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My
inbox is full! Today, I will parse through the noise and attempt to make some
sense of the questions I receive on a daily basis. Plus purging is good. From
cleared clutter to sanitized sanity - here goes.
Does the Presidential election slow commercial real estate
activity?
Certainly some small business owners take the political landscape into
consideration before making a commitment to lease or purchase buildings.
Specifically, how does the current administration deal with ownership? Are
there tax breaks if you occupy your business home? What about borrowing costs?
The vast majority of commercial real estate financing is originated through
loans either made or guaranteed by the Small Business Administration. Frankly,
in the year of the pandemic 2020 - most companies are concerned with their
survival. What happens in November appears to be a distant outpost.
Will office space ever be used as it was pre-virus? Prior to
the lockdown - which sent workers scrambling home to find enough internet
bandwidth and clear the guest bedroom - the trend in office space was toward
more density. Meaning - doing away with fixed walls, creating a more collaborative
work environment, fewer private offices, and more employees per square foot.
Concepts such as WeWork - executive suites on steroids - became popular. For a
small monthly fee, companies can pivot as their space needs morph. Add a few
bodies? No problem. Lose a contract? Just downsize next month. The appeal of
coding alongside several strangers advanced. Now, decision makers are
re-imagining the way their spaces are occupied. Visit my office on a typical
day and you’ll find four or five agents bouncing around a vacant suite. Many of
us have found working from home advantageous, productive, and efficient. Will I
return to the office on a daily basis? Maybe. But taking a work break and
watching Frozen II with our two year old grandson has its advantages.
Is there a “virus discount”? Simply. It
depends. As aforementioned - office space is experiencing some uncertainty.
Therefore, if you charge out into the leasing market - chances are you’ll find
a deal. Retail? Who knows? We are actually witnessing a virus premium in
industrial real estate. Our vacancy was historically low at the beginning of
2020. Even the catastrophic nature of a Covid-19 pause has had little impact. I
suspect the bump is largely due to cheap borrowing rates.
Are touring protocols in place - similar to residential? I read with
great interest, Leslie Eskildsen’s column last week. Outlined were the hoops
required to simply walk through a house prior to buying it. Good grief! No more
open houses, safety gear, financial pre-qualifications prior to touring, handy
wipes at the beckon, masks. Yet houses are leaving the market at a record pace!
We can still tour without much hassle. Sure, masks are required. In the case of
a new build - plan on safety vests and hard hats. But, these are a good idea
whenever walking a construction site. I showed up at a building in shorts a
couple of weeks ago - when the mercury surpassed my patience. You can imagine
my embarrassment when my client perused the space alone - long pants required,
sorry!
How is 2021 shaping up? I’d only be guessing.
However, I suspect the fourth quarter of this year will portend what’s next. If
businesses reopen fully, a vaccine is discovered, and most importantly -
confidence returns, we could see a bounce back like no other. Remember, not so
long ago, folks were optimistic about a banner 2020. Man. That is SO 2019!
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.
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