Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Jason Kelly on Bloomberg Radio. So that's going on certainly
Speaker 1: to say the least virus market itself. Yet companies, investors
Speaker 1: still making decisions, and that includes in the commercial real
Speaker 1: estate market. Gil Barock is US president and CEO of
Speaker 1: Colliers International, usually based in Los Angeles, but he's here
Speaker 1: in our Bloomberg Interactor Broker studio on this Thursday. I'm
Speaker 1: nice to have you here with us. Thank you. So
Speaker 1: what I don't know how do you and your business
Speaker 1: kind of pulled together as you walked in, Like wow,
Speaker 1: what a week between the market sell off concerns about
Speaker 1: the virus. I think we're all now do we have
Speaker 1: to reassess with the market and economic outlooker for the
Speaker 1: rest of the year. So how do you kind of
Speaker 1: take account of it? So I look at something like
Speaker 1: coronavirus as a macro event, and always in commercial estate
Speaker 1: of relative to commercial real estate services, when you look
Speaker 1: at the macro event, whatever it is, whatever it's been historically,
Speaker 1: you generally will get a short term sees up and
Speaker 1: then things normalize. Now I don't know what's going to
Speaker 1: happen with coronavirus, not none of us do. We don't
Speaker 1: know how far it's going to spread. That's the nervous factor.
Speaker 1: But but things do tend to become clearer with time.
Speaker 1: Some of what the CDC has said this week is
Speaker 1: very new news to most of us, so we don't
Speaker 1: quite know how to react. But the one thing I
Speaker 1: do know is when you have a macro event like this,
Speaker 1: things do calm and generally you'll see the market sees up.
Speaker 1: You may see some deals be put on hold, and
Speaker 1: then it as long as things pan out in a
Speaker 1: relatively organized and orderly fashion. Um things, everything else in
Speaker 1: real estate normalizes as well. Deals get that nothing change.
Speaker 1: Yet nothing's changed it. It's very early days, right, especially
Speaker 1: have any deal has been kind of stopped because are
Speaker 1: delayed because of all this? Not that I'm aware of.
Speaker 1: Been around the world because you guys are huge, not
Speaker 1: that I'm aware of. But yes, overseas, I have heard
Speaker 1: instances here and there of of things being deferred. Okay, Um,
Speaker 1: but that is not close for consternation because that's a
Speaker 1: very normal reaction. Why the why is the stock market
Speaker 1: down that? Because we don't know. Right, let's talk about
Speaker 1: your world, the US especially, and sort of pockets of
Speaker 1: strength and weakness. We talk a lot on this show,
Speaker 1: and we think about demographic trends, We think about financial
Speaker 1: trends in migration, you know, sort of people moving around,
Speaker 1: companies moving around. You're in Los Angeles, normally we're here
Speaker 1: in New York. These are places that, to some extent
Speaker 1: are becoming less popular in some cases. We hear a
Speaker 1: lot about Nashville, We hear a lot about Austin, Texas
Speaker 1: and other places. What sort of trends do you see
Speaker 1: out there? Yeah, you know, when things get expensive and
Speaker 1: gateway markets, the natural progression and people are confident, the
Speaker 1: natural progression is to go where stock office stock or
Speaker 1: or whatever industrial retail, whatever it might be. Whatever you're
Speaker 1: buying back office, you tend to go where it's cheaper, right,
Speaker 1: where it's more efficient. Um, And we've had some really
Speaker 1: good markets for a good long while now. So gateway
Speaker 1: cities are are more expensive, and that's in part why
Speaker 1: you see expansion. The deal is to be had somewhere
Speaker 1: other than New York or l A. Of course, New
Speaker 1: York l A cities like that are always going to
Speaker 1: have a level of activity just by the size of
Speaker 1: the population and the demand it creates. How's the build
Speaker 1: out and that, you know, in terms of new properties
Speaker 1: coming out for the for the commercial real estate market,
Speaker 1: what kind of activity are we seeing. There is activity
Speaker 1: depending on where you are, but there's no over building.
Speaker 1: We learned that generally speaking, we learned that lesson a
Speaker 1: long time ago. Of course, when there's demand, uh, you
Speaker 1: get building. Building takes a little while, and that's when
Speaker 1: you sometimes get into an oversupply situation because you don't
Speaker 1: have perfect vision. But generally speaking, there's not an over
Speaker 1: building situation. One of the elements of the commercial real
Speaker 1: estate market, the real estate market at large that we've
Speaker 1: talked a lot about from the private equity perspective, from
Speaker 1: the public equity perspective is sort of the industrial side
Speaker 1: and the power of Amazon and other very logistics heavy
Speaker 1: type companies that they've had. We've seen a lot of
Speaker 1: investment go in there. What's your take on that, Yes,
Speaker 1: that is true. Um, what I would say is that's
Speaker 1: where we start to talk about things like the blending
Speaker 1: of industrial real estate and retail. So so when you
Speaker 1: look at an Amazon a warehouse that's strictly for Amazon
Speaker 1: distribution is that retail or is an industrial I can
Speaker 1: tell you it used to be industrial, right, and traditionally
Speaker 1: you would call it a big they're bigger than than most.
Speaker 1: But it's a big industrial warehouse. But it's essential for
Speaker 1: that last mile of delivery, which is ultimately a retail
Speaker 1: concept selling to an ultimate consumer. Um that that that
Speaker 1: warehouse needs to be close to usually in an in
Speaker 1: an industrial area, traditionally industrial area, but really for the
Speaker 1: purpose of not manufacturing but retail. So there's a blending
Speaker 1: there for sure. And Amazon is the largest retailer right
Speaker 1: at this point, and it's convenient and it's here to stay.
Speaker 1: But that doesn't mean I should make this comment. It
Speaker 1: doesn't mean the demise of traditional brick and more no retail, right,
Speaker 1: but what are the not But but so, what are
Speaker 1: the implications of that for the mix that maybe a
Speaker 1: real estate investor has. Are you seeing people sort of
Speaker 1: leaning more heavily on what, as you say, was more
Speaker 1: traditionally industrial and and maybe better known now is like
Speaker 1: logistics type of opportunities. You have a lot of interest
Speaker 1: in industrial real estate for sure, probably more than your
Speaker 1: data storty because demand is right, So it's sort of a.
Speaker 1: It's a it's it's it's it's the cycle cycle of life.
Speaker 1: If you have a cycle of commercial real estate life.
Speaker 1: Um but Q Lion King here we go, very funny,
Speaker 1: but what but but some as you know, some investors
Speaker 1: you know, have a food group industrial retail that they
Speaker 1: focus on and that's all they do. The largest shops
Speaker 1: tend to look at old food groups. And then you
Speaker 1: do have things that change. Well that we used to
Speaker 1: be industrial were no longer an industrial and those are
Speaker 1: just you know, individual choices that are made. But but
Speaker 1: industrial is the hot thing right now. We're listening to
Speaker 1: Bloomberg Business Week. Gilbarrock still with us, US president, chief
Speaker 1: executive officer for Coliers International, sticking with us for a bit.
Speaker 1: I gotta ask you just in a couple of minutes
Speaker 1: that we have here in this little phil as we
Speaker 1: call it, New York versus l A, what are the
Speaker 1: trends that that you're seeing. Yeah, well, l A last
Speaker 1: year two thousand nineteen had the highest volume of sales
Speaker 1: Capple markets higher than New York, which is interesting, right,
Speaker 1: and it's a very different market. You know, this is
Speaker 1: a New York. This because I'm here today is a
Speaker 1: big off. There's big office stock, and then there's industrial,
Speaker 1: you know, outside of outside of Manhattan. Of course l
Speaker 1: A has less office stock than New York, certainly quite
Speaker 1: a bit less, but big industrial. So dynamics are very different,
Speaker 1: which is why it's been such a healthy market in
Speaker 1: l A. That's not to say that we haven't seen
Speaker 1: office sales in New York. We have, but industrial is
Speaker 1: really disproportionately launcher out there. Apples to apples, right in
Speaker 1: terms of the composition, apples to apples compare, and we
Speaker 1: have the weather, yeah, and l A has just like
Speaker 1: it just goes and goes and goes. And I mean
Speaker 1: didn't talking to people when I was out there this
Speaker 1: week to l A spread there are I mean it's unbelievable,
Speaker 1: but you know they're there are parts of the city
Speaker 1: that even five ten years ago, people wouldn't go to
Speaker 1: or even think about living or working there. Right, that
Speaker 1: is correct. So as you go east of downtown l A,
Speaker 1: for example, that's now the place to be. You know,
Speaker 1: you've got warehouses, and you pass some frankly not so
Speaker 1: great areas and then you get the most popular restaurant
Speaker 1: in the city or some of them. So this is
Speaker 1: in line with the live work play right that that
Speaker 1: there are areas that are certainly developing that you would
Speaker 1: have never thought would develop to be what they are today.
Speaker 1: Just got about ten seconds here. Are people still moving
Speaker 1: back to the cities. Are we really seeing that trend?
Speaker 1: I think so it is. I do think so. Yeah.
Speaker 1: I think it's a millennial, young person's trend. Yes. But
Speaker 1: continuing our conversation here on Business Week with Gil Borak,
Speaker 1: he is US president, chief executive officer of Colliers International.
Speaker 1: Longtime angelie. You know, we've been talking a lot about
Speaker 1: uh that, and I wanted to pick up our conversation
Speaker 1: Gil if we could kind of where we left off
Speaker 1: with our guests who wrote Eat, Sleepwork, Repeat, Bruce Daisley.
Speaker 1: It's a new book out. I believe you got a
Speaker 1: copy of it. You never know what you're gonna get
Speaker 1: hanging on in our green room. But um, you know, Lag,
Speaker 1: he was talking about this notion of open offices. You
Speaker 1: know probably as much as anyone about offices, how they're
Speaker 1: getting built out. What the sort of latest and greatest is.
Speaker 1: We're living in a sort of post not quite post
Speaker 1: we work world. But you know, when we're having all
Speaker 1: these big discussions about what the office of today looks like,
Speaker 1: what do you make of it? So look, I think,
Speaker 1: and I think I've said to you guys before, the
Speaker 1: product that we work brought to the market was an
Speaker 1: interesting and well liked product, right, And it was a
Speaker 1: little bit it was a little bit more, had a
Speaker 1: lot more pozzas than maybe what traditionally was out there. Um.
Speaker 1: I think that that two things, like he one experience.
Speaker 1: Everybody wants an experience, so even work physical the physical
Speaker 1: space adds to the experience that people have at work,
Speaker 1: their enjoyment or lack thereof. And we all know that
Speaker 1: a drab, old office is not that exciting, right, It's
Speaker 1: much better if you have what you have here at Bloomberg, right,
Speaker 1: which is which is on one side of the equation
Speaker 1: versus some of the old office space that we all
Speaker 1: know and found kind of degree but used to accept
Speaker 1: twenty five years ago. Our employee basis is more demanding today,
Speaker 1: So it's about experience. And then the other thing is,
Speaker 1: you know, we have multiple generations more than ever before
Speaker 1: in the workplace, right because people are working longer. Um,
Speaker 1: so we've probably got in many cases three generations in
Speaker 1: the workforce. So variety is important. So I've never been
Speaker 1: a believer that it's an all or nothing or a
Speaker 1: zero sum games. So everything open, all, right, so you
Speaker 1: have phone rooms, but that's an inconvenience. Everything open um,
Speaker 1: you know, is probably not the best solution. Everything closed,
Speaker 1: meaning all offices, is also not the best because people
Speaker 1: do need variety. And I think day and age, you're
Speaker 1: remiss if you don't have what we would call a
Speaker 1: collaborative space, right, or bar stools or a couch or
Speaker 1: a place to stretch or standing desks. I mean, there's
Speaker 1: a there's a menu, a wide menu of things that
Speaker 1: you can choose, and it's not that much more expensive
Speaker 1: than traditional building out of walls. So I think variety
Speaker 1: is important. And of course it's unique to each culture
Speaker 1: and what you want to what you want to select
Speaker 1: few employees, so I have to ask you, so, is
Speaker 1: the availability or the necessity of that menu that's probably
Speaker 1: good for your business? Right? It is? It is. It's
Speaker 1: a higher up front investment very often, right, but you
Speaker 1: generally tend to see more less square footage taken right
Speaker 1: because the space is more efficient. So instead of these
Speaker 1: big offices, you would get maybe three offices in the
Speaker 1: size of a of of one charge office. So and
Speaker 1: then people do tend to work a bit more from home. Uh,
Speaker 1: and so you can really you know, nobody gets generally speaking,
Speaker 1: they don't get a nameplate on the office. If you're
Speaker 1: not there, right, someone else can use your office to
Speaker 1: get higher utilization. So I'm wondering because I remember going
Speaker 1: back a few years and having people to talk about,
Speaker 1: you know, the investments that were going on in warehouse,
Speaker 1: you know, building, and I think, you know, we see
Speaker 1: that and it all makes sense. What are some of
Speaker 1: the trends that you're seeing that maybe people aren't talking about,
Speaker 1: but that you're definitely seeing it in the commercial real
Speaker 1: estate mark. Yeah, well, definitely what we've just talked about, right,
Speaker 1: everybody is paying attention to how the work what the
Speaker 1: workplace looks like, and the design of the workplace office. Uh,
Speaker 1: you know, we're seeing we're definitely seeing more live work
Speaker 1: play type environments experiences at malls. Those are the most
Speaker 1: successful malls, right, indoor, outdoor, medical, office and mall. That
Speaker 1: sounds crazy, but it's close to people. This parking and
Speaker 1: I can go to you know, I can go to
Speaker 1: Nordstrom and then to the doctor. I meant extreme, but
Speaker 1: in fact you can do that, and we have it.
Speaker 1: We have a big story in the magazine this week
Speaker 1: all about Walmart essentially building these like ten fifteen thousand
Speaker 1: healthcare centers in their stories, and I have to think
Speaker 1: part of that is coming from the fact that you
Speaker 1: can go to a strip mall or a real mall
Speaker 1: and there's an urgent and the foot traffic, right and
Speaker 1: the fat traffic. Is that exactly what's what's the story
Speaker 1: for retail in your view going forward? You know? Um,
Speaker 1: so the facts are that that bricks and mortar retail
Speaker 1: still grew in two thousand nineteen limited percentage, right, single
Speaker 1: digit percentage, but it still grew. I think, and I've
Speaker 1: read and I agree with the hypothesis that oftentimes a
Speaker 1: return will go to a bricks and mortar store. You
Speaker 1: might pick something else up. But that is happening the
Speaker 1: return to to to to do the return electronically, it's
Speaker 1: a bit of a pain, right, but to just go
Speaker 1: to I'll just run to the store return and I
Speaker 1: may pick something else up. There's also a lot of
Speaker 1: things I think personally that many of us are not
Speaker 1: comfortable buying online clothes, for example, you can buy a sweater,
Speaker 1: you can you know, you can buy a switcher, but
Speaker 1: I'm not going to go buy a suit online. I
Speaker 1: wanted to touch and feeling, maybe even have some personal service.
Speaker 1: So I think it has you know, So so all
Speaker 1: that equates to um. You know, many bricks and mortar
Speaker 1: stores still doing just okay. Growth is slower than it
Speaker 1: used to be, but it's there and it's the combination.
Speaker 1: Many brands are realizing. Uh, you know when when when
Speaker 1: when e commas first became came out, it was like
Speaker 1: the bricks and watar stores are dead. That that hasn't
Speaker 1: turned out to be the case. It's more of a coexistence.
Speaker 1: One of the things we know is we do not
Speaker 1: live in nearly as much of a binary world as
Speaker 1: anyone have us to leave right, much more of a
Speaker 1: hybrid hybrid world for sure. Gil Barrock, so great to
Speaker 1: get some time with you, US President and CEO of
Speaker 1: Colliers International. Back with here, Back with us here in
Speaker 1: New York, usually based out in Los Angeles,