Multiple Offers Come to Commercial Real Estate

Connecticut has been experiencing a lack of adequate supply in residential real estate for some time now.  It's what we call a "seller's market", meaning that there aren't enough listings to satisfy the demand.  This obviously pushes up prices and lowers time on the market.  It also leads to more than one offer at a time on certain listings, which hasn't happened with such frequency in quite a while.

Lately, we are seeing this trend in on the commercial side as well.  With certain types of real estate, especially warehouse and investment, there aren't enough properties on the market.  This is partially due to the fact that very little has been built in recent years, but changes in demand have also affected us.  

One such trend is the move out of bigger cities into smaller ones.  This has increased during the pandemic, and is leading to a resurgence for places where social distancing is easier.  Offices are less affected, because so many people are actually working from home.  Retail has been impacted by e-commerce.  Even industrial properties, though, have seen the uptick in demand.  

Location is also about proximity to larger markets, so it isn't just about where people want to live.  Our real estate is more affordable, and transportation is available to both Boston and New York. We have become very attractive to investors for these reasons, leading to an increase in multiple offers.

We expect this to continue, and we need more listings, in order to satisfy buyers.  Normally, summer would be slow, but that won't be true this summer. Fewer people are traveling, and more want to buy, rent, and sell before a possible second wave of COVID.  So think about your long-term goals, and call a commercial agent soon!

What Shape Will the Recovery Curve Take for Commercial Real Estate?

This is a somewhat misleading headline, since I am neither a professional economist, nor a seer.  The point I want to make, however, is that there is much more activity than there was after the abrupt economic debacle of 1987, or during the Great Recession of the late "Aughts".  In those two prior times, all interest in viewing real estate, or in buying or renting it, went on hold as soon as the stock market collapsed.  It took many years, in each case, to revive demand, or begin to create supply.

Right now, we are seeing strong activity in the industrial market, as well as demand in investment real estate continuing along.  Retail and traditional office buildings have clearly been harder hit, so it will take longer to see what happens in those sectors.  The fact that sales and leases are occurring, however, shows that this recovery won't be as delayed as the other two.  It may not mean that prices stay up, although we haven't seen that problem yet.  

One big factor is that some parts of the national economy, led by ecommerce, and followed closely by PPE manufacturers, have every reason to be expanding.  The pandemic part of this crisis, leaving the economic issues aside, have created opportunities for new businesses and expanded services.  Some of the current trends seem likely to persist, even if the country completely opens up by the end of the summer.  While things could certainly shift for a number of reasons, nimble entrepreneurs and corporate leaders are moving quickly to fill demand. 

The intervention of the government in the early stages may also mean that banks are more inclined to lend.  The relief provided so far gives financing firms more assurance that they will eventually get paid.  That wasn't true in the last recession, and it was recent enough that we seem to be remembering those lessons.  

Let's hope that I'm right, and that we see strong sales and leasing as restrictions lift.  Given our large role in the overall economy, that would be good news for everyone.

Connecticut's Slow Recovery

Recent press releases by those studying CT economics suggest that our recovery here still has a long way to go.  New Haven is first among 142 metro areas as a buyers' market, meaning that prices are still flat or declining, making it a good place to buy.  This is a little misleading, because the flip side is that prices never went down the way they did in places like Arizona and Florida, which are at the top of the list as far as sellers' markets go.  The reason is that they have little inventory now, and low prices.

We are also near the bottom on a national basis for recovery statistics.  Our unemployment is at 8.8%, vs. 7.7% nationwide.  Our state has only recovered 25% of the jobs lost, as opposed to 52% nationally.  A list of states by recovery amount puts us 46th.

The most interesting thing about these facts to me is that we are busy in commercial at Pearce!  I have been meeting this week with agents, and they are mostly very optimistic and have a lot going on.  We will finish the year at least double last year's totals, and have some fairly big transactions left to close in early 2013.  I am also getting inquiries about commercial real estate as a career, and have hired two agents in the past month.  That hasn't happened in a long time!

What this suggests is that the Pearce results may reflect market share increases, as opposed to market increases, but that the sector is primed to take off, and that 2013 will be an even better year.  So it won't be a buyers' market for long--act now!