Commercial Real Estate Panel Shares Insights Into What’s in Store for 2020
OAKLAND, Calif. – February 26, 2020 – The Northern California chapter of the Society of Industrial and Office Realtors® (SIOR) held its annual kick-off dinner meeting at Lake Chalet earlier this month. Panel moderator, Jordan Schnitzer, president of Harsch Investment Properties, provided the color commentary to keep the momentum going throughout the program. Panelists included James Ellis, managing principal/co-founder of Ellis Partners; Joseph Finnigan, managing director/asset management group lead, west region with Link Industrial Properties; Paul Single, managing director, senior portfolio manager with City National Bank; Paul Stein, managing partner/co-founder of SKS Partners; and Timur Tecimer, chief executive officer of Overton Moore Properties. Here are some of the highlights from the panel:
Stein said he learned a lot in his early years in commercial real estate.
“We had a strong understanding that we didn’t know what we were doing,” he said. “But back then, it was a pretty intuitive business.”
However, Single said the economy is not as complicated as it once was.
“Actually it’s easier,” he pointed out. “The Fed is very transparent and releases its meeting schedule well in advance. In 2018, it tightened its monetary policy, sending a clear message about uncertainty elsewhere.”
And, Single addressed the question everyone is asking: how bad will the next recession be?
“It won’t be as catastrophic as the 1980s, for example,” he observed. “Our economy is three times bigger now. Unemployment is extraordinarily low, the economy is doing well and the Fed cut rates three times as of late. But, job gains can’t tell which president is in office so we don’t know if this will continue at the same rate.”
As for the deficit: should we worry about it?
“It’s the biggest since World War II, and Washington doesn’t seem to care about it,” Single observed. “We spend $1.23 for every dollar brought in and we just print more money. But at some point, you have to service the debt.”
Back to commercial real estate, Stein pointed to the all-to-familiar entitlement process as a frustrating part of doing business in San Francisco.
“There are triple mitigation fees … just whacky,” he said. “But it’s good to see the Bay Area is working collaboratively. The is the biggest booming economy ever.”
Ellis said Oakland is “less whacky. The city has made advances in the planning process very effectively. It’s one of the places to build in the Bay Area where higher density is workable. As for the Bay Area, it’s the epicenter of everything that is good. We haven’t seen cap rates this low since maybe the 1950s.”
Ellis Partners is putting the finishing touches on its project at 12th and Broadway comprised of 370,000 square feet and 18 stories.
“It has a good amount of committed tenants,” Ellis said. “It’s really exciting in Oakland for office right now.”
Tecimer said its One Commerce Center project in San Leandro is 33% leased to Facebook. The firm is also behind developments Pacific Commons South and The Crossings @ 880, both in Fremont. He said Overton Moore is “pricing through perfection”.
Finnigan pondered how quickly could the market get to a 4 to 5 cap. He also pointed to a few issues that keep him awake at night.
“If it passes, split roll will be an impact and disruptive in the long term,” he said. “And, the Amazon effect is affecting absorption.”
The SOCIETY OF INDUSTRIAL AND OFFICE REALTORS® (SIOR) is the leading professional office and industrial real estate association. SIOR members complete more than 80,000 transactions annually. SIOR has more than 3,000 members in more than 630 cities in 34 countries. SIOR represents today’s most knowledgeable, experienced, and successful commercial real estate brokerage specialists. Real estate professionals who have earned the SIOR designation are recognized as the most capable and experienced brokerage practitioners in any market.