Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/923123
COMMERCIAL INVESTMENT REAL ESTATE 16 January | February 2018 T iming the economic cycle correctly means everything for the success of commercial real estate construction projects and acquisition decisions. Having insight into applied economics and how it relates to real estate is critical. It is widely recognized that 11 basic sectors comprise the major industries worldwide, including consumer staples, energy, finan- cials, healthcare, industrial, IT, materials, real estate, telecom- munications services, and utilities. Among each major sector, more than 50 specific industry groups are derived. Commercial real estate professionals need to understand those sectors and how their respective industry groups expand and contract independently of each other. To make predictive invest- ment decisions, they also must evaluate the effect of supply and demand, technology supply chain, and the availability of capital. Industry Shifts An example of the predictive applied economic analysis approach is the explosion of online orders through Amazon. This has resulted in huge demand for distribution and fulfillment ware- house space worldwide. For instance, the Inland Empire region of southern Cali- fornia is one of the leading U.S. industrial warehouse markets, with millions of square feet of warehouse space. Due to strong demand, some speculative properties have been built. As one of the main distribution hubs to the western U.S., the Inland Empire receives imported goods through the Port of Los Angeles, which is the busiest port in the U.S. Due to the lack of existing warehouse space and infill in the Los Angeles and Orange County markets, opportunities for developers in the Inland Empire have flourished because of good transportation corridors and abundant low-cost land. Further analysis shows that the increased demand for indus- trial space also creates the need for more trucking facilities, pallet yards, building supply locations, and equipment leasing yards, which benefit from the increased demand in just one market sec- tor. This example shows how synergistic economic relationships and the destructive effects of expansion are important concepts to understand and take into consideration. The destructive aspect of expansion in online orders and technology is the loss of retail jobs and many large retail buildings going dark. Opportunity, however, is created for adaptive reuse of those dark centers. Many malls now house municipal and government entities, pop ups, and even indoor swap meets. Thatree Thitivongvaroon INVESTMENT A N A LYS I S Applied Economics Look at the obvious and not-so-obvious economic factors to achieve better outcomes. by Nathan Bragg