We're Not Out of the Woods Yet ... Are We?

(Save the date: RealShare L.A.comes to the Hyatt Regency Century Plaza in Los Angeles, CA on March 27, 2013)

LOS ANGELES-I'm reasonably sure few in the commercial real estate industry are saying we're out of the woods yet. We've had a difficult, often painful last few years. Given the lack of clarity and uncertainty in our economy and with both the California state and federal governments, I'd say we're on uncertain ground.  In figurative terms, we've stumbled upon a small clearing in a dark and foreboding forest, but we're still looking for a pathway which will lead us all the way through.

Even against this shadowy backdrop, our brokerage firm experienced one of the strongest revenue years in our 91-year history in 2012, thanks in large part to economic and tax conditions. I don't think we were alone in that experience. The multifamily markets in particular, along with class A trophy high-rise office towers, were aggressively traded. Financing rates were and are at all-time lows. While strong balance sheets had a clear advantage with lenders, many sales were all-cash. Many sellers felt compelled to take advantage of what appeared to be the best capital gains tax and gift exemption climate for wealth transfer that we may experience for the foreseeable future. Many buyers felt real estate was a far better bet than the stock market and other less stable or unpredictable investment vehicles. Foreign investors felt the US market, despite economic and leadership instability, was a “safer” haven for wealth protection, especially in the first and second quarters of 2012.

So what does 2013 have in store for commercial real estate? Probably more of the same! Pressure to find stabilized investments will continue as our local, state and federal governments struggle with a variety of economic and social issues. The specters of rising debt and unclear revenue solutions are looming over us, spurring everyone–especially elderly people, pension funds and foreign nationals—to protect what they have. The upcoming year will likely see multifamily investments remain a fairly hot commodity, with smaller office building sales and retail beginning to gain traction. We're already starting to see a number of investors gain an appetite for industrial, especially multi-tenant, along the more highly traveled corridors in the Los Angeles area.

My advice to everyone in our line of work is patience, diligence and discipline. Stick to an area and/or product type, and immerse yourself in its operations and operators, whether buyers, sellers or tenants. Collecting this knowledge will help you identify the right concentration for your practice, and sticking with a defined sector will lead to consistent, steady and quite possibly uninterrupted business. We may not have cleared the woods yet, but it's clear that the pathway is leading us through extraordinary times.

Walter Conn is president of Charles Dunn Co. in the firm's Downtown L.A. office. The views expressed in this column are the author's own.