This is the second half of a two part series on 2021 Commercial Real Estate Predictions and Insights. You can find the first half of this series here: 2021 Commercial Real Estate Predictions and Insights
Insight 4: An Industrial Real Estate Explosion
Whether it’s a retail conversion or new construction, there’s going to be a massive need for industrial real estate. With e-commerce being the top choice for shopping, we expect to see at least 250 million commercial square feet dedicated to industrial space in the coming years. According to CBRE, $1 billion in e-commerce revenue necessitates a need for 1.25 million square feet of warehouse space. So, all major cities will need expansive warehouses for packaging, storing and shipping consumable goods.
Prediction 4: Industrial Real Estate
Spacious, gateway areas close to ports and bustling cities (particularly in the southwest and southeast) are expected to see a surge in commercial industrial conversions and population growth. Population growth will likely boom with the onset of industrial expansion and greater job availability. But, it should be noted physical labor alone cannot accommodate the anticipated burgeoning growth. To maintain efficacy, streamline productions and reduce operational costs, industrial real estate lessees will depend on autonomous robots, software scheduling and updating and virtual security.
Insight 5: Socially Distanced Multifamily Living
In 2021, affordable housing is at the forefront of everyone’s mind. However, this won’t halt the demand for multifamily living. This year we anticipate multifamily investments to increase by 33% with over $148 billion in revenue. Shelter-in-place mandates made urban cities unappealing for many. Urban areas have turned into undesirable locations that suffer from high rent, high-cost public transportation, and other costly downsides. Additionally, dense populations often have inadequate indoor and outdoor space to social distance. When it comes to amenities, there are many unavailable or unusable entertainment “amenities” like restaurants, theatres, venues, etc.
After feeling the pent-up effects of the lockdown, many city dwellers (who likely work remotely now) have packed up and moved to less dense, suburban areas where they can stretch, relax in ample space. This is mostly to enjoy the natural amenities for the time being. Seeing many cities are not completely abandoned, multifamily investors working to retain tenants need to prioritize community engagement after the pandemic is over. Hopefully, this will make up for emotional connectivity and urban romanticism lost from in-person interactions.
Prediction 5: The Modern Multifamily Experience is Virtual
Multifamily investments in suburban and rural areas will likely grow as remote employees no longer need to live close to their work headquarters. For example with Salt Lake City, areas like Layton and Bountiful will likely be desirable locations. This is because they’ll offer affordable housing solutions that also await industrial prospects like warehouses and distribution centers.
While social distancing remains in effect, virtual engagement in the form of mobile apps will be a must for urban and non-urban multifamily complexes. App initiatives like polls, rewards programs and virtual meetups instill a sense of connectivity.
According to Deloitte, companies can continue to improve the value and connectivity of their assets. This can be done by “deploying smart building design and maintenance capabilities and offering more relevant services to tenants and end-users”. Such services include:
- Tenant-predictive analytics
- Smart-building technologies
- 3D property visualizations
- Facility and maintenance monitoring systems
Insight 6: Socially Distanced Vacations
While the demand for hotel and vacation space is steadily increasing, it’s going to take a while for hotel investments to return to pre-pandemic volume. The public is anxious to relax somewhere that’s not their home. But, they are also hesitant to vacation in once-popular, high-traffic areas. The rate of recovery for hotel occupancy is closely tied to the distribution of the COVID-19 vaccine.
For now, drive-to destinations like campgrounds, parks and natural attractions are popular alternatives to hotel stays. Interestingly enough, rural and interstate hotels do not have any issues with vacancies, compared to their urban counterparts.
Prediction 6: Hotels Will Have to Wait
While all varieties of hotels have experienced some form of loss from 2020 vacancies and closures, economy vacation real estate experienced the least amount of disturbance. We expect economic vacation investments to continue to face the least revenue, unfortunately. Additionally, we expect vacancy and recovery hurdles when compared to their upper-scale and luxury counterparts.
Hotels in urban areas that rely on business travel are expected to recover the slowest. Fortunately for urban, upper-scale and luxury hoteliers, business recovery is predicted to experience the sharpest incline of revenue per available room. However, this is once vaccinations are widely available. In the meantime, hotels can work on boosting their competitive edge by investing in the future of hotel vacationing with technology. Some desirable technological integrations are mobile apps and virtual on-demand entertainment.
Insight 7: The Reign of Colocation Centers
If you’re looking for a long-term, dependable commercial investment, consider colocation. E-commerce, cloud servicing and online content consumption are crucial to our workplaces, shopping experiences, living arrangements and vacation plans. Commercial real estate has a definite need for server and hardware storage to host all these vital services. So, it’s no wonder data center REITs are becoming a popular commodity within the commercial real estate market.
If you’re looking to sharpen your competitive edge, you should know enterprise companies want to maximize power and efficiency by looking for data centers with “clean energy” initiatives. Providing secure, stable, clean and environmentally-conscious data storage environments may be more than a marketable feature. Furthermore, it may also be tax-advantageous.
Prediction 7: Data Centers Aren’t Going Anywhere
We anticipate colocation tenants to look for flexible short-term leases in the foreseeable future. However, with online and cloud technologies driving innovation, commerce and networking, we assume they will eventually buckle down into long-term leases. These will likely be in affordable, budding, rural cities.
Our 2021 Commercial Real Estate Predictions
There’s a lot of promise for 2021 commercial real estate predictions. So, whether you’re looking to buy your first commercial real estate, improve your existing real estate assets, there’s sure to be an opportunity in the coming year. If you have any other questions, please feel free to contact our team. The SVN Alta team is here to help you so you can make a smart investment or have a great sale.
After the 2020 peak of the coronavirus pandemic, the commercial real estate market is ready for positive change and growth. This year, we expect to see auspicious changes within office, retail, industrial, multifamily and colocation spaces. All of these rely on investor abilities to adapt their spaces and services using technology. In this two-part series we are sharing seven exciting insights for 2021 commercial real estate predictions based on CBRE’s and Deloitte’s Market Outlook reports. In this first part, we will cover the first three insights. Part two will be published on February 11.
Insight 1: 2021 Commercial Real Estate’s Technological Leap
Almost a year after shutdowns went into effect, many remote companies are still figuring out how to balance home and work life. With the coronavirus still looming in our everyday life, social distancing, thorough sanitization and virtual connectivity remain a top priority among investors. Not to mention, these are priorities to employers and employees. With vacancies and short-term tenancies abound, investors are looking for ways to increase the value and attractiveness of their assets. This is all while recovering losses from the previous year. In an effort to reduce inefficiencies, streamline processes and cut overhead costs, commercial real estate investors are virtualizing many in-person tasks. Such processes include the digitization and automation of property tours, access and security. Additionally, this helps with amenities and industrial jobs.
Prediction 1: Commercial Real Estate Needs Tech to Thrive
Commercial real estate companies will accelerate their use of technology within their assets to improve tenant experiences, overhead processes and building maintenance workflows. Such improvements include the integration of mobile apps and cloud-based tools. These will help improve tenant experience and assist property managers.
Insight 2: Rethinking Office Space
In 2020, we observed a multitude of businesses shift to remote workflows, with commercial office investors racing to keep up and offset torrential losses. For 2021 commercial real estate predictions, the modern office space stands between the crossroads of flexibility, functionality and quality. According to Deloitte, companies are “incurring higher operating costs because of the additional health and safety measures they are implementing . . . operating costs could increase by at least [$19.4] per square foot.” This equals 5.8% of the average annual office rents at the beginning of 2020.
Flexibility with 2021 Commercial Office Space Leasing
When it comes to 2021 commercial real estate predictions around office space, investors should be cautious. As vaccinations roll out and public fear of the pandemic diminishes, companies are rethinking how and when they will use office spaces. The lockdowns and shelter-in-place mandates of 2020 showed many companies their employees don’t need a full-time physical workplace. Still, companies realize they need a physical workspace to promote company culture, host innovation meetups and conduct critical face-to-face meetings. To future-proof their assets against long-term vacancies, investors and tenant companies alike will need flexible leasing terms. Ultimately, this means increased rent rates and short, shared lease terms.
Multi-Concept Office Functionality
Considering the shared nature of flexible leasing, offices need to be adaptable for use by a variety of companies. Investors are looking for new ways to maximize the use-case potential of their office spaces by creating simple, modular offices. If a commercial office investor wants to make the most use of his or her asset, they should aim to address the needs of multiple industries. But, these should include with accessible, shareable spaces.
Enhanced Office Quality
In a time where remote work blurs the lines between work and home life, companies are also rethinking teamwork processes to design cohesive culture across remote teams. Among all the types of spaces, Class A properties will have the most demand for quality improvements. Commercial office investors can attract lessee companies invested in their employees’ wellbeing. Typically, this can be done by enhancing their offices with modern, clean and premium amenities. After a pandemic, such features include:
- Rigorous sanitation schedules
- Impeccable, monitored air-quality
- Open, airy rooms with lots of light and sunshine
- Contactless food and beverage stations
- Contactless office tools
Prediction 2: Vacant Office Spaces Rebound by Catering to Company Culture Initiatives
Dense cities with tech firms like San Francisco and New York are expected to see a continued decrease in demand for office space since employees are working remotely and moving to more affordable areas. Despite the increase in remote employees, suburban commercial office usage is still expected to return to pre-pandemic normalcy as communities restabilize. However, urban areas will rebound at a slower pace than the suburbs. In order to stay relevant and desirable, office companies must present their locations as safe hosting options for team-building and collaboration across a variety of industries.
For 2021 commercial real estate, we expect to see commercial office space scale the quality and use-case potential of office spaces with a multifunctional design. The most notable changes in office space for 2021 concern future leasing flexibilities, rent increases (to compensate for flexibility and 2020 losses), and contactless technological amenities.
Insight 3: Retail’s Mixed-Use Pivot
The most interesting commercial real estate evolving during this period is in relation to malls. Before 2020, many retailers were already shifting to e-commerce platforms. Additionally, malls were already undergoing a rapid decline in popularity. Then, the virus forced lagging retailers to adopt the e-commerce models or go out of business.
Malls are immensely promising commercial ventures for urban areas. However, converting them into mixed-use spaces requires a good amount of zoning law workaround. For investors, mall storefronts may need to adjust their usage to improve community engagement to combat the losses and costs incurred by storefront vacancies and rent drops.
For urban-dwellers, converting malls into community spaces like medical, grocery, recreation and cultural centers is an opportunity to address the growing demand for essential retail and housing, as well as create a safe gathering place to combat the isolation of social distancing. Some quick, adaptive features malls can put into effect immediately include:
- Contactless shopping flows like self-service checkouts
- Contactless entry and exit points
- Sanitation stations
- Delivery services for essential goods
Prediction 3: Urban Malls Repurposed and Suburban Shopping Resumes
There will be a decreased demand for retail space in dense cities and a moderate to large demand and growth for retail spaces in suburban areas. The difference in growth is largely due to the available amount of living space and population density.
Retail spaces in urban areas are expected to convert into essential retail storefronts within the next couple of years. With more room to spare, suburban areas should expect to see a natural rebound for all types of retail spaces, particularly experiential storefronts like shopping and dining throughout the year. There is no estimated timeline for malls to convert into mixed-use properties. Due to its complexity with zoning and local ordinances, it may be a long process that may outlast the hotel industry’s comeback (more on hotels starting at insight 6).
… Visit our blog again on February 11 to read the second half of this series. …
One of the great challenges for commercial retail spaces in 2021 is finding ways to get customers in the door. Whether restricted by social distancing mandates or simply stymied by an online ordering culture, brick-and-mortar businesses are facing challenges in attracting customers like never before. To continue to thrive, retail spaces must find ways to add value to the consumer experience above and beyond the products and services they house.
Fortunately, there are a number of trendy exterior renovation projects that can boost foot traffic in a retail space, creating the competitive advantage for which SVN has been known since 1987.
1. Simplify the Signage
Customers in 2021 have notoriously fickle attention spans. They do not want to spend time looking, reading, and thinking before making a decision. They want to see it, make their decision, and go on with their lives.
If a store features hard-to-read fonts and text-intensive messages as part of its permanent signage, consider simplifying this to something more digestible for a crowd that is likely to offer a cursory glance, at best.
Spend time developing a simple logo and brand and incorporate this as the focal point of the signage. When thinking about logos, ask the question: Would this make a good app icon? Subway and Best Western are two major retail chains that have recently modified their logos to be more app-friendly, with signage at physical locations being updated to match this change.
2. Add Some Architectural Decor
Although customers like the consistency of a simple, recognizable brand, there is something to be said about using individual creativity to catch the attention of passersby. The country is in a bit of a DIY renaissance, with custom craftwork and artisanship in high demand, so features that can make a business stand out in the midst of a cookie-cutter crowd can be beneficial.
Some creative decor ideas that can spruce up a retail space’s exterior include architectural grilles, ornate columns, and/or artwork made of recycled metals or other sustainable materials.
3. Improve the Parking Lot
A parking lot that feels unsafe, illogical, or is in a state of disrepair will be a major deterrent to foot traffic. Freshly landscaped islands, filled potholes, angled spaces, and re-painted space lines are all great ways to make a parking lot more inviting, an important first step in getting customers in the door.
4. Give Customers a Look Inside
Using a large display window or wall not only allows customers to see product offerings, but it can be influential in creating an open and inviting atmosphere that appeals to passersby. As contemporary retail shopping needs to be more of an experience than a buy-and-sell transaction to appeal to modern customers, giving customers the ability to look inside and see what value a business can add to their lives should be a primary consideration.
5. Make Accessibility a Priority
An important aspect of increasing foot traffic is making sure that a business can accommodate all potential customers. Without ramps, handrails, and benches to assist disabled clients, a business is immediately eliminated from consideration by this demographic.
6. Install an Automatic Door at the Entrance
Automatic doors make customers feel like they are getting the red carpet treatment. In addition, the accumulation of germs on door handles has gotten a lot of attention during the COVID-19 pandemic, so this small renovation can help make customers feel safe by ensuring a contactless entrance.
Getting customers in the building will be a riddle that contemporary retail spaces must continue to solve to remain relevant in 2021 and beyond. By using the six exterior renovation ideas listed in this article, businesses can increase foot traffic at their physical locations to secure the competitive advantage for which SVN is known.
Matt Lee is the owner of the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.
Owning a restaurant is an exciting business opportunity and it can generate great income over the years. As easy as it sounds, purchasing a restaurant space is an important task and it should be done carefully. Additionally, there are some factors you should take into consideration when you want to buy a restaurant. Proper planning of a restaurant is crucial so you can save on costs and make more profit. So, in this blog post, we cover what to consider when purchasing a restaurant space.
The Size of the Space
The size of the restaurant is definitely a key characteristic to look at. The square footage you need from a space depends on the type of restaurant you plan on opening. There is a rule of thumb we call the 60/40 rule. When it comes to restaurant size, this rule can make your space much more comfortable. This rule states the dining section of the restaurant is meant to comprise or occupy most of the space in the restaurant. To be specific, about 60 percent of the space should be allocated to dining, while the remaining 40 percent can be shared between the kitchen, storage, and other parts of the restaurant.
An example of spacing like this would be a restaurant that has about 7000 square feet. In this situation, 60 percent of the space (4,200 square feet) would be allocated to dining while 40 percent of the space (2,800 square feet) would be allocated to other sections, such as the kitchen or storage rooms.
The Style of the Restaurant
The style of your restaurant will go a long way in determining whether or not your restaurant will be successful. Unfortunately, there are many cases where the restaurant owner overlooks this factor, and they have to shut down. While the style might not be the entire reason they shut down, it could certainly be a contributing factor. So, your space’s style should be in line with the cuisine that is served at your restaurant. When a person goes to eat at your restaurant, they should feel as though they stepped into a different country, a classic American restaurant, or something else that would be appropriate to the style of food being served.
A typical example of this is when you go to a Chinese restaurant to eat a meal. In a case like this, the restaurant should have a classic Chinese culture feel. The space shouldn’t feel like an American sports bar or a Mexican cantina. It should feel as though it matches the menu being served. This can be accomplished through architecture or decorations. The style of the space truly matters when purchasing a restaurant location. Don’t overlook this factor.
The Parking Options
The parking ratio of a restaurant is another important factor that should be considered when purchasing a restaurant space. The main objective of a parking lot is to give customers a space to leave their cars when they visit the restaurant. Ensuring they have space to park will encourage them to come inside. How many times have you had to leave a restaurant because there wasn’t enough parking for your car? This is why it’s so important to provide enough parking at your restaurant. A typical parking standard for restaurants includes the following:
- <2,500 square feet of building territory – one space for every 100 square feet of a building region
- >2,500 square feet of building territory – one space for every 75 square feet of a building region
- If you have a food truck or a walk-up restaurant where customers don’t stay, allow one space to every 275 square feet of the building.
Having ample parking will ensure more customers come inside and can park their cars comfortably.
The Cost of the Space
When looking for a building to purchase, you must save money where you can. Purchasing commercial buildings can be costly, so look for ways to cut costs to be more profitable. When looking for ways to get a great building for less money, you can consider:
- Locating your restaurant in the suburbs: This is certainly a good idea if you plan to minimize costs. In the suburbs, you can find less costly buildings available for purchase.
- Locating your restaurant in an older building that you can renovate: The idea of doing this is brilliant. It saves costs and other expenses that you would have been burdened with if you had to purchase it. Locating your restaurant in an older building will give you the leisure to purchase other things to make your restaurant look way better.
- Locating your restaurant in a low tax neighborhood: Doing this is cost-effective. When a restaurant is located in a low-tax neighborhood, it saves money because the taxes you pay will be much lower. This can save you thousands of dollars every year. So, find a low tax neighborhood or ask your broker to refine their search to these areas.
Purchasing a Restaurant Space
When purchasing a restaurant, it is advisable to do proper research about the place you want to use. You also need to look for ways to reduce costs. Reducing the cost of your restaurant does not mean your space should be of low quality. It should still look great and feel welcoming to your customers. It is important for you to always have your customers in mind so they are more likely to visit your restaurant often.
If you are ready to purchase a restaurant space in the Salt Lake City, Utah area, please contact us. Our team can help you find the perfect space for purchase!
Purchasing industrial warehouses as investment properties is typically an excellent idea. Despite the uncertain circumstances caused by the coronavirus, industrial real estate still saw great success. Companies are always in need of warehouse space, no matter if they do in-person or online operations. With that being said, industrial warehouses are almost always occupied by a tenant, which means purchasing one is a great idea. In this blog post, we are going to explain what to look for in a warehouse to ensure it is a great investment.
What to Look For in Industrial Warehouses
When it comes to purchasing an industrial warehouse, the most important factor is location. It should be in an area where the tenant’s employees can commute to easily. This means near a larger city that has a significant population size. Also, it should be close to a major highway, so trucks can get to the loading docks with ease. This will encourage higher productivity rates as the truck drivers can pull off the road, load up the trailer, and get going again. Additionally, this can save your tenants excess costs, and can potentially get them more customers when they see their amazing productivity rates. When your tenants have success at your location, they will be more likely to stay in your space for several years.
The Size of the Industrial Warehouse
Another very important factor is the size of the industrial warehouse. Of course, you don’t want your warehouse to be too small to fit your tenant’s merchandise and employees. Or, you don’t want them to grow out of it within a year. At the same time, you don’t want your warehouse to be too large for your products and employees. This is why choosing the right size warehouse for your needs is so important.
To choose the correct size of your warehouse, you will want to take a look at which industry you would like to target. When doing this, you should consider what the booming industries are in the city or state you are purchasing a property in. Once you choose an industry, you will need to look at the average warehouse square footage needed. Your commercial real estate broker should be able to tell you this, and there are online resources to find this information. Then, look for warehouses that are around the same size, if not slightly larger. Being the option with the most space will prove to be desirable among tenants.
Consider Buying an Industrial Warehouse With an Office Area
Many of our clients choose to purchase industrial warehouses that include an office area. This is a highly valuable feature that many property owners do not think of. In almost every warehouse, there is likely a management team that handles business activities concerning finances, employee management, employee records, and more. This management team benefits from being at the same location as their employees, rather than having to drive from another location. When your property features an office area for the managers, it is much more valuable. You will save the tenant from renting out a second space, and you make it easier on the staff. Fit Small Business has an excellent layout on their website including an office space example.
Cost per Square Footage
Another important factor when purchasing industrial warehouses concerns budgeting. The cost per square footage depends on the property’s condition, as well as its location. There are many markets in which industrial warehouses are booming due to the low cost per square footage. However, there are other markets that are failing because of the price of buying and leasing industrial space. For example, in San Francisco, California, you can find industrial warehouses for sale for upwards of $320 per square foot (in mid-2020). However, in Memphis, Tennessee, you can find similar listings for under $20 per square foot. Clearly, in Memphis, you would have much more wiggle room to make a profit off of your tenant’s lease payments. In San Francisco, you would likely struggle to find a tenant who is willing to pay what it takes for you to make a significant profit.
Our office is in Salt Lake City, Utah, and we have many industrial warehouse listings. This post is being written in mid-2020, and we are seeing warehouses be sold at around $115 to $170 per square foot. However, these prices can go up and down depending on the market and seller, as do properties in other cities. But, as you can see, prices are subjective to the city and state you are in. So, be sure you take this into account before investing in industrial warehouses. You want to find a listing in a great area (which does increase the sale price), but also a listing that allows you to make a profit at a reasonable rate.
Purchasing Industrial Warehouses as Investments
At the end of the day, purchasing an industrial warehouse is typically an excellent investment. However, when you keep the factors above in mind during your search, you are much more likely to be happy with your investment. If you need the services of a commercial real estate broker in Salt Lake City, feel free to contact us. Our team would love to assist you and help you find a property that you can make a smart investment in.