Ecommerce is Still on the Rise

A recent article about retail sales in the New York Times indicated that, while online retail--especially Amazon--had done very well during the pandemic, it still only amounted to about a quarter of retail sales.  That has some interesting implications for commercial real estate in Connecticut.

Given our location between Boston and NYC, and our high average income within the State, it stands to reason that, if ecommerce has not reached its peak yet, our warehouses, flex spaces, and raw land should do well in the future.  Distribution is the key to timely deliveries, and the ability to get something within a couple of days is a key factor in deciding whether or not to buy it online.  Whether goods are traveling further up into New England, or being delivered to homes around us, there will need to be warehousing available near our highways, railroads, and airports.  

Although our roads and bridges have been a challenge for trucks and overland traffic, Governor Lamont's call for a stronger focus on infrastructure, combined with President Biden's emphasis on the same, seem to point to a brighter future for distribution in and through Connecticut.  Smart buyers will begin to develop properties that have been languishing, and take advantage of changes coming down the pike (pun intended!).  Even if there is only a small continued shift toward home delivery, the amounts in question are enormous. Those developments should get filled, and provide income for the owners well into the next economic cycle.  

Commercial Real Estate Loans Coming Due

2012 marks the year when many, many commercial real estate loans, written at the craziest height of the market, are coming due or need adjustment.  Although there has long been talk that such an event would cause huge disruptions in the market, the economy seems to have improved enough to allay those fears somewhat.  However, there are definitely loans out there that should never have been written.

Today's New York Times cites one such loan, that made wild assumptions about the increases in NYC rents, the ability of an owner to do condo conversions, and the lack of any increases in operating costs.  Viewed through the lens of the past five years, all that comes to mind is "What were you thinking?".  But isn't that always the way the cycles go?  It does often seem that the life cycle of a banker is just slightly shorter than an economic cycle, so that we are always repeating the same mistakes.