenarios based on their deal pipelines.
 
8. Continuation. The work doesn’t stop after the deal closes, and AI ensures agents stay top-of-mind with their clients. Automated follow-up systems powered by AI can check in periodically with past clients, send personalized updates, or even flag when a client might be ready for another deal based on activity patterns.
 
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. His website is allencbuchanan.blogspot.com.
 
 

How To Make Sense of Multiple Proposals

Balance in a market - or lack thereof - can dictate how offers are made or received. Think about it this way. If you’re an occupant in a buyer’s market, you have myriad choices. Conversely, try to transact in an environment weighted toward owners and you’ll be lucky to have any choices. In the industrial real estate arena, this balance has tipped in favor of occupants. Not terribly long ago, this wasn’t the case. But the spate of new development coupled with a softening in demand has created a glut of available properties. 
 
In a balanced environment - where supply and demand are at parity - a negotiation would unfold like this. A need emerges. The alternatives are considered - three to five of them. The best is selected for function and value. An offer is made. A back and forth ensues. Agreed upon points are reduced to a contract. The deal is completed. Easy! 
 
Now, tip the scales in favor of the occupant or the owner and a very different approach must be employed. We start with the need. But in an occupant hedged domain, rather than three to five alternatives, there are twenty! And, there could be a number of these available buildings that are functional and can be leased or purchased at a great value. So how do you make sense of this clutter and refine it to the best option. 
 
What follows is a strategy I employ. 
 
1. Clarify the Need
Start by defining the fundamentals of what you’re looking for:
Are you leasing, purchasing, or considering a hybrid option? What incentives (e.g., free rent, tenant improvements) are critical? What is your budget? Consider base rent, escalations, and other costs like common area maintenance (CAM) fees. Do you need special features like upgraded office space, employee parking, or nearby dining and retail? Is the property move-in ready, or will it require modifications? Is ownership an option, and how does it align with your long-term operational goals?
 
2. Establish a Shortlist Using the S.P.A.C.E. Framework
In a market flooded with options, narrowing the field is essential. Use the S.P.A.C.E. framework to assess each property’s strengths and weaknesses:
1.   Structure of the Deal:
·        Are the lease or purchase terms favorable and flexible?
·        What incentives are offered, such as tenant improvements or free rent?
2.   Price:
·        Is the rent or purchase price competitive within the market?
·        What additional costs, like property taxes or operating expenses, impact the total cost?
3.   Amenities:
·        Are there value-added features like upgraded office areas, energy-efficient systems, or nearby retail and dining options for employees?
·        Does the property provide unique advantages, such as expanded parking, fitness centers, or collaborative spaces?
4.   Coordinates - Location:
·        Is the location approximate to Mears, key, employees, and customers.
·        Are the streets surrounding the building conducive to truck traffic?
5.   Equity of Ownership:
·        If ownership is an option, what are the financing terms?
·        How does owning versus leasing align with your operational and financial goals?
·        If you are leasing, what is the financial position of the ownership. Will they be able to fulfill the terms of the transaction?
 
3. Solicit Proposals
Once you’ve identified your top candidates, request detailed proposals. These should include:
·        Pricing (base rent, escalations, CAM fees, purchase price)
·        Terms (lease length, purchase options, tenant improvements)
·        Key features (amenities, condition, and ownership opportunities)
 
4. Rank the Alternatives
·        Property A scores highest for deal structure and price but lacks sufficient amenities.
·        Property B scores well across all categories, offering both favorable terms and modern amenities.
·        Property C offers ownership potential but requires significant upfront investment in renovations.
This process provides a clear, objective way to prioritize options.
 
5. Engage in Negotiation
With your top-ranked property identified, enter negotiations. Use your position in an occupant-favored market to secure the most favorable terms:
·        Extended free rent or higher tenant improvement allowances
·        Flexible lease terms or ownership incentives
·        Concessions like lower operating costs or early occupancy
If negotiations stall or due diligence reveals concerns, pivot confidently to your next choice.
 
6. Trust, but Verify
Even with a top-ranked option, thorough due diligence is critical. Conduct property inspections, financial reviews, and legal checks to ensure the property meets all expectations.

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. His website is allencbuchanan.blogspot.com.
 
 

What the Hawaiian Islands Can Teach Us About Commercial Real Estate

The Hawaiian Islands are a study in contrasts. On one hand, they are the embodiment of tranquility—waves lapping against volcanic rock, trade winds carrying the scent of plumeria. On the other, they are a vivid reminder of nature’s unpredictability—lava flows reshaping the land, hurricanes forging new paths, and the ever-present pull of erosion and renewal.
This dynamic environment offers an unexpected metaphor for the world of commercial real estate. Whether you’re managing a warehouse in Southern California or negotiating a lease in the Inland Empire, the lessons of Hawaii’s landscape and culture provide valuable insights into navigating this industry.

1. Land Is Finite: Make It Count
Hawaii’s geography is the most obvious lesson: land is finite. With only so much coastline and volcanic rock to develop, property in Hawaii is a premium commodity. Similarly, industrial real estate in regions like the Inland Empire operates within finite borders. As available land diminishes, the value of strategic decisions—whether to build, buy, or lease—skyrockets. Understanding how to maximize the utility of limited resources is a skill that sets successful brokers, owners, and tenants apart.

2. Be Prepared for Shifting Conditions
In Hawaii, weather can change in an instant. One moment you’re basking in sunshine, and the next you’re seeking shelter from a sudden downpour. The commercial real estate market mirrors this volatility. Shifting economic conditions, interest rate hikes, and unexpected global events can upend even the best-laid plans. Those who thrive are the ones who, like Hawaiian locals, keep a watchful eye on the horizon and prepare for the unexpected.
During the 2008 financial crisis, I witnessed this firsthand while representing a manufacturing facility in Anaheim. Just as a hurricane alters its course, a sudden credit crunch derailed a deal that had seemed certain. Remaining adaptable allowed us to eventually close a sale, albeit at a lower price, when the financial storm had subsided.

3. Sustainability Matters
Hawaii’s deep-rooted cultural respect for the ‘aina—the land—teaches us the importance of stewardship. Overdevelopment without regard for environmental or community impact can lead to long-term challenges, both ecological and economic. In commercial real estate, this principle translates to thoughtful planning: designing buildings with sustainability in mind, considering the impact on surrounding communities, and balancing growth with preservation.
This isn’t just an ethical concern; it’s a market-driven one. Tenants are increasingly prioritizing eco-friendly spaces, and properties with sustainable features often command higher rents and stronger demand.

4. Relationships Drive Resilience
Hawaii’s aloha spirit is built on a foundation of community and relationships. In real estate, relationships are just as vital. Deals are rarely transactional—they’re built on trust, communication, and mutual benefit. Like the ohana (family) concept in Hawaiian culture, real estate thrives when brokers, owners, and tenants collaborate, rather than compete unnecessarily.
When I’m working with a client in the Inland Empire, for instance, the success of the transaction often hinges on maintaining open dialogue. Whether I’m representing a tenant searching for a logistics hub or helping an owner market their property, the spirit of cooperation ensures smoother negotiations and enduring partnerships.

5. Change Brings Opportunity
Hawaiian islands are born from volcanic activity—an inherently destructive force that simultaneously creates new land. This duality reminds us that change, even when disruptive, often brings opportunity. In real estate, market shifts can feel catastrophic, but they also present openings for those who are ready.
For example, when demand in one sector slows—say, big-box retail—it can pave the way for adaptive reuse projects, like converting empty stores into industrial warehouses or fulfillment centers. Just as lava reshapes the islands, change reshapes the industry, offering new possibilities for growth.

Closing Thought
The Hawaiian Islands remind us that even in the midst of uncertainty and constraints, there is beauty, opportunity, and resilience. By adopting the lessons of this unique landscape—maximizing limited resources, staying adaptable, embracing sustainability, fostering relationships, and recognizing the potential in change—commercial real estate practitioners can navigate their own dynamic terrain with a little more grace and aloha spirit.

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. His website is allencbuchanan.blogspot.com.