How’d I do in 2020?

Image Attribution: www.istockphoto.com 

Happy new year! If you’re reading this - 2021 is now a footnote, the Amazon boxes are broken down awaiting delayed pickup, and many of your resolutions have already been broken. Wow, that didn’t take long! I took a look back at my predictions for calendar 2021. The column was authored post T-giving and pre-holiday 2020. Some 13 months ago. How’d I do? Spoiler alert. I was a freakin Nostradamus!
 
From late 2020: 
 
Wow! December. With Christmas lights festooning the neighborhood - we are reminded 2020 is almost history! 2021 is a mere 30 days hence. What can we expect of the commercial real estate landscape next year? Someone famous once opined - “well, they’re only predictions, but they’re all mine.” So please bear with me as I get my Nostradamus on.
 
Bullish industrial owners. We represent an importer. Warehoused are goods they distribute. He’s slammed for space - thus our engagement to find more. Recently our full priced offer was met with a reluctance - by the owner - to grant a financing contingency. I’ve seen this with investment properties - but never with owner occupied real estate. You see, time is needed for a lender to nod yay or nay. Very few occupants have idle cash sitting in an account awaiting a purchase. Today. Nailed it! Same occupant is still in the market. Prices have hopped 50% in 2021!
 
Shorter leases. Until the aroma of economic uncertainly ceases to waft, expect occupants to seek commitments of fewer years than before. Ten year leases will become five and so on. Today. This is certainly the case for office suite deals. Expect more of this in 2022.
 
Clarity in the office market. I suspect by this time next year - the runway will be clear and office occupants will have a direction - up or down. As previously mentioned, uncertainty is a killer for any business trying to gauge a need for space. But, as we are seeing in retail storefronts with their downward trajectory - at least we can plan. Today. Yeah. Not so much. The office landscape has seen fits and starts. Mid-year - when our state fully reopened - was derailed by Delta. And now with Omicron sweeping the caseload, it’s anyone’s guess when business will fully return to the office.
 
Low interest rates. The Biden administration will most likely be gridlocked by a Republican senate. With the house near balanced, a Democrat in the White House and a red senate - expect the Federal Reserve to keep interest rates low. Our ten year treasuries - a bellwether for commercial real estate loans - are expected to wallow at historic bottoms as well. Today. Spot on! Although, those storm clouds massing? Yessir. Those are higher rates coming.
 
Burgeoning ECommerce. If the Buchanan household is any indication - internet ordering and “just in time shipments” to your door will continue with a vengeance. Recently, we purchased a new mattress on-line. The next day, two beefy gentlemen ushered it into our upstairs master suite. Will someone kindly develop a box compactor for home use? Something between the kitchen trash masher and the ones in Albertson’s storeroom would be awesome. There’s your million dollar business idea for 2021! You’re welcome. Today. Boom!
 
Continued safety protocols. As the pandemic blossomed in March, predicted were temperature checkpoints, masks, hand washing stations, and distancing. Actually, it was not terribly futuristic. Observed was what other countries were employing. I am startled how quickly we adapted, however. Akin to airline changes post 9.11 - we can’t simply attend a concert, eat in a restaurant, or shop without a face covering. Shocking. Although, expect more in 2021. Today. A new mask mandate, proof of vaxxing, 2020 redeaux? Maybe.
 
An innovative technological offering? Commercial real estate is rarely disrupted by something shiny and new. CoStar - in the mid 1990’s was probably the last big thing. With CoStar’s acquisition of Ten-X this year - we could see a more robust platform from which to transact. At the site’s disposal now is available inventory, what’s recently sold, and an auction template. Hmmm. Where do brokers fit in? But, look no further than our residential counterparts to get a glimpse. Matterport tours, consumer facing available inventory, and accurate internet loan processing lessen the need for “buy-side” representatives. Today. Well. Missed this one. Unless of course it’ll appear in 2022. Tic Tock?
 
Scant industrial vacancy. I see nothing on our immediate horizon that would cause industrial availability to rise. The drivers of increased square footage could be new construction. Nope. Not enough vacant land in the OC to stem demand. Plus, it takes an eternity to get a new development entitled. Business failures - probably not. We’ve just endured the greatest health crises in 100 years and many industries thrived. Exodus out of state. Maybe. We’ve definitely seen some movement. However, our local businesses are largely private. They’re your neighbors with a rich history and deep rooted residency in SoCal. A financial meltdown. Yeah. That could do it. 2009 again. I certainly hope not. Today. Again, nailed it! Frankly, it’ll take something catastrophic to get us back to a normal vacancy of 5%. Between you and me - I’d prefer the scant vacancy! 
 
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.