California residents have no doubt heard about the United Kingdom's decision to exit the European Union. After the Brexit vote was tallied, the U.S. stock market had a decidedly negative reaction to the event as stock prices went down on June 24. However, shares of real estate investment trusts went up after the Brexit vote.
A multinational investment firm based in California has predicted that commercial real estate values around the country are set to fall by as much as 5 percent in the coming 12 months. Pacific Investment Management Company made the prediction in a report released on June 20. The firm says that stricter regulations and a wave of maturing debt are fueling a developing storm in the commercial property market.
Commercial real estate investors may be aware that the retail sector has been having problems since the recession and has still not fully recovered. However, the recession alone is not to blame. The rise of Internet shopping has also been a significant factor and has been at least partly responsible for the closure of such familiar retailers as Blockbuster and Borders Books, both of which had a significant California presence.
In early June, the National Association of Real Estate Editors met for its 50th annual conference to discuss 2016's top real estate trends in California and nationwide. Some of the hottest topics included the decline of the starter home, the rise of the "semi-suburb" and the impact the sharing economy and technology are having on the real estate industry.
Whether shopping for new appliances or clothing, many people in California look online before going to a physical retailer. The trend toward online shopping is a likely reason why retail vacancy rates are high. In fact, vacancy rates for retail stores in metropolitan areas are almost 3 percentage points higher than they were before the recession.
Real estate developers in California and around the country are discovering that many of their office tenants now favor casual mixed use spaces with added amenities over traditional office buildings with imposing lobbies and strict security. A sign of the growing popularity of office sharing is the spectacular rise of New York-based WeWork, which was founded in 2010 and has become a $16 billion company in just six years.
California real estate investors and regular savers may be able to help each other out by avoiding people in the middle. An investor has several typical options. One is a long-term rental mortgage. A passive investor might fund a mortgage in this case. Another is a wholesaling investor purchase-to-sale. This requires funding to purchase the property for a short time until the close. The third is fix and flip investing in which the purchase price and the rehab cost must be funded.