Economic forecast 2020: Commercial real estate

COMPANY: Paula Clair Smith, a managing director of commercial services at Colliers International, says 2019 was a year of disruption for her firm and the Tampa Bay commercial real estate sector. Smith, whose market is primarily Pinellas County, says the rise of the startup economy and co-working spaces has caused her and her colleagues to “rethink everything.” Landlords’ view of the market is changing because the way tenants enter the market is also shifting. “It’s had a major impact on how businesses react,” Smith says. Even in heavily built-up Pinellas County, where commercial real estate is hard to come by and thus in high demand, “consumers have a choice, … leases have been shortened, terms are changing, and landlords are having to adjust to that. Even in some of the Class A office buildings, they’re having to change their thinking. Some landlords are still trying to ‘win’ the negotiation, when really, they need to use common sense and just say, ‘Let’s fill up my center.’”

OPPORTUNITIES: Advancements in location technology will be a differentiator for Colliers in 2020, Smith says, in finding value for its clients in red-hot Gulf Coast markets. “We've always heard location, location, location,” she says. “But how we choose that location has changed because of the amount of available information and how you can interpret that information.” Colliers mines data from sources like Census.gov and the U.S. Bureau of Labor Statistics to get away from long-held assumptions and perceptions — “‘Oh, I bet there are a lot of moms here,’ or, ‘Oh, there’s crime here,’” she says — about neighborhood demographics. “Data is what gives you the information that you really need to know as to where corporations and people are going to choose to locate their businesses — and why.” Leaning on data science, she adds, will help Colliers understand long-term demographic growth patterns down to the finest details. “If you have data that support what you think and what you know, that will continue to change how people make decisions.”

THREATS: Smith doesn’t see any major macro-economic troubles on the horizon — “nothing that would directly affect my pocket,” she says — but lack of inventory, particular in Pinellas County, coupled with a steadily upward creep in construction costs and delays, due to overly busy contractors, are leading to significant price increases. “What used to be $15 per square foot is now $40,” Smith says. Another negative trend, she says, is overall lack of activity on the part of investors due to the property market being near or at its peak. “What do they have to swap into that will make more money? So they continue to hold their property, which affects the lack of inventory.”