Author: Allen Buchanan This post originally appeared on Location Advice and is republished with permission. Learn how to submit your blog to theBrokerList.
Today is the first
Halfway through 2024. Wow! Christmas decorations will be adorning the shelves of DIY shops.
It's coming to retailers soon, so get yours soon! After all,
Try to get your Christmas lights up before Labor Day, but I digress.
today,
I thought it would be interesting to take a look at the predictions I made.
To see how they are progressing this January. That's always a good idea
Make sure you are moving in the right direction, especially with the owner and
Resident of industrial property in Southern California.
With that as a backdrop,
I'm going to look back at what I said six months ago and see how that prediction is going.
What's going to happen the rest of the year?
What I want to say is this
January 2024. Industrial lease rates will be relaxed.
Last year, a client of ours was facing an expiring lease.
There was no suitable alternative to relocate the business. Nothing was ideal. We advised him.
Maintain the status quo, negotiate a short-term solution for 6-12 months, and continue to investigate.
The owner only agreed to six months, so the new deadline is now June.
2023. I almost made a fortune in March,
It was just a little too big for his size. Again we approached his owner.
I asked for more time. He agreed to extend it until December. Our bet was
It was worth it as we were able to secure the right building with a 15% discount!
Wondering? It's simple economics. We track new avails and those leaving the market,
I noticed an imbalance. Yes, there was more coming in than going out. Someone
Lowering prices to secure quality tenants. We expect this trend to continue this year.
Especially in Class A buildings over 100,000 square feet.
OC – 11 properties are open and looking for tenants. 2 properties are
Last year's market. Hmm. Someone got motivated and made a deal, and their competitor
You'll be reset to a new level and the frenzy will begin.
What is happening now. Yes! If you read my column,
Last week, we talked about the stages in which price cuts will occur.
You will notice that we are in the price reduction concession stage.
In other words, owners can rent out industrial buildings.
Offering additional perks such as free rent and increased brokerage commission
Allowances may be moved to attract tenants to vacant units.
This trend is expected to continue until all Class A inventories exceed 100,000.
ft.² will be absorbed. You may be wondering how long it will take.
I think there will be a supply shortage in February or March 2025.
The situation again.
What I want to say is this
January 2024. Sales volume is expected to increase.
The forces outlined in the paragraph above will permeate the sales industry.
This means that owners who are waiting for tenants may choose to sell.
A further catalyst could be asset-backed debt.
We took out a short-term construction loan to build a Class A building.
You have taken into account the construction cost, construction time, and lease term. Your calculations are
A new building has been conditionally constructed for early 2022.
Different market – longer vacancies and lower interest rates. Lenders
I'm a bit worried. When will the maturing debt be paid off? So the pressure to liquidate is
New building. What's happening?
In the southern inland
Inland California, institutional owners
They choose to sell vacant units rather than wait for tenants who are hard to come by.
In this way, they can reallocate funds to different markets,
It is possible to achieve better fundamentals or return capital to investors.
The building will be vacant for the foreseeable future and is expected to be filled within a year or two.
Continue.
What I want to say is this
January 2024. Recession? I say no.
This year I took a contrarian approach and predicted that a recession could be avoided.
2023. A recession is a decline in gross national product for at least two years.
I believed in the resilience of the U.S. economy, especially
Consumers have avoided a recession in 2023. As of this writing,
In today's forecast, the only storm clouds visible on the horizon are global.
Uncertainty in the Middle East, especially the Red Sea routes
Will the disruption cause inflationary pressures on delivered goods? If this proves to be the case,
That could persuade the Federal Reserve to hold off on cutting interest rates.
In my predictions for this year, however, I recall our situation
January 2020. We were on track until a tiny enemy attacked us.
Empty rooms. Beware of black swan events.
What is happening now. So far, so good. In fact,
Apart from retail sales, our economy appears to be doing well.
Although interest rates have risen slightly, they are still at historic lows.
That's higher than two years ago, but still much lower than what we have.
Will the Federal Reserve Choose to Cut Interest Rates?
Could interest rates rise later this year? Only time will tell.
Lower interest rates after the election.
What I want to say is this
January 2024. Interest rates. Last year,
For the first time in decades, you can actually make money.
Idle funds. Last year, 10-year government bonds
It's over 5%. This morning the rate is just over 3.8%. That's good news.
That's bad news for borrowers and bad news for savers, and could trigger higher institutional interest rates.
Buying activity. These giant asset managers are always looking for returns.
You may see commercial real estate as a safe haven to earn extra income.
I think the 10-year bond will hover around 4% to 4.25% this year.
Year. What's happening now.
At the time of writing, 10-year government bonds are hovering around 4.2-4.3%.
This is significantly lower than the 5% target for the end of 2023. As mentioned above,
Government bond rates are a great indicator for savers, but
Companies that rely on borrowing, i.e.
Rent space, buy facilities and machinery, hire people, etc. I still believe it will end.
A year in which the 10-year interest rate will be well below 4.5%.
So, what I said was,
What's happening now and what to expect for the rest of 2024?
Have a safe and healthy Independence Day. See you in the second half of 2024.
The best ever!
Allen C. Buchanan, SIOR is Lee &
Orange Associates Commercial Real Estate Services, contact details are
in [email protected] or 714.564.7104.
The website is allencbuchanan.blogspot.com.
