What kinds of changes are you seeing in the commercial real estate marketplace post-pandemic… and is this the new normal?
Small is the new premium. The market for smaller spaces is active with an influx of commercial customers coming to us with specific needs and expectations that we are trying to meet and exceed through the wide variety of buildings that KDA represents for lease or sale. Small is hot, according to Co-Star News, as buyers and investors actually refocused their investments in the first quarter on smaller properties. Co-Star data showed investors paying 7% to 9% more on average than they were in the same quarter last year.
We’re also seeing positive movement across our retail, office and industrial locations especially in these smaller (2,500-3000 sf) spaces. On the retail side we’re seeing new hair and nail salons and similar boutiques opening up in areas that are becoming new residential locations in parts of Greenpoint, and the north and east sides of Williamsburg. On the industrial side, we’ve been preaching from the start that companies start small and crawl before they can walk and run. Growth takes time. So small is the premium here, too. That includes buildings with nearby outdoor parking locations for manufacturers and service companies that want to park their trucks in the same vicinity of their building. Many large spaces, as I mentioned my prior post are still available for rent perhaps because companies are more likely to buy these large buildings versus renting them. These are trends that we hadn’t seen over the last year.
Investors have been active throughout the pandemic picking up deals where they can find them. What might spur a flurry of sales this summer through end-year will be possible changes to the federal tax code. It’s likely that investors will want to take advantage of 1031 Exchanges this year before this IRS provision that allows a building owners to defer federal taxes on exchanges of real estate, is eliminated or modified. The possible elimination of the step up tax basis and possible higher tax brackets for investors, could all impact the commercial real estate marketplace.
It will take some time to really know what is the new normal, but I’ll keep you posted on what I’m seeing on the street. If you’re a building owner or investor with questions, email me and let’s set up a call.
Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.