Forget Ghouls, Ghosts and Zombies…8 Frightful Facts related to Commercial Real Estate

1. For years we have been told if the economy was a baseball game, we would be at the bottom of the 7th inning and the growth expansion will soon be over.  By now I figure we must be in the bottom of the 10th inning.  Statistically, it has been a longer run than most expansions.

2. Trade Wars lead to increased prices and hurt our buying power.  Construction costs are rising and build-out costs for existing space are escalating.  As consumer prices increase, consumption decreases and economies tend to contract.

3. Retail sales have been trending downward as more shoppers go online.  Losing retail stores and not being able to see products before we buy them online is very frightening.  Let’s face it, people like to go to the store and test out an expensive purchase before turning to the internet and finding a bargain.

Interesting exception:  Sales of Halloween costumes, candy and decorations will surpass $9 billion this year – 3 times more than was spent 15 years ago.

4. The President, Impeachment, Claims of Fake News and daily reports from the White House are very frightening.  Will the US remain the world’s superpower and will the dollar remain the global currency of choice?

5. Climate change and extreme weather events.  Hurricanes, rising water levels, droughts, and climate change will severely impact where people can live.  There will be massive costs to protect buildings or remove them from affected areas and relocate to more favorable habitats.

6. Driverless cars will be a game-changer for how and where we live and work.  Predictions are all over the board on this one.  The urban core could become denser because existing parking can be built on.  On the contrary, access to suburban areas will increase and longer commutes will be more tolerable.  These changes could greatly affect the current value of real estate and change the definition of prime locations.

7. Immigration restrictions.  Fewer people moving to this country means less labor and lower demand for real estate.  If the population does not keep increasing, we become oversupplied and a lack of buyers for existing houses leads to declining prices.

8. Perhaps the most frightful of all scenarios is being scared off by the previous risks and missing out on continued economic expansion and watching everyone else get rich while you sit on the sidelines.  After all, risk creates opportunity.  And don’t forget interest rates are declining and new tax laws have led to the lowest effective tax rates of our lifetimes for real estate investors.

Will this be another 1984 baseball game similar to when the White Sox beat the Brewers in a 25-inning game?

Dan Stiebel, CCIM