Speaker 1: This is Bloomberg Business Week with Carol Messer from Bloomberg
Speaker 1: Radio US no new home sales. We talked about this
Speaker 1: with Mike McKee. Rising into Scember for the first time
Speaker 1: in five months. It's capping the best year since oh six,
Speaker 1: signaling that record low mortgage rates continue to drive demand
Speaker 1: for a sector that's really been a bright spot in
Speaker 1: the US economy. Saw another story on the Bloomberg about
Speaker 1: Hampton's home sales are at a record in the fourth quarter.
Speaker 1: People continuing to leave New York City head out to
Speaker 1: the Hampton's. Meantime, even as the pack of Chapter eleven
Speaker 1: filings in commercial real estate have slowed amid easy access
Speaker 1: to fund some are still telling us that the real
Speaker 1: estate industry is quote facing an existential crisis of what's next.
Speaker 1: So let's see what Gil Barack has to say. He
Speaker 1: is the U S Presidency of Colliers International. He is
Speaker 1: with us on the phone from Los Angeles. Gil looks
Speaker 1: so nice to have you here. How are you and
Speaker 1: how is your world and how does it compare from
Speaker 1: kind of what we saw over the last year. I
Speaker 1: tell nice to talk with you again. Yeah, Look, I
Speaker 1: think we're doing fine. It's been a long year for
Speaker 1: all of us, or along eleven months um, and I
Speaker 1: think that you know, sort of where we are. We're
Speaker 1: closer to the end than the beginning. That's the good news, right.
Speaker 1: The vaccines are rolling slowly, but they're rolling, uh. And
Speaker 1: I think that most people are quite encouraged by that,
Speaker 1: and encouraged about the fact that we should be returned
Speaker 1: to some sense of normalcy by the middle of the
Speaker 1: year and into the back half of the year. And
Speaker 1: so things are looking up. And they didn't end as
Speaker 1: badly as some might have predicted. Sort of when the
Speaker 1: crisis hit us in March and April last year, there
Speaker 1: was activity, uh, and there was some sense of optimism,
Speaker 1: you know again towards the end of last year. Clearly
Speaker 1: we didn't perform last year like we did in two
Speaker 1: thousand nineteen, but things did gradually start to get better
Speaker 1: and that trend seems to be continuing. Is that true
Speaker 1: around the world? I mean, I knew you focus on
Speaker 1: US properties, but you guys are international. Is it kind
Speaker 1: of the same story everywhere? It depends on the market.
Speaker 1: I mean, I know real estate is location, location, location,
Speaker 1: and it's a very local story. But I'm just curious. Yeah,
Speaker 1: I know everything I've heard and read from my colleagues,
Speaker 1: you know, across the ponds, UM is that they're feeling
Speaker 1: sort of generally the same way. There is enthusiasm, activity
Speaker 1: is picking up, um and UM. You know, their their pockets. Obviously,
Speaker 1: there are things within the industry, things like industrial, which
Speaker 1: I think is fairly common now than anybody that follows
Speaker 1: the space. Industrial real estate is having. You know, COVID
Speaker 1: has been a silver lining for them, right It's it's
Speaker 1: been because of e commerce and you see this globally,
Speaker 1: the demand for that type of real estate has really
Speaker 1: been the opposite of most other asset types because of
Speaker 1: the e commist growth. Are you seeing any bankruptcies with
Speaker 1: any of your properties? Because I'm trying to get my
Speaker 1: head around that, because I think that was the story
Speaker 1: we thought was coming was coming was coming in uh
Speaker 1: and and expectations as restaurants shut down, as retail shut down,
Speaker 1: and I'm just curious, are you guys facing some bankruptcies
Speaker 1: with any of your properties or are you seeing any
Speaker 1: of that? We really it's really diminimous. Um. There was
Speaker 1: a lot of talk and this is not dissimilar to
Speaker 1: two thousand and eight two thousand nine that the stress
Speaker 1: debt is coming, the the special servicing needs are coming,
Speaker 1: and it's going to be a wave, and that wave
Speaker 1: didn't happen. Yes, they're clearly there are properties that are distressed.
Speaker 1: There are there are problematic situations. They are higher than
Speaker 1: what they are they normally are in normal times. But
Speaker 1: it hasn't been at least from what we've seen, it
Speaker 1: hasn't been a huge wave yet. Um. I don't know
Speaker 1: what the next few months hold as stimulus checks are
Speaker 1: coming out again, but whether you know, if, if if
Speaker 1: we don't see some improvement in terms of of of
Speaker 1: stimulus and in terms of the crisis receding through vaccination, right,
Speaker 1: then the longer it goes on, the harder it is
Speaker 1: going to be for people to keep going. But so
Speaker 1: far it's been manageable, easy for me to right if
Speaker 1: it's not, if I haven't been directly impacted, Well, I mean,
Speaker 1: does that change? Does that any of that? I mean
Speaker 1: you say that you see that we're closer to the
Speaker 1: end than we are at the beginning, But I do
Speaker 1: wonder do you think that there will still be some
Speaker 1: fallout of properties just because the world is changing When
Speaker 1: it comes to real estate, I think they will be
Speaker 1: and I think it would be you know, remiss of
Speaker 1: me to say that, or putting my head in the
Speaker 1: sand if I didn't say. Look, I think the way
Speaker 1: that for example, office, that's the big elephant in the room, right,
Speaker 1: How is office going to come back and in what fashion?
Speaker 1: And how is demand going to be? Well, it's it's
Speaker 1: it's a mixed bag. You see some new developments that
Speaker 1: are fifty and sixty and sev already pre leased, and
Speaker 1: I think it depends on where they are and what
Speaker 1: type of um, you know, office space you have. So
Speaker 1: new is generally good and popular. Old is probably going
Speaker 1: to struggle more, um you know, because we will work
Speaker 1: a bit differently, and I think we will see people
Speaker 1: working more remotely than they have historically. And the trend
Speaker 1: will be get downward trend in demand, uh, you know,
Speaker 1: offset by when the economy recovers and stoughts to grow
Speaker 1: again and there's more demands for space. So there are
Speaker 1: going to be some lasting impacts, particularly I think in
Speaker 1: the office arena. So Gil, let me ask you, um offices,
Speaker 1: wide open spaces, right, that has just been the thing
Speaker 1: at Bloomberg. It's been in our culture from day one,
Speaker 1: this whole idea of open spaces and no real offices, um,
Speaker 1: and then we start really take off with all the
Speaker 1: tech companies. Right, it was the cool thing, the right
Speaker 1: thing to do, and everybody got away from offices. Will
Speaker 1: we stay with it? Do you think that changes significantly? Yes,
Speaker 1: in the short term, conventional wisdom would suggest that that's
Speaker 1: probably not a good idea to be guest sharing, right,
Speaker 1: and to be so close to each other without some
Speaker 1: kind of plexiglass separation. I think it remains to be
Speaker 1: seen because if you reconfigure offices, there is a capital
Speaker 1: cost to doing that, and I think that in the
Speaker 1: short term anyway, my own sense is we can manage
Speaker 1: it a different way. So, for example, have half the
Speaker 1: employee has come in on Monday and Wednesday and the
Speaker 1: other half on Tuesday and Thursday. A lot of people
Speaker 1: want to work remotely a little bit anyway after the pandemic,
Speaker 1: and that's sort of you know, and a lot of
Speaker 1: people can work remotely quite effectively. So I think we're
Speaker 1: going to come back in stages, and it sort of
Speaker 1: does remain to be seeing what the long term holds.
Speaker 1: I think we'll get back to it. I think there
Speaker 1: is a camaraderie and a productivity to having open offices.
Speaker 1: I think people like it and they have gotten used
Speaker 1: to it, and I weren't for the pandemic. Uh, you know,
Speaker 1: nobody would think twice about it. So there'll be some
Speaker 1: I think, some short term, short to medium term restraint
Speaker 1: on that type of setup. But I think over time,
Speaker 1: we you know, we can evolve back to it. Particularly
Speaker 1: the vaccines are effective. All right, So what about retail.
Speaker 1: We just did a story about them all out in
Speaker 1: Vegas and it's not a new story deal, right, like
Speaker 1: we've been talking about it for a year. We're overstored,
Speaker 1: We're overmauled. Uh. And I do feel like mall developers
Speaker 1: are getting a little bit more strategic in terms of
Speaker 1: where they put them all. So what's what what do
Speaker 1: we continue to see on that front? Yeah? So I
Speaker 1: think you know, retail is um It has obviously suffered
Speaker 1: and that and and it has for us, as you say,
Speaker 1: and the pandemic obviously accelerated and deepened that suffering, if
Speaker 1: you will. But I think that malls that offer an experience,
Speaker 1: and it used to be that you think of that, Okay,
Speaker 1: that has to be an outdoor mall. Not necessarily so,
Speaker 1: because you have some of these new malls that have
Speaker 1: been developed unfortunately maybe not quite gotten off the ground
Speaker 1: because of the pandemic. But they have attractions, whether that's
Speaker 1: roller coasters or attractions to kids or whatever it is. Uh,
Speaker 1: those draw crowds and of course then they shop right
Speaker 1: And so I think if it's a new mall, if
Speaker 1: it's an exciting mall, if it's in a good location,
Speaker 1: maybe good restaurants when we get back to normal, those
Speaker 1: I think are ultimately going to be fine. The malls
Speaker 1: of the type you're talking about in somewhat of a
Speaker 1: remote location. It's not entirely remote because a lot of
Speaker 1: cards as a lot of card plastic and outlets. People
Speaker 1: would stop on the way to Vegas. It makes sense.
Speaker 1: But they're not surviving very well in the pandemic. Maybe
Speaker 1: they come back, or maybe some of them come back,
Speaker 1: but then who ever owns them sort of have to
Speaker 1: have the wherewith all the capital to keep them going
Speaker 1: until things turn around. So that's why they're sort of
Speaker 1: falling a bit by the wayside, and they may have
Speaker 1: to be repurposed. Now you say, well, what's that repurposing
Speaker 1: you know, I don't know, but I do know that
Speaker 1: developers and owners are are are creative and who ever
Speaker 1: paid a million five to five for that mall has
Speaker 1: some idea of how they might repurpose it. Uh, you know,
Speaker 1: to get a return on that investment. Well, when you
Speaker 1: look at properties that you want to be involved in,
Speaker 1: what's changed? How have you been impacted by the last year? Look,
Speaker 1: I think you know the not not You've got to
Speaker 1: be thoughtful about you know, how you make investments, and
Speaker 1: it's the truth about the stock market or anything else
Speaker 1: that you're going to invest in. Right, So you you've
Speaker 1: got to look at where the trains are going. Um,
Speaker 1: and that's what we would advise our clients. Where are
Speaker 1: the trends going and what's the pricing? And some clients,
Speaker 1: you know, it has to do with their their risk, right,
Speaker 1: their risk profile and how risk averse they are. Uh,
Speaker 1: somebody's buying assets for a cheap price or cheaper price
Speaker 1: because somebody else is concerned about the future of that asset,
Speaker 1: and there'll be winners and losers, is what's going to happen. Right.
Speaker 1: But if you're you know, if you're a conservative investor,
Speaker 1: you might Right now, you might be investing in places
Speaker 1: and thinking about places that are the next the next
Speaker 1: industrial boom right Uh, where Eventually we're running out of
Speaker 1: space in the traditional industrial hubs. So where's the next
Speaker 1: best place? Because that's here to stay. I believe that ecomistration, it'll, it'll,
Speaker 1: growth will slow, but it's here to stay. And if
Speaker 1: you're conservative, pretty good place to put your money. Where
Speaker 1: do you think the next industrial hub will be? Oh?
Speaker 1: I hadn't anticipated that question. I don't want to answer
Speaker 1: it in a in a milk toast kind of way,
Speaker 1: but it's got to be where there's where there's access
Speaker 1: to freeways and access to ports, and so I there's
Speaker 1: you know you are. Those types of hubs are constrained
Speaker 1: by geography. Obviously, the big ones are the big ports
Speaker 1: cities Los Angeles, Long Beach, San Francisco to some degree. Uh,
Speaker 1: you know that you've got them obviously on the East coast.
Speaker 1: You've got it in Texas. So I think you're what
Speaker 1: we're gonna find. I think is expansion close to where
Speaker 1: they are, But maybe you're gonna have half an hour drive,
Speaker 1: but a very manageable drive to the next top. I
Speaker 1: can't go into the middle of the country. It doesn't
Speaker 1: doesn't logistically work right, Hey, what do you make of
Speaker 1: We've did so many stories about people moving to Austin.
Speaker 1: I was just having a conversation with somebody the other day,
Speaker 1: or moving south and whether it's Elon Musk or Oracle
Speaker 1: to Austin, whether it's increasingly financial firms to South Miami.
Speaker 1: So are those real? They are real? I mean there's
Speaker 1: definitely a trend. You do get some firms saying the
Speaker 1: count right, were worth sticking it out in New York City?
Speaker 1: Um right? I think black Crowk was one who came
Speaker 1: out and said that, and there've been a handful of others.
Speaker 1: It is real, and it stands to reason. Right, if
Speaker 1: you can work remotely and we we currently are um
Speaker 1: many of us who have you know, office jobs and
Speaker 1: it's been effective, then you can move to cheaper locations
Speaker 1: now to catch of course, and people don't talk about
Speaker 1: this as much as a number of companies that have said,
Speaker 1: you can work wherever you want, but by the way,
Speaker 1: we are going to change your compensation to match the
Speaker 1: cost of living. And then the question becomes in an
Speaker 1: Austin if it does get an influx of people and
Speaker 1: for yours, people have gone to Austin, but now in
Speaker 1: a bigger way. Right, is the cost of living going
Speaker 1: to go up in Austin? Stands the reason? It probably will,
Speaker 1: So it'll be interesting to watch. And you know, things
Speaker 1: tend to revert to the means, so I think maybe
Speaker 1: it's a you know, there'll be some lasting impact, but
Speaker 1: I think a lot of people will also come back
Speaker 1: when things normalize. Yeah, somebody talk to me about a
Speaker 1: house in Austin and they were like, bids on it
Speaker 1: or offers so crazy stuff. Um, Gil's so nice to
Speaker 1: check in with you, Gilbarrock. He is US president CE
Speaker 1: have Collier's International with us on the phone from l
Speaker 1: A