Happy New Year dear readers! 2023. Wow. A full three
years since the pandemic’s outset. Who believed Covid 19 - and it’s variants
would still be in our collective conversations in 2023. Not seeing many hands
raised - you, like I couldn’t fathom it’s offspring would still be wreaking
havoc. Yet it’s one of the three amigos - along with the regular flu and RSV -
causing the hacking. Well. On to some happier conversations - my commercial
real estate predictions from 2022.
Here were my words this time last year.
Industrial rents. They’ll
increase. Next bullet point. However, I’ve a few more words, so stay with me.
We track Class A inventory for an upcoming assignment. What’s that, you may
ask? We describe Class A inventory as buildings constructed since 2000. In this
way we are able to weed out functionally obsolete structures that may exist in
the market. In Orange County, there are eight new developments proposed or
under construction totaling over 2,700,000. A staggering number until you
factor in what’s available today. Ummm. That would be one. That’s correct! One
available. Demand is still strong so nowhere for rents to go but up. 2023 Update. Nailed it.
Developer appetite. With industrial rents increasing, interest rates still low - that will change this year - plentiful capital seeking a place to reside, and an acute shortage of land from which to produce concrete caverns - a conundrum continues. An industrial development at your neighborhood Sear’s store? A campus built for industries who’ve left the area? All will be targets this year. 2023 update. Quite prescient was I.
The office. No, not the series - the market. Recently, I read this with interest in these pages - “A new report from Ladders, a career site for high-paying jobs, says things will likely stay that way. In fact, Ladders predicts that 25% of all professional jobs that pay $80,000 or more will be remote by the end of 2022.” Wow! My suspicion is it will be greater than that. Anecdotally, take our office as an example. We own a 21,700 square foot, two story location. We occupy the upstairs and a portion of the down for about 13,000 square feet. When locked and loaded - 49-52 folks commuted in each day. Now? Probably half regularly attend. My team works remotely as do others. Adjusting to this change will be smaller footprints and more multi-use spaces. 2023 Update. This story is still unfolding. But, we appear to be headed toward a permanent hybridcy.
Retail slowdown? We all know that, big fella. How’s that a prediction? Actually, what slowed during our two year pandemic fueled sabbatical were trips to the store. Retail sales actually increased as we bought tons of stuff from our home keyboards. But, one of our clients, corporately based in NYC, is a tremendous gauge on the brick and mortar retail business. By that I mean, destinations such as Wal-Mart, Costco, Burlington, and the like. He’s sensed a REAL dip and predicts more to come. So we’ll see. 2023 Update. Yes! Most large retailers are de-inventorying.
Stagflation. What on Earth is that? According to Wikipedia -“In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.” Hmmm. Inflation rates, high - check. Economic growth slowing - check. Unemployment high - check. By the way, you may be thinking - I thought unemployment was low, currently. Actually, the percent of the workforce NOT working is high. The statistics reported are only those who’ve filed claims - quite misleading. 2023 Update. We heard this mentioned a bit but not to the extent I believed. Inflation increases are slowing, employment is strong along with wage growth, and economic growth is also returning. I’d rate this prediction a miss.
Four out of five ain’t - sorry Miss Penney, my 7th
grade English teacher - bad!
Next week, I’ll strike out with some bold 2023
predictions.
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.
Developer appetite. With industrial rents increasing, interest rates still low - that will change this year - plentiful capital seeking a place to reside, and an acute shortage of land from which to produce concrete caverns - a conundrum continues. An industrial development at your neighborhood Sear’s store? A campus built for industries who’ve left the area? All will be targets this year. 2023 update. Quite prescient was I.
The office. No, not the series - the market. Recently, I read this with interest in these pages - “A new report from Ladders, a career site for high-paying jobs, says things will likely stay that way. In fact, Ladders predicts that 25% of all professional jobs that pay $80,000 or more will be remote by the end of 2022.” Wow! My suspicion is it will be greater than that. Anecdotally, take our office as an example. We own a 21,700 square foot, two story location. We occupy the upstairs and a portion of the down for about 13,000 square feet. When locked and loaded - 49-52 folks commuted in each day. Now? Probably half regularly attend. My team works remotely as do others. Adjusting to this change will be smaller footprints and more multi-use spaces. 2023 Update. This story is still unfolding. But, we appear to be headed toward a permanent hybridcy.
Retail slowdown? We all know that, big fella. How’s that a prediction? Actually, what slowed during our two year pandemic fueled sabbatical were trips to the store. Retail sales actually increased as we bought tons of stuff from our home keyboards. But, one of our clients, corporately based in NYC, is a tremendous gauge on the brick and mortar retail business. By that I mean, destinations such as Wal-Mart, Costco, Burlington, and the like. He’s sensed a REAL dip and predicts more to come. So we’ll see. 2023 Update. Yes! Most large retailers are de-inventorying.
Stagflation. What on Earth is that? According to Wikipedia -“In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.” Hmmm. Inflation rates, high - check. Economic growth slowing - check. Unemployment high - check. By the way, you may be thinking - I thought unemployment was low, currently. Actually, the percent of the workforce NOT working is high. The statistics reported are only those who’ve filed claims - quite misleading. 2023 Update. We heard this mentioned a bit but not to the extent I believed. Inflation increases are slowing, employment is strong along with wage growth, and economic growth is also returning. I’d rate this prediction a miss.
