OPINION
By Thomas M. Mulroy
Janurary 11, 2002
In the wake of September 11, many analysts predicted commercial real estate markets in upstate New York, New Jersey, and Connecticut would be hard pressed to fill the 13 million square feet of lost office space. Yet within weeks more than half of that total was replaced right in New York City. The outflow of companies from the city to outlying towns never materialized: a slumping economy allowed many companies to sublease portions of their offices to the businesses so tragically displaced.
While the agony and chaos visited upon New York City is unique, elsewhere the one word that probably best describes the nation�s new commercial real estate scene is mercurial (unpredictable/unstable/aberrant/puzzling/volatile.)
Interest rates that have dipped to pre-Vietnam War levels should make it an easy decision to acquire new property, yet refinancing has become even more attractive, convincing some property owners who may have considered selling an office building two months ago, to take another avenue now.
The volatility in the stock market and uncertainty about the economy should certainly put the brakes on price increases for parcels of prime commercial real estate. However, that�s not always the case. A sharp eye can still catch special situations offering high returns in a short time frame. In one south Florida community, for example, a zone change approval that came after September 11 virtually doubled the price of acreage in a parcel west of I-95.
In all of this seeming chaos and confusion there are few certainties, except that the definition of business as usual will never be the same as it was before September 11. And when a new normalcy finally does take hold, only those who are adaptable, who are quick to see the value of and seize new initiatives, who are in a position to recognize prime space and acquire it at bargain rates, who actually understand and can function effectively through the ebbs and flows of change will be in a position to utilize those changes to maximum benefit.
To be successful during this turbulent time, you not only have to be knowledgeable about commercial real estate, but also the external influences that can have a different impact on the market from one region of the country to the next. What might work for South Florida might not for Manhattan. Virginia and the Washington, D.C., area have their own unique requirements.
Simply assuming that by applying a rigid set of standards to all business initiatives and transactions will yield similar results as past efforts is to run the very real risk of being left behind in a haze of uncertainty and missed opportunities.
Surviving the turmoil, and being in a position to flourish when the new normalcy arrives will require a combination of traditional business savvy, a wide ranging network of timely, accurate information that can track local, regional, national and worldwide trends, and perhaps even a bit of fortune telling ability.
To successfully acquire new properties or market existing opportunities, businesses will need the ability to know the difference between a diamond in the rough and rough cut glass. Will the attacks on the World Trade Center create a long-term demand for high tech office parks, away from city centers and tall buildings that could be the targets for future terrorism?
Will the use of the normal mail channels to spread infectious disease result in a new wave of demand for high-speed broadband access and electronic capabilities that will re-ignite the stalled fiber optic industry?
Or will the war on terrorism be so successfully administered that businesses will themselves enlist — returning with confidence to pre-September 11 methods and practices? Only true survivors will have the ability to properly answer the new questions they are facing, and that will take depth, both in business acumen and financing.
The key now is to understand what “business”is today, and what it is likely to become. The firm that bridges the gap from yesterday to tomorrow will be the firm that keeps its head in an otherwise headless environment.
Thomas M. Mulroy is T-Rex’s Chief Executive Officer