Let’s Talk Real Estate
Another unanticipated impact of the pandemic and current economic uncertainty is ahead: real shifts in the commercial real estate market. As I look for landmarks, those that can offer at least a 5-year “near term” view, commercial real estate is a bit of a “canary in the coal mine.” Macroeconomic forces that include high inflation, interest rate hikes, increased regulations, and this new hybrid work environment have thrust us into uncharted territory. And the very real challenge is that both real estate leases and new commercial developments reflect decisions being made now, with tails that can extend 5, 10, or 30 years. All of which require betting on a future we don’t yet see clearly. So it’s important to pay attention to what’s happening there. I ask a lot of questions of developers, real estate brokers, property owners, and commercial tenants. How are landlords and tenants negotiating leases for office space, and where? Where are commercial developments still starting – or not? For what kind of client?
In the office leasing space: this year leases, renegotiated for a short term to get tenants through the pandemic, are being reviewed again for the next lease term commitments.
New developments: where are they starting (or not) and who’s funding them?
Traditionally, real estate investments perform well in a rising interest rate environment. But so much more is going on right now. Developers and business owners/tenants alike are needing to execute on strategy that feels like a moving target. Despite economic headwinds, the pace of change will not ease – I just don’t yet have a good sense of what that change will look like. Will keep you posted as I learn more.
See you in the trenches,
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