|This is my first blog and I am very honored to be given the opportunity by OC Metro Business to share my thoughts on the commercial real estate industry in the coming weeks, months and perhaps beyond. Thank you to Steve Churm, Kimberly Porrazzo and George Kuzmanoff with OC Metro Business for encouraging me to be a part of this new and growing Orange County business forum.
Last weekend, my wife and I were invited to a beach barbecue and dinner party in Emerald Bay, by a friend and colleague of mine. It was a gorgeous day, sunny and warm and the ocean was sparkling. The beach at Emerald Bay is nothing less then extraordinary, with magnificent homes nestled on the surrounding cliffs and hills of the private cove. As sunset and evening approached, I could not help but think about how fortunate I was to be living in such a beautiful place as Southern California. Growing up in the Midwest, I truly value and appreciate the weather, topography and economic opportunities that are unique to us here. Sometimes, we can all lose sight of this fact or take it for granted.
On this day I wasn’t; I had my beautiful wife with me, was drinking good wine and eating good food while barefoot on the sand in one of the premier locations in the world. Things were good.
Our dinner group consisted of five couples, all friends. The five men were all in the commercial real estate industry in Southern California, including two brokers, two regional managers and one real estate developer. It was a diversified group within the industry – two living and working in Los Angeles County and the other three each living or working in Orange County and/or the Inland Empire. With everyone being in the real estate business of course the conversation soon turned to the changes and difficult markets we are currently in. Spirited conversation and debate began and ultimately focused on a couple key issues: when was the market going to turn and what did we need to do to survive until that happened? Both of the questions are being asked and discussed by everyone in our industry today, and the sad truth is that no one really knows. We can only speculate and then try to adapt to the changing times.
The general consensus of the group was that we probably have another 18-24 months left before things straighten out. It may be sooner, or perhaps longer, but it’s not going to be the short fix we were hoping for. The credit and capital markets need to sort out the issues they are having and we may not have seen the worst of that yet. High energy prices, declining home values, an unstable stock market and loss of jobs have all shaken consumer confidence and paralyzed decision making across most business sectors. Add the uncertainty of an election year and pending loom of increased taxes, and it all adds up to a very challenging business climate.
The second question evolved around how people in our industry are going to adapt and survive until the market turns around. The answers to this one can be discussed and debated about for hours. The short answer is that we all need to adapt and change. We can’t do business the way we traditionally have for the past several years; we must change our model and focus on the new opportunities that will open up. As one of my colleagues said to me, “deals are no longer being made from the middle of the fairway – they are all being made from out of the rough.” Furthermore, he said, “It’s now about gorilla brokerage.” I’m not sure I know exactly his definition of gorilla brokerage, but what I think he meant and I concur, is that it’s not enough to put a sign on a property and send out a few mailings in order to get activity. With fewer buyers, lessees, and a widening disconnect of expectations between buyers and sellers, it’s now the time to not only work harder, but also work smarter. The focus needs to be in working with clients who are motivated and have realistic expectations.
Day has turned to evening in Emerald Bay as I now sit with friends around a bonfire on the beach. As I gazed at the stars in the sky, I felt the cool ocean breeze on my face; I thought again of how lucky I am to be here. I have a wonderful wife, two beautiful daughters, and live in the most beautiful place in the world – Southern California. I also count my blessings for the privilege of being in the commercial real estate business. I think it’s one of the best professions in the world. It is a close-knit industry with fantastic people of high caliber and integrity; it offers unlimited opportunities for those with drive and creativity, and flexibility for life balance and self determination. Yes, it’s cyclical and yes we are now in a down market, but it’s still a good day at the beach.