Today marks a milestone I never imagined when I
wrote my first column for the Southern California News Group ten years ago.
Back then, I approached commercial real estate as a puzzle—complex,
fascinating, and full of moving parts. Ten years later, that hasn’t changed,
but the pieces themselves certainly have.
Writing this column has given me a front-row seat to
some of the most dramatic transformations in the industry, many of which have
touched not just buildings and businesses but the way we live, work, and shop.
To mark this anniversary, I’ve reflected on the ten biggest events and trends
that have shaped commercial real estate over the past decade.
1. The Rise
of E-Commerce and the Decline of Traditional Retail
It’s hard to overstate how much e-commerce has
changed the retail landscape. When I started writing, shopping malls were
struggling, but most still felt like community hubs. Today, many of those same
malls have been converted into warehouses, medical centers, or even housing.
The retail spaces that survived learned to adapt, focusing on experiences that
can’t be replicated online.
2. The
Co-Working Revolution (and WeWork’s Wild Ride)
Remember when co-working spaces were just for
freelancers? Then came WeWork, which turned flexible office space into a global
phenomenon before its very public implosion. Despite WeWork’s struggles, the
concept of flexible office space took root, and today, hybrid work models have
made flexibility more important than ever.
3. The
Industrial Real Estate Boom
Ten years ago, warehouses were the quiet workhorses
of real estate. Now, they’re the rock stars. E-commerce and the need for faster
deliveries turned industrial space into one of the hottest commodities in
Southern California, with the Inland Empire leading the charge. Finding
available space became a challenge as rents soared and demand outpaced supply.
4. The
Pandemic’s Impact on Offices
COVID-19 changed everything—especially how and where
we work. Remote work, once a perk, became a necessity, and it sent shockwaves
through the office market. Companies downsized, reconfigured, or questioned
their need for physical offices altogether. Landlords are still figuring out
what the future holds, and so are the rest of us.
5. Adaptive
Reuse Gains Traction
If the last decade taught us anything, it’s the
value of reinvention. Underperforming malls, empty office buildings, and even
old hotels were transformed into new uses like housing and mixed-use
developments. Adaptive reuse isn’t just practical—it’s creative, and it
highlights the industry’s ability to evolve.
6. The
Explosion of PropTech
Technology found its way into every corner of real
estate over the last decade. From smart buildings to digital platforms that
streamline leasing and property management, PropTech became an essential tool.
The days of handwritten rent checks and manual building inspections feel like
ancient history now.
7. The
Affordable Housing Crisis
Southern California’s housing crunch became
impossible to ignore. Every discussion about development now comes with a focus
on affordability—or the lack thereof. The crisis has pushed the industry to
grapple with tough questions about zoning, density, and who real estate truly
serves.
8. The
Climate Change Imperative
Sustainability moved from being a
"nice-to-have" to a “must-have.” Green buildings, renewable energy,
and water-efficient designs are now priorities, especially in Southern
California. Climate-conscious development isn’t just about compliance anymore—it’s
about future-proofing properties for the generations to come.
9.
Opportunity Zones
When Opportunity Zones debuted in 2017, they were
hailed as a game-changer for distressed communities. While they did spur
development, they also sparked debates about whether they truly benefited the
people they were meant to help. Still, the program left its mark on how we
think about incentives and investment.
10.
Institutional Investors Enter the Single-Family Market
If you’ve struggled to buy a home in recent years,
you’re not alone—and institutional investors are part of the story. Over the
last decade, major players entered the single-family rental market, buying up
homes in bulk and changing the dynamics of suburban housing. The shift sparked
debates over affordability and fairness, but one thing is certain: it reshaped
the market.
A Decade of
Transformation
Reflecting on these changes, I’m struck by one
constant: real estate never stands still. It adapts, reinvents itself, and
reflects the world we live in—sometimes for better, sometimes for worse, but
always with a story to tell.
Writing this column has been one of the greatest
privileges of my career. It’s given me the incentive to reflect, introduced me
to some awesome people and enabled me to highlight issues that confront owners
and occupants of commercial real estate.
I’m grateful for your readership!
I’m penning this column overlooking the Mississippi
sound - a tributary of the Gulf of Mexico. After spending time in New Orleans,
Biloxi, and Mobile, I’ve been reflecting on what the Gulf South has to teach us
about commercial real estate. These cities, rich with culture and history, also
hold valuable lessons for commercial real estate in a region shaped by its
unique economic drivers and environmental challenges. Here’s what stood out:
Resilience
in the Face of Natural Disasters
The Gulf South has faced its share of hurricanes and
flooding, but it’s clear that resilience is embedded in the fabric of its
development. From elevated structures to advanced drainage systems, commercial
real estate projects here are built to withstand nature’s extremes. For anyone
in the industry, it’s a reminder that risk mitigation is not optional—it’s a
necessity.
Industry-Specific
Demand
The economic lifeblood of the Gulf South—energy,
maritime industries, and tourism—directly shapes its real estate market. You
can see it in the industrial warehouses near ports, the corporate campuses for
energy firms, and the hotels that cater to millions of visitors each year.
Success in commercial real estate hinges on understanding and aligning with
these local economic drivers.
Port
and Logistics Infrastructure
From the Port of Houston to the Port of New Orleans,
this region thrives on its strategic position in global logistics. Warehouses,
distribution hubs, and industrial spaces are crucial to keeping goods moving.
For investors, areas like these with robust logistical networks are ripe with
opportunity.
A
Business-Friendly Environment
States in the Gulf South know how to attract
business. Lower taxes and incentives make the region appealing for commercial
real estate development, and it shows in the range of office, industrial, and
mixed-use projects taking shape. For developers, understanding these incentives
can make all the difference.
Adapting
to Climate Challenges
With rising sea levels and more intense storms,
sustainability is no longer just a buzzword here—it’s an imperative. Green
building practices, renewable energy integration, and eco-conscious designs are
becoming standard. It’s clear that in regions like this, sustainability isn’t
just good ethics; it’s good business.
The
Power of Culture and Demographics
From the vibrant streets of New Orleans to the
historic charm of Mobile, the Gulf South’s cultural identity is unmistakable.
This diversity is reflected in the demand for mixed-use developments, retail
spaces, and community-focused projects. Commercial real estate that taps into
the local culture not only thrives but also strengthens the connection between
spaces and people.
Emerging
Secondary Markets
While cities like New Orleans and Houston often grab
the headlines, smaller markets like Biloxi and Mobile are quietly gaining
traction. These areas offer lower barriers to entry and opportunities for
significant growth. For those willing to look beyond the obvious, the Gulf
South’s secondary and tertiary markets are full of potential.
Tourism
and Hospitality
The Gulf South is a magnet for tourists, whether
they’re drawn to New Orleans’ festivals, Biloxi’s casinos, or the Gulf Coast
beaches. This creates steady demand for hotels, vacation rentals, and entertainment
venues. For commercial real estate, the lesson is clear: when you invest in
what makes a place unique, the returns often follow.
Our recent travels were a vivid reminder that
the Gulf South is more than just a fascinating region—it’s a case study in the
importance of adaptability, alignment with local economies, and resilience in
commercial real estate. These lessons aren’t just regional but universal for
the commercial real estate industry.
As I shared last week, I
celebrated the 68th year of my birth recently. My wife treated me to a weekend
at Pebble Beach. I know. But someone had to do it.
We stayed in a spot overlooking
the iconic Pebble Beach golf links—home of the annual AT&T Pro-Am and
countless major championships over the years. The golf course has witnessed so
many unforgettable moments, from Jack Nicklaus’ famous one-iron shot to a foot
at the 17th hole in the 1972 U.S. Open to Tiger Woods’ runaway U.S. Open
victory in 2000. Orange County is well represented, too, with Mark O’Meara
hoisting the AT&T trophy a record five times and Jordan Nasser claiming the
title of California amateur champion there in 2006. As a lifelong golfer, I was
in awe.
The weather can be a bit tricky
in January, but we rolled lucky snake eyes—clear skies and cool temps.
Perfection!
So what do my ramblings about the
former home of the Crosby Clambake have to do with commercial real estate?
When you think about Pebble
Beach, it’s easy to picture the world’s greatest golfers competing on a
pristine course, overlooking the rugged coastline. But beneath the beauty and
the legends, Pebble Beach is a masterclass in careful planning, adaptability,
and excellence—the same principles that apply to success in commercial real
estate.
Let me share a few lessons I
learned during my visit.
It’s
the journey, not the destination, that matters.
Each hole at Pebble Beach
presents a unique challenge, much like every deal in real estate. Some days,
the weather’s perfect, and every shot falls into place. Other days, you’re
fighting wind, sand traps, and frustration. But just like in golf, the process
of getting there—the strategy, the effort, the adjustments—is where the real
value lies. The destination—a trophy, a closing—is just the cherry on top.
Professional
golfers and real estate agents eat what they catch.
Golfers and real estate
professionals share a bond: there’s no safety net. A missed putt or a deal that
falls through means starting over. But that pressure drives us to be
resourceful, resilient, and relentless. It’s not for everyone, but for those
who thrive under the challenge, the rewards are sweeter because we’ve earned
every bit of them.
Don’t
overlook the trees for the forest.
Golfers know that every hole,
every shot, every decision matters. It’s tempting to focus on the big
picture—your scorecard, the finish line—but the real work happens one stroke at
a time. In real estate, the same holds true. It’s the small details that often
make or break a deal—a clause in the contract, the way you handle a client, or
even the vibe of a property. Don’t lose sight of the trees.
Focus
on the freedom.
Standing on the 18th fairway at
Pebble Beach, gazing out at the Pacific, I couldn’t help but feel an incredible
sense of freedom. Golf, like real estate, offers that in spades. You’re not
tied to a desk or a clock. Sure, there are deadlines, but the autonomy to chart
your own course is priceless.
There
are many ways to score.
The beauty of golf—and real
estate—is that there’s no single path to success. Some win by overpowering the
course with booming drives, others by finesse around the greens. In real
estate, success can mean building relationships, mastering negotiations, or
finding creative ways to add value. The key is to play to your strengths and
embrace the diversity of opportunities.
As I soaked in the beauty of the
Monterey Peninsula, I realized how much the game of golf and the art of real
estate have in common. Both demand patience, creativity, and a deep
appreciation for the journey. And both, when done well, offer rewards far beyond
the scorecard.
So, the next time you’re out on
the course—or walking through a property—remember this: it’s not just about
where you’re going. It’s about how you get there. And sometimes, the view along
the way is the greatest reward of all.
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.
