Job growth is returning to the United States due to increased energy efficiency and onshoring of jobs, according to Pat Donahue ’78, chairman and CEO of Donahue Schriber Realty Group.
“Stars are starting to line up for prosperous and stronger growth,” Donahue said.
Top CEOs in the commercial real estate industry participated in a panel discussion moderated by Donahue on Jan. 30 at Westin South Coast Plaza in Costa Mesa.
The 2014 Commercial Real Estate Forum, “Moving Forward … The New Real Estate Market,” was sponsored by Bank of America Merrill Lynch. Panelists included Brandon Birtcher, CEO at Goodman Birtcher; Kim Redding ’80, chief investment strategist at Brookfield Investment Management; Allen Staff, market president/-region executive at Bank of America Merrill Lynch; and Frank Suryan, chairman and CEO at Lyon Communities.
The annual forum presented by Cal State Fullerton’s Real Estate & Land Use Institute opened up with Donahue making some positive points about the future of economic prosperity in the United States. Panelists agreed that there is an onshoring trend and the future looked bright for commercial real estate.
There is going to be a period of low rates for a long time and the federal government is committed to zero interest rates, Redding said.
“We have an energy renaissance here in North America,” he added. “Energy independence and the impact that has on manufacturing and moving jobs back to the states … is going to serve North America well.”
The markets have changed dramatically, according to the panelists, and Corporate America has more cash on the balance sheet than it did 60 years ago. This means disposable income has increased among consumers. Panelists agreed that there is a lack of confidence in all government: local, state and federal.
The Internet and the steady increase in online shopping is also affecting dramatic change in the real estate market. However, according to Redding, the shopping malls in good locations will still continue to get more sales and be productive. His company continues to buy industrials and malls. Sales figures in malls are still doing well despite all of the options to shop online, he said.
People who are smart and pay attention to the changes in their market will be able to survive, said Donahue. He used the example of Wal-Mart using technology and the Internet to their advantage. Wal-Mart was smart about moving inventory around at minimal cost because they used technology as a tool for their success. Other conglomerates like Robinsons-May did not welcome the changes in technology. Instead they stuck to what they knew like the paper catalogues we no longer see.
The rise in Internet consumerism will result in the demise of brick-and-mortar retail has been a popular assumption, but according to Donahue it does not have to be that way. Internet commerce can be used to help companies succeed.
“Videos have disappeared. Records have disappeared. Books are getting ready to disappear,” said Donahue. “But [the Internet] is one more of a distribution point for the retailer.”
People shop online from the companies one would find in a mall. The Internet is augmenting the retailers’ sales, said Donahue.
The Internet is indeed drastically changing the market. The new generation has to anticipate these changes. Donahue told students that if they were to get one thing out of this forum it should be to keep their heads on a swivel. Everything changes so fast and students have got to be ready.
Birtcher said his company is focused on moving toward things you cannot do on the Internet.
“You can’t eat on the Internet,” said Birtcher.
We are going to see more restaurants, salons and other services, he adds. Real estate locations are going to start attracting more of those types of businesses. He added that he thinks the Internet is augmenting retailers and apartments.
“It’s adding to the human experience … and good, competitive people are going to adapt to it,” said Birtcher.
Commercial real estate has grown at a much larger rate than the rest of the economy in the last couple of years, but it is not sustainable. It will still grow, but it will not be at the same pace, according to a panelist.
On the other hand, Redding argues that real estate is a good investment at this time.
“When you’re coming from zero interest rates there’s only one way to go from here,” he said.
Panelists shared with students in the audience what they believed were the secrets to succeeding in the real estate business, including career advice from Birtcher:
There are advantages to working for a small company because you will have the opportunity to participate in a lot of things, but big companies have financing, he said.
Redding warned students to not be afraid and to recognize change in the industry.
“Technology is changing so fast, and it’s affecting real estate,” Redding said.
Work hard and be a team player. It is important to have people skills no matter what your discipline may be, said Staff.
The forum raised $18,000, and all funds helped support student scholarships and research programs at Mihaylo College.
Watch the full length video of the 2014 Commercial Real Estate forum below: