CRE Brokers, Changed By The Pandemic, Look Ahead To 2022
Commercial real estate brokers were not immune to the business disruptions of the pandemic. But while change can be difficult, one seasoned observer suggests the impact has been a net positive for professionals in his industry.
Brokers adapted by putting new skills to work and, for some, rethinking their career options. As a result, many became more self-sufficient, said Clifford Moskowitz, North American executive vice president for NAI Global.
“The pandemic gave brokers, most of whom are fiercely independent, a greater sense of autonomy,” Moskowitz said. “Rather than relying on a support team, many embraced technology tools such as marketing/listing, presentation and video/photography software and performed those tasks themselves.”
The NAI Global network includes more than 300 independently owned brokerage offices worldwide. That puts Moskowitz in a prime position to observe many of the trends impacting CRE brokers today. Many of them, he said, began to rethink their relationships with brokerage firms during the pandemic.
“Some brokers that generate their own business are questioning whether they need to give up a large percentage of their income in traditional firm splits and instead are exploring other options,” he said.
Moskowitz said he is not surprised by a recent study that found brokers are increasingly optimistic about their careers.
“2021 was a record year for network transactions for us, driven primarily by industrial requirements and investment sales,” Moskowitz said. “I believe 2022 will be strong again for certain asset classes, although possibly a bit tempered compared to 2021 as some of the backlog from indecision in 2020 has been met.”
As always, Moskowitz said, the top challenge for brokers in 2022 will be to “find that next deal.” Bisnow spoke with several of his colleagues at NAI affiliate offices across the country to learn their thoughts on the past few years and what lies ahead.
A Career First
The industrial market boomed during the pandemic. Jim Caronna, a principal at NAI KLNB Commercial Real Estate Services in Baltimore, expects that trend to continue in 2022.
“There will be a carryover of the strong demand and limited supply that the market experienced in 2021,” Caronna said. “In some pockets of my market, from June 2021 to December 2021, rates increased 20%. I’ve never seen anything like it in my career.”
To Steve Pastor, a vice president at the NAI James E. Hanson office in Teterboro, New Jersey, the big story of 2021 was supply chain disruption. He expects it to continue into 2023, even as companies look for facilities close to U.S. ports and domestic intermodal facilities to save on transportation costs.
“The supply chain disruption is probably the greatest contributor to the inflation we are experiencing,” Pastor said. “The situation might improve in the second half of this year but keep your expectations in check.”
An Erosion of Profits
It has been a tough couple of years for hotels, and yet Steve Martens, president of NAI Wichita in Kansas, said some of the firm's hospitality clients performed better in 2021 than in 2019. In 2022, he added, hotels in parts of the country that didn’t shut down during the pandemic — such as Florida and Texas — are doing better than markets that endured closures. But that doesn’t mean they have avoided all pandemic-related setbacks
“The challenge now is that while revenue is up, increased operating costs are eroding profitability,” Martens said. “Part of it is employee turnover and training, which is affecting a lot of industries, not just hospitality.”
Obituaries For Retail Are Premature
The past two years have been tough on brick-and-mortar stores, but don’t count retail out.
Jay Blacker, retail specialist with NAI Excel, Lehi, Utah, put it succinctly: “Retail is not dead. It is adjusting and many retailers are improved and stronger now.”
Brian Luft, executive vice president with NAI Capital in Los Angeles, said he senses increased optimism in both the retail and restaurant sectors.
“The second half of 2021 generated a lot of momentum in retail real estate,” Luft said. “Meanwhile, demand for restaurants in the 1,500 to 2K SF range is extremely competitive as there is a very limited supply.”
The Very Slow Return To Office
Office market conditions vary across the country and some regions have clear advantages in attracting tenants. Jeremy Larkin, co-chairman of NAI Miami, said South Florida is attracting interest from New York businesses seeking secondary offices.
“Zero percent state and local income taxes is a big draw,” he said. “Also, the mayor of Miami is leading an aggressive campaign to attract tech companies to South Florida, and it is working.”
The situation in other markets is tougher. Indianapolis, for instance, “has not fared well during Covid,” said Andrew Follman, vice president and business manager for NAI Cressy.
“The broad consensus among the brokerage community is that we anticipate the hybrid work model to remain for quite some time,” he said. “Rate and absorption figures will reflect this reality for the duration of 2022. Tenants will navigate to the best of their ability relative to lease expirations and growth trajectory, while landlords will be left to strategize with respect to asset life cycle.”
In Cincinnati, Laurence Bergman, CEO of NAI Bergman, said the pandemic prompted his office to take an alternative approach to a 100K SF office building it owns downtown. NAI Bergman is offering short-term leases in the building for offices of between 700 and 4K SF and is open to doing one-year deals. This makes the space more attractive to tenants with hybrid work arrangements.
“There always seems to be demand for small office space in good locations and near urban amenities,” he said.
This article was produced in collaboration between Studio B and NAI Global. Bisnow news staff was not involved in the production of this content.
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