Adapting the Face of Commercial Real Estate

07/29/2010

Adapting the face of Commercial Real Estate:

The most significant factors in the growth of Commercial Real Estate

In the last article we discussed decreased new home inventories as a possible cause for the upswing in vacant land sales (priced historically low, based on current hold time and risk). While I always welcome debate and other perspectives on the Commercial Real Estate market, I should mention that one article is never a reflection of the full Commercial Real Estate picture. Our industry is facing important questions:

Where do we go from here? We’ve seen the bottom, but where is the top? How can we get things back to normal?

With that said, this article will concentrate on what I believe are the most significant contributing factors in the growth of the Commercial Real Estate market in our area: population growth, job creation, diversification of economy, and credit access.

Population Growth:

The population in Lee County has seen significant growth over the last 10 years (double Florida’s rate of increase of 16%, it sits at 33% - from 2000 to 2009, according to the Census Bureau). The top emerging demographic within this population until 5 years ago was the “Baby Boomer” market. Over the last few years, a younger generation of tech-savvy, fast-paced, no-nonsense consumers has emerged. The adoption curve of the values surrounding this generation was complete in 2008 and 2009. We see it everywhere: from television ads to emerging social media, internet, and mobile technologies. We’ve replaced shiny, idealistic advertisements with realistic, no-nonsense campaigns. Users are creating their own content, reviewing products, services and business – and most large corporations have taken this bull by the horns and jumped on the mobile technology band wagon, placing increased importance on consumer opinion and customer service.

As our population’s largest demographic emerges, and those values are adopted by society, the most important piece to the puzzle – and the ultimate success of our community, means that local economies must adapt accordingly.

Diversification of Economy & Job Creation:

We discovered quickly at the end of the housing boom in 2006 that far too large a portion of Southwest Florida’s income was dependent upon the construction and service industries. Our job market was a responsive, service based market and most jobs in our area relied heavily on the tourist trade with specific attention to those tourists moving to their ideal Florida location. While our lifestyle continues to attract those from all areas, we have to remember that innovation in our industries is what keeps us afloat. As we diversify our economy, placing focus on an innovative technology market would mean the most significant recovery. Creating jobs based around this industry and developing businesses so that the ratio of new jobs to lost jobs continues to increase, will fuel the other important factors that affect the Commercial Real Estate market.

New jobs means new money. New money means new investments. New investments mean new assets. New assets mean new loans. New loans mean even more new job and an expanding economy.

Credit Access:

With the continual creation of new jobs for the emerging demographic, the financial market will experience pressures to lend. It may become necessary to consider underwriting policies over the next three to five years to compensate. It is imperative to note that the overcompensation for loose underwriting that has followed with the increase of distressed assets has acted as a noose. These policies are strangling emerging borrowers – and crippling our community’s ability to grow. A fine line must be followed, loosening the noose to allow emerging borrowers to breathe, while simultaneously remembering the importance of details in the origination of such loans.

Innovating our Industry:

The process our community of professionals within our market must undergo in order to reface our economic outlook is long, but changes like these will mean recovery for both the economy and inevitably, the Commercial Real Estate market.

Within my company, we have been embracing the new face of technology. Our website continues to grow with our marketing efforts, and we know that the best way to succeed within our business is to not to sell a product, but to become a source of real, original information. Rather than hiding behind sales pitches and gimmicks, we continually relay information that our buyers, investors, sellers, tenants, landlords and even other Commercial Brokers see as useful and original. Our quarterly Market Beat report is generated through research that we conduct throughout the quarter complete with a market forecast and analysis. Through our Commercial Real Estate expertise, we service our clients within our own community as well as prospective clients throughout the nation, putting their needs before our own. I sincerely believe that innovation like this is the key to remaining successful and thriving in any market, but also one of the steps we must take to ensure the survival of our industry.

We must take our own advice. Technological innovation, job creation, and catering to the values of the emerging demographic (who will ultimately be our newest clients in the CRE arena) are only small steps leading to growth within our market. I look around now and see very plainly that the Commercial Real Estate brand is behind this curve – and to this industry I offer two options: grow or die.