Category: Commercial Real Estate

Commercial Real Estate Outlook 2020 

Image of downtown San Diego

With a pandemic-induced recession still looming large in the United States, reports such as the Allen Matkins and UCLA Anderson Forecast provide valuable insight into the current state of commercial real estate. Here are some takeaways:

Office Space Markets

The survey looked into trends surrounding working from home and how this impacts office space demand. Will an increase in work from home setups decrease demand for office spaces? It appears that the answer is not as straightforward. Factors such as what industries are currently hiring (tech and finance) and which ones will ramp up hiring in the future (health care) need to be considered. The survey also notes that:

“Although half of the Bay Area and Southern California panelists said their plans for the coming 12 months were unaffected by the pandemic, one-third are ramping back development by more than 15 percent from their previous plans. Overall, 75 percent of panelists expressed some stress with current tenant leases. For the one-third that will engage in some new development, the panelists in each market believed that land, building materials, and labor costs would be more favorable.”

Developments are projected to be on the rise beginning in late 2021.

Retail Space Markets

One of the hardest hit industries during the pandemic has been retail. Workers could not come in, there was loss of income so consumers have little to spend, and consumers in general have increasingly been turning to online shopping thus affecting brick-and-mortar stores. Here’s what the survey says regarding retail space markets:

“In the Bay Area and Southern California, two-thirds of panelists will not develop any new properties in the coming 12 months. Approximately the same percentage expect difficulty with current leases and expect plummeting property values.”

New retail development projects are still happening but there is a significant decline.

Industrial Space Markets

While panelists from the survey are generally pessimistic about the retail markets, they believe that the demand for warehouse spaces will still see steady growth. 

“Sixty percent of the panelists in Southern California and 43 percent in Northern California are planning at least one new development in the next 12 months, and 39 percent and 29 percent are planning multiple projects respectively.”

However, “[i]f If the demand for warehouse space and the stock of warehouses are increasing at about the same rate as projected, then 2023 will see a mild erosion of rental rates when adjusted for inflation, and there remains the possibility of some erosion in occupancy.” The outlook for industrial spaces leans towards a more balanced one. 

Multi-Family Housing Markets

In a previous UCLA Anderson study, there was a contrast between Southern California and Bay Area development growth rates. Panelists predict that with economic recovery and growth, multi-family housing demands in both Southern California and the Bay Area will increase with it. 

“Though the UCLA Anderson Forecast is looking at a 30-month recovery in the state, and there remains a great deal of uncertainty with regard to the current public health crisis, the market for multi-family housing remaining robust seems likely. Indeed, in spite of the turn-around in sentiment from each of the six panels, almost three-fourths of the Southern California panelists and two-thirds of the Bay Area panelists stated that the pandemic had either not changed their plans for future activity or increased it.”

The survey concludes with a hopeful take. Jerry Nickelsburg, UCLA Anderson Forecast Director & Senior Economist, notes that “this survey is not what is going on now, but what is going to go on three years from now in 2023. Across these spaces, with the exception of retail, there is certainly some optimism about opportunities that may exist.”

Your Southern California Real Estate Attorneys

If you or your business need legal counsel regarding your commercial space, our real estate law firm can help. Hoffman & Forde’s real estate attorneys have years of experience handling commercial real estate cases and advising business owners about their rights and responsibilities. Schedule a complimentary consultation today and tell us how we can help.

Can You Renegotiate Your Commercial Lease?

Nobody should be kicked out of their storefronts in the midst of a public health crisis. During these unprecedented times, it’s important to find every way to cut down on expenses and still keep your gym, restaurant, salon, or other commercial space. Thankfully, local governments have recognized this and issued moratoriums to halt evictions. With rent being one of the biggest expenses for business owners, now is the time to renegotiate your lease to help keep your business afloat.

In places like San Diego, county officials have approved a resolution that creates a moratorium on “all evictions of residential and commercial renters in the unincorporated areas who have seen their income reduced or been otherwise substantially economically harmed by the COVID-19 pandemic.” The moratorium will last through May 31. Los Angeles county announced their moratorium on evictions also lasting to May 31 and in the city of LA, tenants have 12 months after the moratorium is lifted to pay back rent. Several Orange County cities have also approved their own moratorium for both residential and commercial tenants.

When should I renegotiate?

The short answer? Now is the time. With the law on halting evictions in place for Southern California businesses, legal counsel will ease the negotiation process in a way that is mutually beneficial to you, your lender, and your landlord. Business struggles, market changes, or impending lease expiry are typical situations in which business owners seek to adjust their lease terms. The pandemic hits all of these factors and it would be wise to renegotiate before you are even further behind on payments.

Does renegotiating mean I don’t have to pay rent?

During this time you must be able to provide documentation of financial hardship due to COVID-19, and tenants are not exempt from payment. Different counties will have payback options once the moratoriums are lifted for missed payments. At the end of the 60-day moratorium (which may or may not be broadened), you are still at risk of eviction. Preparing to modify your lease terms now could impact your repayment as you and business recover.

We want to help protect your business.

At Hoffman & Forde, our lease negotiation attorneys are experts at real estate law and policies. Negotiation is an art and we have mastered it, yielding fruitful results for our clients. Our commercial loan modification program has helped our clients keep their properties and meet the cost of operations in the past, and we can do so even now. Leave the tedious, exhausting and potentially confusing commercial real estate negotiations to us and put your mind at ease.

We’ll put together a solid game plan to make sure you get a fair negotiation that will impact your business not just now, but also beyond the pandemic. Call us today to see how we can help.