Colliers Intl. U.S. CEO on Commercial Real Estate

People continuing to leave New York City head out to the Hampton's. Meantime, even as the pack of Chapter eleven filings in commercial real estate have slowed amid easy access to fund some are still telling us that the real estate industry is quote facing an existential crisis of what's next. So let's see what Gil Barack has to say. He is the U S Presidency of Colliers International. He is with us on the phone from Los Angeles. Gil looks

so nice to have you here. How are you and how is your world and how does it compare from kind of what we saw over the last year. I tell nice to talk with you again. Yeah, Look, I think we're doing fine. It's been a long year for all of us, or along eleven months um, and I think that you know, sort of where we are. We're closer to the end than the beginning. That's the good news, right.

The vaccines are rolling slowly, but they're rolling, uh. And I think that most people are quite encouraged by that, and encouraged about the fact that we should be returned to some sense of normalcy by the middle of the year and into the back half of the year. And so things are looking up. And they didn't end as badly as some might have predicted. Sort of when the crisis hit us in March and April last year, there was activity, uh, and there was some sense of optimism,

you know again towards the end of last year. Clearly we didn't perform last year like we did in two thousand nineteen, but things did gradually start to get better and that trend seems to be continuing. Is that true around the world? I mean, I knew you focus on US properties, but you guys are international. Is it kind of the same story everywhere? It depends on the market. I mean, I know real estate is location, location, location,

and it's a very local story. But I'm just curious. Yeah, I know everything I've heard and read from my colleagues, you know, across the ponds, UM is that they're feeling sort of generally the same way. There is enthusiasm, activity is picking up, um and UM. You know, their their pockets. Obviously, there are things within the industry, things like industrial, which I think is fairly common now than anybody that follows

the space. Industrial real estate is having. You know, COVID has been a silver lining for them, right It's it's been because of e commerce and you see this globally, the demand for that type of real estate has really been the opposite of most other asset types because of the e commist growth. Are you seeing any bankruptcies with

any of your properties? Because I'm trying to get my head around that, because I think that was the story we thought was coming was coming was coming in uh and and expectations as restaurants shut down, as retail shut down, and I'm just curious, are you guys facing some bankruptcies with any of your properties or are you seeing any

of that? We really it's really diminimous. Um. There was a lot of talk and this is not dissimilar to two thousand and eight two thousand nine that the stress debt is coming, the the special servicing needs are coming, and it's going to be a wave, and that wave didn't happen. Yes, they're clearly there are properties that are distressed. There are there are problematic situations. They are higher than

what they are they normally are in normal times. But it hasn't been at least from what we've seen, it hasn't been a huge wave yet. Um. I don't know what the next few months hold as stimulus checks are coming out again, but whether you know, if, if if we don't see some improvement in terms of of of stimulus and in terms of the crisis receding through vaccination, right, then the longer it goes on, the harder it is

going to be for people to keep going. But so far it's been manageable, easy for me to right if it's not, if I haven't been directly impacted, Well, I mean,

does that change? Does that any of that? I mean you say that you see that we're closer to the end than we are at the beginning, But I do wonder do you think that there will still be some fallout of properties just because the world is changing When it comes to real estate, I think they will be and I think it would be you know, remiss of me to say that, or putting my head in the

sand if I didn't say. Look, I think the way that for example, office, that's the big elephant in the room, right, How is office going to come back and in what fashion? And how is demand going to be? Well, it's it's it's a mixed bag. You see some new developments that are fifty and sixty and sev already pre leased, and I think it depends on where they are and what type of um, you know, office space you have. So

new is generally good and popular. Old is probably going to struggle more, um you know, because we will work a bit differently, and I think we will see people working more remotely than they have historically. And the trend will be get downward trend in demand, uh, you know, offset by when the economy recovers and stoughts to grow again and there's more demands for space. So there are going to be some lasting impacts, particularly I think in

the office arena. So Gil, let me ask you, um offices, wide open spaces, right, that has just been the thing at Bloomberg. It's been in our culture from day one, this whole idea of open spaces and no real offices, um, and then we start really take off with all the tech companies. Right, it was the cool thing, the right thing to do, and everybody got away from offices. Will

we stay with it? Do you think that changes significantly? Yes, in the short term, conventional wisdom would suggest that that's probably not a good idea to be guest sharing, right, and to be so close to each other without some kind of plexiglass separation. I think it remains to be seen because if you reconfigure offices, there is a capital cost to doing that, and I think that in the short term anyway, my own sense is we can manage

it a different way. So, for example, have half the employee has come in on Monday and Wednesday and the other half on Tuesday and Thursday. A lot of people want to work remotely a little bit anyway after the pandemic, and that's sort of you know, and a lot of people can work remotely quite effectively. So I think we're going to come back in stages, and it sort of does remain to be seeing what the long term holds.

I think we'll get back to it. I think there is a camaraderie and a productivity to having open offices. I think people like it and they have gotten used to it, and I weren't for the pandemic. Uh, you know, nobody would think twice about it. So there'll be some I think, some short term, short to medium term restraint on that type of setup. But I think over time, we you know, we can evolve back to it. Particularly the vaccines are effective. All right, So what about retail.

We just did a story about them all out in Vegas and it's not a new story deal, right, like we've been talking about it for a year. We're overstored, We're overmauled. Uh. And I do feel like mall developers are getting a little bit more strategic in terms of where they put them all. So what's what what do

we continue to see on that front? Yeah? So I think you know, retail is um It has obviously suffered and that and and it has for us, as you say, and the pandemic obviously accelerated and deepened that suffering, if you will. But I think that malls that offer an experience, and it used to be that you think of that, Okay, that has to be an outdoor mall. Not necessarily so, because you have some of these new malls that have been developed unfortunately maybe not quite gotten off the ground

because of the pandemic. But they have attractions, whether that's roller coasters or attractions to kids or whatever it is. Uh, those draw crowds and of course then they shop right And so I think if it's a new mall, if it's an exciting mall, if it's in a good location, maybe good restaurants when we get back to normal, those I think are ultimately going to be fine. The malls of the type you're talking about in somewhat of a remote location. It's not entirely remote because a lot of

cards as a lot of card plastic and outlets. People would stop on the way to Vegas. It makes sense. But they're not surviving very well in the pandemic. Maybe they come back, or maybe some of them come back, but then who ever owns them sort of have to have the wherewith all the capital to keep them going until things turn around. So that's why they're sort of falling a bit by the wayside, and they may have

to be repurposed. Now you say, well, what's that repurposing you know, I don't know, but I do know that developers and owners are are are creative and who ever paid a million five to five for that mall has some idea of how they might repurpose it. Uh, you know, to get a return on that investment. Well, when you look at properties that you want to be involved in,

what's changed? How have you been impacted by the last year? Look, I think you know the not not You've got to be thoughtful about you know, how you make investments, and it's the truth about the stock market or anything else that you're going to invest in. Right, So you you've got to look at where the trains are going. Um, and that's what we would advise our clients. Where are the trends going and what's the pricing? And some clients, you know, it has to do with their their risk, right,

their risk profile and how risk averse they are. Uh, somebody's buying assets for a cheap price or cheaper price because somebody else is concerned about the future of that asset, and there'll be winners and losers, is what's going to happen. Right. But if you're you know, if you're a conservative investor, you might Right now, you might be investing in places and thinking about places that are the next the next industrial boom right Uh, where Eventually we're running out of

space in the traditional industrial hubs. So where's the next best place? Because that's here to stay. I believe that ecomistration, it'll, it'll, growth will slow, but it's here to stay. And if you're conservative, pretty good place to put your money. Where do you think the next industrial hub will be? Oh?

I hadn't anticipated that question. I don't want to answer it in a in a milk toast kind of way, but it's got to be where there's where there's access to freeways and access to ports, and so I there's you know you are. Those types of hubs are constrained by geography. Obviously, the big ones are the big ports cities Los Angeles, Long Beach, San Francisco to some degree. Uh, you know that you've got them obviously on the East coast. You've got it in Texas. So I think you're what

we're gonna find. I think is expansion close to where they are, But maybe you're gonna have half an hour drive, but a very manageable drive to the next top. I can't go into the middle of the country. It doesn't doesn't logistically work right, Hey, what do you make of We've did so many stories about people moving to Austin.

I was just having a conversation with somebody the other day, or moving south and whether it's Elon Musk or Oracle to Austin, whether it's increasingly financial firms to South Miami. So are those real? They are real? I mean there's definitely a trend. You do get some firms saying the count right, were worth sticking it out in New York City? Um right? I think black Crowk was one who came out and said that, and there've been a handful of others.

It is real, and it stands to reason. Right, if you can work remotely and we we currently are um many of us who have you know, office jobs and it's been effective, then you can move to cheaper locations now to catch of course, and people don't talk about this as much as a number of companies that have said, you can work wherever you want, but by the way, we are going to change your compensation to match the

cost of living. And then the question becomes in an Austin if it does get an influx of people and for yours, people have gone to Austin, but now in a bigger way. Right, is the cost of living going to go up in Austin? Stands the reason? It probably will, So it'll be interesting to watch. And you know, things tend to revert to the means, so I think maybe it's a you know, there'll be some lasting impact, but I think a lot of people will also come back

when things normalize. Yeah, somebody talk to me about a house in Austin and they were like, bids on it or offers so crazy stuff. Um, Gil's so nice to check in with you, Gilbarrock. He is US president CE have Collier's International with us on the phone from l A