Better Real Estate Deals Outside Gateway Cities

nice to have you here with us. Thank you. So what I don't know how do you and your business kind of pulled together as you walked in, Like wow, what a week between the market sell off concerns about the virus. I think we're all now do we have to reassess with the market and economic outlooker for the rest of the year. So how do you kind of

take account of it? So I look at something like coronavirus as a macro event, and always in commercial estate of relative to commercial real estate services, when you look at the macro event, whatever it is, whatever it's been historically, you generally will get a short term sees up and then things normalize. Now I don't know what's going to happen with coronavirus, not none of us do. We don't know how far it's going to spread. That's the nervous factor.

But but things do tend to become clearer with time. Some of what the CDC has said this week is very new news to most of us, so we don't quite know how to react. But the one thing I do know is when you have a macro event like this, things do calm and generally you'll see the market sees up. You may see some deals be put on hold, and then it as long as things pan out in a relatively organized and orderly fashion. Um things, everything else in

real estate normalizes as well. Deals get that nothing change. Yet nothing's changed it. It's very early days, right, especially have any deal has been kind of stopped because are delayed because of all this? Not that I'm aware of. Been around the world because you guys are huge, not that I'm aware of. But yes, overseas, I have heard instances here and there of of things being deferred. Okay, Um, but that is not close for consternation because that's a

very normal reaction. Why the why is the stock market down that? Because we don't know. Right, let's talk about your world, the US especially, and sort of pockets of strength and weakness. We talk a lot on this show, and we think about demographic trends, We think about financial trends in migration, you know, sort of people moving around, companies moving around. You're in Los Angeles, normally we're here in New York. These are places that, to some extent

are becoming less popular in some cases. We hear a lot about Nashville, We hear a lot about Austin, Texas and other places. What sort of trends do you see out there? Yeah, you know, when things get expensive and gateway markets, the natural progression and people are confident, the natural progression is to go where stock office stock or or whatever industrial retail, whatever it might be. Whatever you're buying back office, you tend to go where it's cheaper, right,

where it's more efficient. Um, And we've had some really good markets for a good long while now. So gateway cities are are more expensive, and that's in part why you see expansion. The deal is to be had somewhere other than New York or l A. Of course, New York l A cities like that are always going to have a level of activity just by the size of

the population and the demand it creates. How's the build out and that, you know, in terms of new properties coming out for the for the commercial real estate market, what kind of activity are we seeing. There is activity depending on where you are, but there's no over building. We learned that generally speaking, we learned that lesson a long time ago. Of course, when there's demand, uh, you

get building. Building takes a little while, and that's when you sometimes get into an oversupply situation because you don't have perfect vision. But generally speaking, there's not an over building situation. One of the elements of the commercial real estate market, the real estate market at large that we've talked a lot about from the private equity perspective, from the public equity perspective is sort of the industrial side and the power of Amazon and other very logistics heavy

type companies that they've had. We've seen a lot of investment go in there. What's your take on that, Yes, that is true. Um, what I would say is that's where we start to talk about things like the blending of industrial real estate and retail. So so when you look at an Amazon a warehouse that's strictly for Amazon distribution is that retail or is an industrial I can tell you it used to be industrial, right, and traditionally you would call it a big they're bigger than than most.

But it's a big industrial warehouse. But it's essential for that last mile of delivery, which is ultimately a retail concept selling to an ultimate consumer. Um that that that warehouse needs to be close to usually in an in an industrial area, traditionally industrial area, but really for the purpose of not manufacturing but retail. So there's a blending there for sure. And Amazon is the largest retailer right at this point, and it's convenient and it's here to stay.

But that doesn't mean I should make this comment. It doesn't mean the demise of traditional brick and more no retail, right, but what are the not But but so, what are the implications of that for the mix that maybe a real estate investor has. Are you seeing people sort of leaning more heavily on what, as you say, was more traditionally industrial and and maybe better known now is like

logistics type of opportunities. You have a lot of interest in industrial real estate for sure, probably more than your data storty because demand is right, So it's sort of a. It's a it's it's it's it's the cycle cycle of life. If you have a cycle of commercial real estate life. Um but Q Lion King here we go, very funny, but what but but some as you know, some investors you know, have a food group industrial retail that they focus on and that's all they do. The largest shops

tend to look at old food groups. And then you do have things that change. Well that we used to be industrial were no longer an industrial and those are just you know, individual choices that are made. But but industrial is the hot thing right now. We're listening to Bloomberg Business Week. Gilbarrock still with us, US president, chief executive officer for Coliers International, sticking with us for a bit.

I gotta ask you just in a couple of minutes that we have here in this little phil as we call it, New York versus l A, what are the trends that that you're seeing. Yeah, well, l A last year two thousand nineteen had the highest volume of sales Capple markets higher than New York, which is interesting, right, and it's a very different market. You know, this is a New York. This because I'm here today is a big off. There's big office stock, and then there's industrial,

you know, outside of outside of Manhattan. Of course l A has less office stock than New York, certainly quite a bit less, but big industrial. So dynamics are very different, which is why it's been such a healthy market in l A. That's not to say that we haven't seen office sales in New York. We have, but industrial is really disproportionately launcher out there. Apples to apples, right in terms of the composition, apples to apples compare, and we have the weather, yeah, and l A has just like

it just goes and goes and goes. And I mean didn't talking to people when I was out there this week to l A spread there are I mean it's unbelievable, but you know they're there are parts of the city that even five ten years ago, people wouldn't go to or even think about living or working there. Right, that is correct. So as you go east of downtown l A,

for example, that's now the place to be. You know, you've got warehouses, and you pass some frankly not so great areas and then you get the most popular restaurant in the city or some of them. So this is in line with the live work play right that that there are areas that are certainly developing that you would have never thought would develop to be what they are today. Just got about ten seconds here. Are people still moving back to the cities. Are we really seeing that trend?

I think so it is. I do think so. Yeah. I think it's a millennial, young person's trend. Yes. But continuing our conversation here on Business Week with Gil Borak, he is US president, chief executive officer of Colliers International. Longtime angelie. You know, we've been talking a lot about uh that, and I wanted to pick up our conversation Gil if we could kind of where we left off with our guests who wrote Eat, Sleepwork, Repeat, Bruce Daisley. It's a new book out. I believe you got a

copy of it. You never know what you're gonna get hanging on in our green room. But um, you know, Lag, he was talking about this notion of open offices. You know probably as much as anyone about offices, how they're getting built out. What the sort of latest and greatest is. We're living in a sort of post not quite post we work world. But you know, when we're having all these big discussions about what the office of today looks like,

what do you make of it? So look, I think, and I think I've said to you guys before, the product that we work brought to the market was an interesting and well liked product, right, And it was a little bit it was a little bit more, had a lot more pozzas than maybe what traditionally was out there. Um. I think that that two things, like he one experience. Everybody wants an experience, so even work physical the physical space adds to the experience that people have at work,

their enjoyment or lack thereof. And we all know that a drab, old office is not that exciting, right, It's much better if you have what you have here at Bloomberg, right, which is which is on one side of the equation versus some of the old office space that we all know and found kind of degree but used to accept twenty five years ago. Our employee basis is more demanding today, So it's about experience. And then the other thing is, you know, we have multiple generations more than ever before

in the workplace, right because people are working longer. Um, so we've probably got in many cases three generations in the workforce. So variety is important. So I've never been a believer that it's an all or nothing or a zero sum games. So everything open, all, right, so you have phone rooms, but that's an inconvenience. Everything open um, you know, is probably not the best solution. Everything closed, meaning all offices, is also not the best because people

do need variety. And I think day and age, you're remiss if you don't have what we would call a collaborative space, right, or bar stools or a couch or a place to stretch or standing desks. I mean, there's a there's a menu, a wide menu of things that you can choose, and it's not that much more expensive than traditional building out of walls. So I think variety

is important. And of course it's unique to each culture and what you want to what you want to select few employees, so I have to ask you, so, is the availability or the necessity of that menu that's probably good for your business? Right? It is? It is. It's a higher up front investment very often, right, but you generally tend to see more less square footage taken right because the space is more efficient. So instead of these big offices, you would get maybe three offices in the

size of a of of one charge office. So and then people do tend to work a bit more from home. Uh, and so you can really you know, nobody gets generally speaking, they don't get a nameplate on the office. If you're not there, right, someone else can use your office to get higher utilization. So I'm wondering because I remember going back a few years and having people to talk about, you know, the investments that were going on in warehouse, you know, building, and I think, you know, we see

that and it all makes sense. What are some of the trends that you're seeing that maybe people aren't talking about, but that you're definitely seeing it in the commercial real estate mark. Yeah, well, definitely what we've just talked about, right, everybody is paying attention to how the work what the workplace looks like, and the design of the workplace office. Uh, you know, we're seeing we're definitely seeing more live work play type environments experiences at malls. Those are the most

successful malls, right, indoor, outdoor, medical, office and mall. That sounds crazy, but it's close to people. This parking and I can go to you know, I can go to Nordstrom and then to the doctor. I meant extreme, but in fact you can do that, and we have it.

We have a big story in the magazine this week all about Walmart essentially building these like ten fifteen thousand healthcare centers in their stories, and I have to think part of that is coming from the fact that you can go to a strip mall or a real mall and there's an urgent and the foot traffic, right and the fat traffic. Is that exactly what's what's the story

for retail in your view going forward? You know? Um, so the facts are that that bricks and mortar retail still grew in two thousand nineteen limited percentage, right, single digit percentage, but it still grew. I think, and I've read and I agree with the hypothesis that oftentimes a return will go to a bricks and mortar store. You

might pick something else up. But that is happening the return to to to to do the return electronically, it's a bit of a pain, right, but to just go to I'll just run to the store return and I may pick something else up. There's also a lot of things I think personally that many of us are not comfortable buying online clothes, for example, you can buy a sweater, you can you know, you can buy a switcher, but

I'm not going to go buy a suit online. I wanted to touch and feeling, maybe even have some personal service. So I think it has you know, So so all that equates to um. You know, many bricks and mortar stores still doing just okay. Growth is slower than it used to be, but it's there and it's the combination. Many brands are realizing. Uh, you know when when when when e commas first became came out, it was like the bricks and watar stores are dead. That that hasn't

turned out to be the case. It's more of a coexistence. One of the things we know is we do not live in nearly as much of a binary world as anyone have us to leave right, much more of a hybrid hybrid world for sure. Gil Barrock, so great to get some time with you, US President and CEO of Colliers International. Back with here, Back with us here in New York, usually based out in Los Angeles,