Commercial real estate is a dynamic industry that’s constantly evolving. In California, the industry has experienced some significant changes in recent years, with the emergence of new trends that are transforming the business landscape. As a commercial real estate investor, it’s essential to keep up with these shifts and stay informed of current market conditions.
At Bell Properties, we’ve been the leading Southern California property management company for years, and our experience inside the local market and as leaders in the industry give us a great foundation from which to make predictions and highlight trends.
Here’s what we’re seeing.
Market Shifts in Southern California Commercial Real Estate Investments
It’s tempting to take a look at the real estate market and view it on a general, and macroeconomic level. There were a lot of experts who promised a recession last year. It never really materialized. There has been a lot of chatter about interest rates, but no one except the Fed really knows what the Fed is going to do.
Here’s what you need to remember: the real estate market is actually quite local. It’s not really a good idea to make predictions and trends without paring it down to the part of the market that impacts you and your investments.
Keep an eye on national and even global trends - but remember that what happens here in Southern California is really what’s most important to you as an investor here.
There are also market-specific trends that are completely dependent on the types of properties we’re talking about. With remote working being so popular, for example, commercial investors who rent out office buildings have had to be especially creative.
While there are a number of nationwide trends that are hard to ignore, it’s important for investors to focus on their local markets and the nuances that come with them.
No one can predict the future. But, experts like us at Bell Properties can study the trends. We can get to know what’s happened historically. We can carefully track shifts in the market, but we don’t really know what’s coming at us next.
That doesn’t mean we aren’t preparing for multiple scenarios. We’re making judgment calls and decisions based on what markets have done before, what Bell Properties expects the commercial real estate landscape to look like in the future, and how consumers are responding to inflation, higher prices, and a little bit of uncertainty.
Partner with a Southern California commercial property management company, like Bell Properties if you have not already. This will make a huge difference in your success now and in the coming year. The data and insights we’re able to collect can help you make better decisions about your properties as well as your investment goals.
Commercial Investments and the Rise in Demand for Flexible Workspaces
Let’s get started on one of the most significant trends in commercial real estate, which is the increasing demand for flexible workspaces.
For a while, many “experts” thought that office buildings would never recover. So many people began working from home (and continue to), that it seemed impossible for commercial real estate investors to ever make money from office space again.
This is proving to be not exactly true. It’s not that tenants don’t want office space. It’s more than they need flexible office space.
Startups, freelancers, and small businesses are looking for alternative office environments that provide more flexibility and affordable rental rates than traditional office space. Coworking spaces are fulfilling this demand, and they have taken the commercial real estate industry by storm.
If you’re looking for a new investment option that promises lucrative results, think about coworking space. Yes, WeWork, one of the shining stars in this industry, recently filed for bankruptcy. However, that has more to do with internal operations than consumer demand.
According to our data, flexible workspaces in major California cities have grown by about 25% annually over the past five years, and this trend is expected to continue. As a result, commercial real estate investors should consider investing in coworking spaces or repurposing existing spaces to meet this growing demand
Ongoing Evolution around Retail Spaces
Retail spaces have also needed to be flexible over the last decade or so. Everyone is ordering what they need online, and thanks to services like DoorDash and UberEats, those things can be delivered on the same day that they’re ordered. Why are retail spaces even necessary?
Because there’s still demand, although that demand looks a little different, now.
Retail spaces have undergone a significant transformation over the past few years. With the rise of e-commerce, brick-and-mortar retailers have had to adapt to stay competitive. In California, retail spaces are shifting towards providing experiences, rather than just products. Retail destinations are moving towards becoming more entertainment-focused with components such as cinemas, arcades, bars and restaurants, and fitness facilities. Commercial real estate investors should be aware of this trend and consider investing in retail spaces that offer more than just retail.
This can work for you if you’re willing to think outside of the box and rent your commercial retail space to a diverse pool of tenants. Event organizers, for example, may want seasonal space. Provide it. When you stay open to the new trends and you’re adaptable to the needs of new tenants, you’ll find you can continue being successful as a real estate investor who focuses on retail space.
Commercial Tenants are Thinking about Sustainability
Another major trend that’s easy to miss if you’re not paying attention? Going green. Bell Properties predicts that in the coming year, there will be an even higher demand for sustainable spaces. Especially when we’re talking about Southern California commercial property. Our local tenants are more concerned than ever with climate change, recycling, energy efficiency, and cutting down on toxic chemicals.
Green and sustainable building practices have become a top priority in the commercial real estate industry. California has been at the forefront of sustainability efforts, with the state mandating that all new commercial buildings must be designed to meet green standards.
As a result, commercial real estate investors who want to maintain long term value must invest in sustainable buildings. Although the initial costs of building sustainably may be higher, the savings in the long run can be significant, not just for the environment but also in operational and maintenance costs.
Technology Advancements to Assist Commercial Properties
With the advancement of technology, commercial real estate investors must upgrade their properties to meet new demands. Smart technology like Internet of Things(IoT) devices, Artificial Intelligence(AI), and Big Data can help commercial real estate businesses better understand their customers and spaces, provide extremely efficient and secure building operations and unlock new efficiencies in cost management and energy savings.
Have you tried ChatGPT or any similar AI? If you use Gmail, you may have noticed that Google is now offering to write your emails for you. Every website you click on seems to have an idea about what you want to do there. AI is here, and it’s quickly being normalized. This can be a source of contention among people who argue it’s out to get us, but it can also be a huge opportunity - especially for commercial investors.
For Southern California commercial property managers, Bell Properties knows that it can help us do our jobs and serve our owners and tenants more efficiently. AI has improved systems and saved time in very non-invasive ways.
AI automates tasks such as responses to questions, but it’s not going to replace your live property manager. Human connection is still critical, especially in our industry.
This is more than a trend. AI will likely be used more consistently by property managers, real estate agents, leasing agents, and even vendors and contractors. There’s a lot it can do to help with more automated functions.
The artificial intelligence we use in property management can quickly process large amounts of data. There’s more data than we can possibly make sense of as humans. The machines we utilize can process it right away and that will help us with things like pricing your property better and screening your tenants more thoroughly and consistently.
Perhaps what investors will find most interesting is that costs are minimized with AI. There are also fewer errors and oversights.
Commercial real estate investors who keep up with industry trends and anticipate future shifts stand to benefit significantly in the upcoming year. We’re here to help when you have questions or you want to leverage yourself and your properties to benefit from these trends and predictions.
Being aware of coworking trends, understanding the evolution of retail spaces, building for sustainability, upgrading to smart technology, and incorporating unique amenities that your commercial tenants will find beneficial can make a real estate investment more appealing to a range of business needs. By exploring and anticipating these trends, investors can adapt their strategies, capitalize on opportunities, and ultimately enjoy long-term success in the commercial real estate industry.
Let’s talk about what all of this means for you and your Southern California commercial investment property. Contact us at Bell Properties Commercial Real Estate.
