Commercial Real Estate

2017’s Main Lessons for Commercial Real Estate

Highlights in commercial real estate in the year 2017

The year 2017 is now behind us, and we have entered 2018. 2017 proved to be a good year for the Orange County commercial real estate market. It continued to grow, values continued to break records, and the up-trend is now longer than what it has been in decades. Of course, some people continue to be cautious as a result of the 2009-2010 calamities, but there are now cases where prices are three times higher. Meanwhile, lease rates are showing similar trends. So which lessons have been learned from commercial real esate in 2017 that can be applied to 2018?

1. You Have Not Yet Seen It All in Orange County

A lot of new and unexpected things happened in 2017. For instance, Ten-X, the Orange County online real estate firm, was sold for over $1 billion.

Ten-X, a national online real estate firm founded in Orange County 10 years ago, said Thursday it’s selling a majority interest in the company to a Boston investment firm. Terms of the deal weren’t disclosed, but industry publication Inman News reported the sale price at $1 billion or more.

Ten-X was originally founded in Irvine, where it maintains its headquarters. It also has some 500 employees across Orange County alone.

Meanwhile, there is still a possibility that Orange County will be home to Amazon’s HQ2, although there are some rumors that Atlanta, GA will have won the bid. Lots of other surprising events have also happened on more individual real estate deals, which shows that just about anything is possible in Orange County.

2. You Can Sell Anything

Commercial real estate in Orange County is a huge market and demand continues to outpace supply almost constantly. This is important, because it also means that people want to buy. If a property is priced properly, it will attract interested people, even from non-traditional areas. For instance, there has been a significant increase in re-zoning applications.

To change the Zoning designation for your property, submit a rezoning application, fees and necessary documents to the Planning Division. The application is reviewed and presented to the Planning and Zoning Commission, which makes a recommendation to the Board of County Commissioners. Final approval is made by the Board.

3. Real Estate Professionals Cannot Become Complacent

2017 saw the renewal of a lot of commercial leases across the county. Lease prices have sky-rocketed, however. What this means is that there is less interest in new long term leases, because prices are so high that people want to wait for a bit longer. The result is that there has been an increase in demand for discounted three year leases, and property owners are agreeing to this.

4. Commercial Real Estate Continues to Be Poorly Understood

There continues to be a lack of understanding on how commercial and residential real estate are different. This is because there is a lot of overlap between the two. A commercial real estate professional sells and leases buildings, including renewing leases. Usually, these professionals are paid solely on commission, receiving no salary at all. This can happen with residential brokers as well. However, a residential broker will focus almost solely on sales, and not at on leases (or tenancies).

5. This Is the Greatest Up-Trend in History

As with all elements of the economy, commercial real estate usually follows the so-called Juglar Cycle.

The first authority to explore economic cycles as periodically recurring phenomena was the French physician and statistician Clement Juglar, who in 1860 identified cycles based on a periodicity of roughly 8 to 11 years.

In commercial real estate, the downturn usually starts one year after that of the residential market. However, the up-turn started to happen in Q3 of 2009, and it has only been growing since then. Perhaps it is time for some sort of adjustment.

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