Gone are the four basic sectors of commercial real estate: retail, office, industrial and multi-family. They are still very much a part of many portfolios, but the investor and broker will need to consider several new categories.
Real estate investors and brokers alike must consistently remain nimble for the ever-changing demographics, laws, and business needs to remain relevant.
Technology is one reason we see changes, but consumer habits play a large role. New laws also bring the changes we may not have anticipated. We probably did not see coming an industry built-up around marijuana ten or twenty years ago. But, California, as well as other states, are experiencing a new opportunity as we cater to this growing industry.
Online sales are huge and have a significant impact on the retail landscape. At the end of 2016 Amazon had a market value of almost $356B. This is more than Walmart, Target, Best Buy, Macy’s, Kohl’s, Nordstrom, JCPenney, and Sears combined! This year nine retailers announced they are closing almost a combined 1,000 brick & mortar stores.
Let’s take a look at eight of the emerging trends in commercial real estate today:
We are moving to where we value a sense of place with the lines of life, work and play blurring. Placemaking strengthens the connection between people and the places they share and through collaboration creates public areas that support both the physical, cultural and social identities.
What creates a great place? Four main guidelines are instrumental and include sociability, uses & activities; access & linkages; and comfort & image.
With the blurring of our life, work and play lives we tend towards moving back to the downtown city core for a sense of place. The mixed-use building is generating considerable interest to help facilitate this.
Many countries find this type of building to be the mainstay of their old cities where you live upstairs and have your office or storefront on the lower levels.
Hubs and Collaboration
We keep hearing collaboration is our future. Coworking spaces sometimes called hubs create an environment which facilitates collaboration.
Think of it as an executive center plus innovation lab, business incubator, and community center. Through a membership, you can be a part of a growing community of members and collaborators who will help inspire you.
There are thousands of hubs throughout the US and the world, but the location is the key.
Energy Efficient, Sustainable and Healthy Offices
Tenants and their employees want more features and amenities in their office buildings as it has been found to increase happiness and productivity.
Workspace integrating flexibility, collaboration, wellness, and connectivity are the key.
Often used for seasonal items as well as small mom & pop shops, the trend is being noticed by major retailers both online and brick & mortar.
This concept is being used for “experimental” storefronts–ways for companies like Amazon or eBay to test a concept, introduce a new product line or quickly connect with online shoppers.
While many of the stores we have patronized for decades see a consistent decline in sales, online retailers continue to grow and consider ways of connecting with their online shoppers.
Marijuana Storefronts and Growing Facilities
California is starting to experience the “420 effects” behind Colorado, Oregon, Washington, Alaska, Nevada and Washington D.C. The new law is being rolled-out in phases, but we already see retail storefronts and warehouses being leased by proprietors at higher than average rents.
We still do not know the full ramifications of the state law and how to handle leases and management of these types of businesses.
With the growth of online retailers, demands for a central and strategic location is the key to keeping costs and shipping times low.
Online retailers such as Amazon and Walmart are two key players who are looking for sites to lease or develop for their mega warehouses.
Data centers’ importance lies in the availability of the Internet backbone and reliable power. With that comes security and safety concerns in the obscurity of these buildings to not draw any attention to what is contained inside to the safety of not being exposed to hurricanes, tornadoes or earthquakes.
As more companies move their data to the cloud we will see both small companies and large providers continuing the growth of this sector.
Burt M. Polson, CCIM, is a local real estate broker specializing in commercial, luxury estates and wineries. Reach him at 707-254-8000, [email protected]. Sign up for his email newsletter at BurtPolson.com.