Commercial real estate predictions for 2023 have proven accurate for at least one real estate broker. (Adult Photo)
Happy New Year to all my readers. I believe your man had a fruitful year in 2023 and wish him success in 2024.
As you are reading this on New Year’s Eve 2023, let’s look back at what I predicted in January 2023 and see how I made Nostradamus come true.
Return of industrial property rights
after that: Third party logistics provider returns space. Over the past three years, 3PLs have flourished and leased hundreds of thousands of square feet of logistics boxes to meet the demands of online shopping.
These providers will require less square footage due to the current “inventory reduction.” However, problems have arisen as many of the signed fixed-term leases still have deadlines.
Therefore, consider putting much of this surplus into the market as sublease space.
July 2023 update: As Amazon began the reduction process in late 2022, we saw a significant amount of return on profits. The push for space doesn’t seem to be as intense in 2021 or he is in 2022. Frankly, I expected more space to come back. Marketplace from third party logistics providers.
December 2023 update: The giving back continues! I recently made a listing for her 275,000-425,000 square foot space in the Inland Empire. Of the 34 available, a third were subleases, or companies looking to reduce space.
prediction? nailed it!
recession? I vote no.
after that: What about contrarian thinking? This is how to read tea leaves. The Fed fired the cannon last year, raising interest rates three times by 0.75% and once by 0.5%. As already explained, this increase affects banks’ borrowing rates. The theory is that rising money prices will cool down the heated economy, as companies will reconsider borrowing to expand their businesses. I choose to believe in the resilience of the American economy.
July 2023 update: I made this prediction correct because our economy is not in recession.
December 2023 update: We can finish 2023 without a recession. This is absolutely miraculous considering what so many people were saying at this time last year. No one expected Hamas to attack Israel or for the interest rate on the 10-year Treasury bond to rise above 5% (for a brief period in November).
Uncertainty continues in the Middle East, but interest rates have stabilized at the 4% level. Nine out of 10 people believe a recession can be avoided in 2024. As one of them, I hope they are right.
prediction? nailed it!
return to office
after that: Much has been written on this subject. Year three begins after we are all forced back into our spare bedrooms. Remember that fateful day in March 2020? I predicted that employees would return to the office this year. Certainly, there will be a hybrid model. For example, Tuesday through Thursday are office work days, and Monday and Friday are optional work-from-home days.
July 2023 update: According to an article in the Orange County Register, overall office vacancy rates have doubled since the 2020 pandemic. With the exception of a few industries, the new normal is a hybrid workspace.
December 2023 update: Industries such as wealth management are making a comeback. This is not the case for professions that are typically office-bound, such as lawyers, real estate professionals, and CPAs.
prediction? nailed it!
retail will survive
after that: The continuation of the return to brick-and-mortar experience continues in 2022. It remains a tug-of-war over how cities choose to eliminate tax bases while increasing their police and fire departments.
July 2023 update: Brick and mortar retail stores continue to amaze me. I recently purchased several items online, returned them at the store, and had them repackaged and shipped via UPS. There was a line in the return lane that rivaled the busy weekend traffic on Route 405.
December 2023 update: If you visit a mall or retail center during this long shopping season, you’re likely to encounter a shocking sight usually reserved for the intersection of Routes 5, 57, and 22. It’s just gridlock. Our economy seems to have settled on a nice mix of online and in-person shopping.
prediction? nailed it!
As for those keeping score, I gave it a 4 out of 4. Next week, I’ll share my predictions for commercial real estate in 2024. Don’t miss that episode. Until then, stay safe, my friend.
Allen C. Buchanan, SIOR, is president of Lee & Associates Commercial Real Estate Services in Orange. Contact him at abuchanan@lee-associates.com or 714.564.7104.