Commercial real estate facing office densification, taxes in 2013

Commercial real estate always has been an industry with proverbial hills and valleys. But the past several years, the hills have been higher, and the valleys have been lower than they have been in many decades. As we enter a new year, Commercial Real Estate Women members are reflecting on the past and predicting what the future may hold.

Jill Hogan, CREW’s director of marketing communications and a vice president with West Coast Retail Management, weighed in on the biggest winners and losers in commercial real estate in 2012. Tenants who were active in leasing retail space in the past year probably came out on the winning side, especially if their businesses were inflation-proof (think discount stores), according to Hogan.

“Lessors have been eager to attract and retain quality tenants,” said Hogan, whose company manages shopping centers.

Mom-and-pop businesses that do not have deep pockets or that just cannot compete for the budget-conscious consumers have been hit hardest, according to Hogan.

“While some have been able to adapt or even renegotiate their lease in order to survive, many have been forced to throw in the towel," Hogan said. "However, this is often how markets recalibrate after prolonged periods of growth. It was probably never a great idea to have four frozen yogurt shops on one block to begin with, but it still hits those who put their life savings into running that yogurt shop very hard.”

Allison Beall, CREW’s immediate past president and director of business development for Pacific Building Group, a large local construction firm, won a national award in 2012 from CREW Network for her outstanding abilities in creating working relationships with and for other CREW members. When asked if relationships were more or less important in 2012, she said, “Having built a strong platform of relationships over the past five years, it was easier and even more important to leverage those relationships this past year in order to differentiate Pacific Building Group.”

It is important to create value for one’s core network of people by proving to be a resource of information, introductions and quality services, according to Beall.

“Ultimately, we all look to surround ourselves with people who make our own jobs easier,” she said.

While many industry pundits believe that commercial real estate is starting to climb out of the valley, 2013 will not be without challenges. Kellie Hill, CREW San Diego’s new president and a vice president at Cassidy Turley, predicts that new realities in the industry are bringing new issues to the forefront, including the densification of office occupancy.

“This has occurred for a variety of reasons, chief among them, cost savings and the move to collaborative work environments,” Hill said. “With the increased density, many properties — suburban locations in particular — have run into parking capacity issues.”

To help its members deal with the issue, CREW will be holding a program focusing on the new dynamics of parking in March. Public officials, owners, developers, managers and construction firms will discuss outlooks and solutions.

Taxes are also on Hill’s mind. Proposed tax hikes could impact small businesses.

“This would likely translate to a negative for the industry in that investment in both real estate and the companies that lease real estate would be reduced,” Hill said.

In response to the looming threat, CREW members were being encouraged to become politically active by communicating with their senators and congressional representatives to encourage them to keep tax increases down.

With the new year comes new opportunities. CREW San Diego is planning multiple events for 2013 that will provide commercial real estate professionals with the skills and information they need to succeed.

Warren is president of TW2 Marketing Inc. and provides public relations support to CREW San Diego.

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