LOS ANGELES—The California minimum wage increase may pump even more energy into the commercial real estate market. According to new research from Newmark Grubb Knight Frank, commercial real estate will see increases in sale-leasebacks, reduction in retail square footage and new leasing and development opportunities at vacant buildings. The new minimum wage increase will raise minimum wage to $15 per hour by 2022, with $1 per year incremental increases.

“Real estate broker's jobs are going to be even more important as operational expenses increase,” Chris Beck, Newmark Grubb Knight Frank, tells GlobeSt.com. “Brokerage is a way that we can save clients money by ensuring that the building that they are in fits their clients' operational needs. Clients are going to need to evaluate the type of space they occupy and forecasting the space they occupy.”

While there has been a lot of fear and uncertainty about the impact of the wage increase, Beck says that businesses will simply adjust to the new operational expense, as businesses did with the implementation of the Affordable Care Act. “The key word is efficiency. Business owners and operators are going to look at how to offset these increases in operational costs, and each sector is going to analyze was to become more efficient,” says Beck. “This isn't the operational expense that businesses have seen. A lot of people hear the word efficiency and think of employment, but efficiency doesn't always mean job cuts.”

While the wage increase affects the entire state, Beck says that Southern California will not see a huge impact because of the number of people and the diversified employee base, which creates stability. “Commercial real estate in Southern California will remain strong because of the number of people here. One thing that can't change is the number of people from the Ventura County line to the Mexican border,” he adds. “We are pretty diversified across multiple business sectors, and that always helps any economic change. The more diversified an economy is, the better the people in that economy do.”

The wage increase will likely affect the industrial and retail companies most. Some companies, especially those in warehousing, will turn to automation to decrease costs, but there are some companies that will look at moving headquarters operations out of the state. Even if that does happen, Beck expects that all firms will need to have a presence here. “There has to be a presence in Southern California, just because of how many people are here,” he adds. “However, you are starting to see some companies looking at relocating the headquarters while maintaining a presence here. We are in an evaluation stage right now because it is still relatively new. As we get to 2018 and 2019, we will start to see the impact.”

LOS ANGELES—The California minimum wage increase may pump even more energy into the commercial real estate market. According to new research from Newmark Grubb Knight Frank, commercial real estate will see increases in sale-leasebacks, reduction in retail square footage and new leasing and development opportunities at vacant buildings. The new minimum wage increase will raise minimum wage to $15 per hour by 2022, with $1 per year incremental increases.

“Real estate broker's jobs are going to be even more important as operational expenses increase,” Chris Beck, Newmark Grubb Knight Frank, tells GlobeSt.com. “Brokerage is a way that we can save clients money by ensuring that the building that they are in fits their clients' operational needs. Clients are going to need to evaluate the type of space they occupy and forecasting the space they occupy.”

While there has been a lot of fear and uncertainty about the impact of the wage increase, Beck says that businesses will simply adjust to the new operational expense, as businesses did with the implementation of the Affordable Care Act. “The key word is efficiency. Business owners and operators are going to look at how to offset these increases in operational costs, and each sector is going to analyze was to become more efficient,” says Beck. “This isn't the operational expense that businesses have seen. A lot of people hear the word efficiency and think of employment, but efficiency doesn't always mean job cuts.”

While the wage increase affects the entire state, Beck says that Southern California will not see a huge impact because of the number of people and the diversified employee base, which creates stability. “Commercial real estate in Southern California will remain strong because of the number of people here. One thing that can't change is the number of people from the Ventura County line to the Mexican border,” he adds. “We are pretty diversified across multiple business sectors, and that always helps any economic change. The more diversified an economy is, the better the people in that economy do.”

The wage increase will likely affect the industrial and retail companies most. Some companies, especially those in warehousing, will turn to automation to decrease costs, but there are some companies that will look at moving headquarters operations out of the state. Even if that does happen, Beck expects that all firms will need to have a presence here. “There has to be a presence in Southern California, just because of how many people are here,” he adds. “However, you are starting to see some companies looking at relocating the headquarters while maintaining a presence here. We are in an evaluation stage right now because it is still relatively new. As we get to 2018 and 2019, we will start to see the impact.”