3 Reasons for Optimism in CRE
2020 has brought rapid change and economic volatility.
But despite recent challenges, commercial real estate (CRE) brokers and firm leaders still have good reason to look to the future with confidence.
Below, we cover three reasons for optimism in CRE.
1. The industrial sector is thriving
While recent economic uncertainty has hurt many industries, industrial real estate is thriving.
With people spending more time at home and practicing social distancing, ecommerce is increasing rapidly.
In fact, when shelter-in-place laws were more common, Jim Cramer, Host of “Mad Money w/ Jim Cramer” and Co-Anchor of CNBC’s “Squawk on the Street,” suggested Amazon was benefitting from the viral outbreak.
The increased activity Amazon saw even led the company to temporarily prioritize “household staples, medical supplies and other high-demand products coming into our fulfillment centers so that we can more quickly receive, restock, and ship these products to customers.”
And the ecommerce giant doesn’t appear to be slowing down anytime soon.
Amazon is currently looking to convert closed department stores to distribution centers
Rethink CEO Vijay Mehra — who has 15 years of CRE experience, ranging from underwriting and acquiring commercial properties and managing sale-leasebacks as part of a $1.2 billion joint venture fund to overseeing development projects — expects the trend to continue.
“For the foreseeable future, there’s going to be a need for manufacturing and distribution,” he said. “People love online ordering, and that drives a need for those goods to be manufactured, shipped, and delivered.”
But ecommerce isn’t the only thing supporting the industrial sector.
With more people doing business and seeking entertainment from home, data centers are becoming increasingly critical.
According to Darob Malek-Madani and Samuel Bendix of National Real Estate Advisors, “As the life support system of the internet, data centers, are proving themselves to be essential to conducting business, learning, and socializing remotely.”
They went on to say that “the essential nature of data centers is reflected in public financial markets as, according to Nareit, data centers were the best performing public real estate sector in 2020 through the end of June.”
2. Big deals are still closing
In April, Vijay noted that, while the economy was slowing down, “deals are going to continue to happen.”
He proved to be right.
In the past several months, many major deals have closed.
In July, for instance, Chicago Title National Commercial Services brokered the sale of a $134,000,000 office development in San Francisco, CA.
Congratulations Ty! Our team of industry professionals are here to assist you through every step of the transaction! #chicagotitle #commercialrealestate #realestate #escrow #titleinsurance pic.twitter.com/ZlPFaxnG2B
— Chicago Title NCS California (@CTT_NCS_CA) July 8, 2020
In May, Matthews Real Estate Investment Services announced they brokered the sale of a multifamily property in San Fernando Valley for $11,650,000.
Matthews Real Estate Investment Services™ announces the sale of a #multifamily property in #SanFernandoValley for $11.65M. Senior Vice President & Senior Director, Daniel Withers, represented the seller in the transaction. Learn more here: https://t.co/QVRGESjobn#Matthews #CRE pic.twitter.com/veGZmSepTq
— Matthews™ (@Matthews_REIS) May 22, 2020
The point is this: opportunities for deals are out there. It’s up to you to be innovative and aggressive enough to find and close them.
3. Downturns present an opportunity to increase market share
While it may seem counterintuitive, economic downturns actually present an opportunity for companies to gain even greater market share.
According to BCG Henderson Institute, “Competitive volatility increases during downturns (for example, the rate at which businesses jump into or fall out of the Fortune 100 each year rises by 50%), reflecting an opportunity to use the downturn to your competitive advantage.”
So, how do you ensure your firm is ready to take advantage of this opportunity?
The key is to focus on innovation, finding ways to become more efficient and develop deeper relationships with your clients and prospects.
According to Vijay, who formed Rethink in 2007, the CRE firms that positioned themselves for success during The Great Recession were those that keep their foot on the gas.
“The people who really excelled and dominated during that downturn are the ones who turned to innovation, turned to technology, and utilized technology to their advantage. And a lot of them have since retired,” he said. “They came out of that downturn stronger than when they went in.”
“As I compare it to today, I think the same thing is going to happen,” he added. “Those who really excel, and those who come out of this stronger than when they went in are going to now realize that using technology to help give visibility to their data, their processes, their deals, and their relationships is what’s going to help them come out of this ahead and stronger.”
Investing in a CRM like Rethink Core, for example, can help position CRE firms for success, empowering users to:
- Spend more time prospecting by reducing the amount of time they spend searching for critical information.
- Improve decision-making by providing the reporting and analytics capabilities needed to uncover key trends.
- Reduce the risk of losing deals due to follow-up tasks falling through the cracks with automated workflows and reminders.
And for firms working from home, it empowers greater collaboration and insight into how brokers are impacting the business.