It’s a mid-December day and I am quasi-grudgingly on my way to NYC. What I consider a cold concrete jungle, but always enjoy my time and understand New York’s allure—and opportunities. It’s a transitional time. I’m on a plane and nobody was wearing their mask, shaking hands and talking face to face and even giving embraces.
No, it wasn’t a dream—it was late 2019.
I wrote an outline and very rough draft of the article below on a Jetblue flight O-Town to NYC. We landed and I had planned a rendezvous my writing confidante—Mike Guggs. We finished diatribing and we started writing while I was imbibing a few midday mimosas in Manhattan. We gave a handful of predictions and both felt something coming. Not this. An enshrouded darkness—a shadow cast—by a hovering black swan that has accelerated trends. And the expedited rotation of cycles and the tectonic crumbling of newly-minted archaic paradigms. Virulent pestilence.
- Dave’s 12/10/19 Prediction: “Retailers will close locations, ask for rent reductions, and aggressively negotiate renewals. It will become a more tenant-friendly commercial real estate market.”
- Mike’s 1/6/20 Response: Unfortunately this prophecy came true and due to the pandemic accelerated greatly on all fronts throughout the year. Particularly hard-hit were sit-down restaurants, tourist-related retail, fitness clubs, movie theaters & regional malls.
- Mike’s 12/10/19 Prediction: “When the recession scenarios above occur, Owners and Landlords will have to adjust their pricing, deal with Lender events, adapt to the landscape, or lose their property. In many cases, the fallout of a few key tenants creates a cash flow domino effect that ultimately results in a default event.”
- Dave’s 1/6/20 Response: Mikey Guggs was right. A tsunami of default and consolidation events are on the horizon and the first wave will start in Q1-Q2 in 2021. Grab a life raft or a surfboard—opportunities amidst market chaos exist for those that can outride the turmoil.
- Dave’s 12/10/19 Prediction: “The traditional retail merchandise mix is rapidly changing, and LL/Owners must evolve as well.”
- Mike’s 1/6/20 Response: Acceleration of the re-imagining of retail properties. Usually, trends take many years to percolate through the retail landscape. 2020 will be the year future trends relative to merchandise mix blasting off like a spacecraft. Smaller sit-down areas, outdoor and covered patio seating, larger drive-thru’s, greater emphasis on delivery, convenience and technology.
our black swan predictions for 2021
WHAT DO YOU THINK THE RETAIL COMMERCIAL REAL ESTATE LANDSCAPE WILL LOOK LIKE?
Guggs: Opportunistic!!! Our industry ecosystem will experience accelerated retail closures—the decimation of tired brands—and the conception of innovatory and novel concepts. Novel times. Locally owned businesses will adapt or wither, thrive or die. With the pandemic continuing through at least the first quarter of 2021 and the psychological impact lasting for much of the year, expect many local & national legacy brands to shutter. Vacancy rates will climb in the 1st half of 2021 and rental rates will generally remain stable or decline for most of the year—depending on a variety of factors—including government cash interventions.
With continued low interest rates, shifting population centers and changing consumer behaviors this is the time to strategize. As Warren Buffet so eloquently stated “we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
This is the perfect time to start planting the seeds for future success. The emergence of innovative and cutting-edge concepts that have transitioned, adopted and embraced the accelerating trends—and technologies of consumer behavior—and safety protocols in these novel times—ordering apps, curbside and home delivery. Reap, sow and grow.
Cobby: My crystal ball is pretty opaque at this point. I do have flashes of fleeting and unsure, unreliable, dreamlike and possibly imagined clarity. Depending on my state of consciousness and depth of thought—some visions of the chessboard are indicatively enigmatic. It will come. But. Nobody knows what will happen—there will undoubtedly be amazing opportunistically-fruitful leasing, disposition, development and redevelopment strikes. In CRE. If prepared. Contrarily, the fog of virulence is still clouding the competitive landscape and many veiled opportunities unknowingly await. Currently clandestine future targets—shifting relationships. Hidden, burrowed, latent and changing. Emergent relationships in a divergence of roles, capacities, positions and organizations. Many are redefining and will redefine—themselves—online. An avalanche of divergent emergings—when the inoculated and inefficacious dust settles.
Have you ever seen the first scene of the Hunger Games? I’m staying on my platform, let the amateurs trip, get greedy or expose their plan. Hamsters on a wheel because they have nothing to do. Forced solitude combined with checking account attrition (which sucks—I know) impels emotionality. Calm the hamster and endure the wait.
When the anxiously-impatient don’t meet unrealistic expectations, the second or third expert fixes the problem. Strikes with a tactical arrow. Then monetizes—that’s my strategy.
In a previous blog I wrote in mid-2019 called “Why I’m Excited for a Correction” I said that “in times of duress, mayhem and droughts, the watering hole shrinks, thins and deteriorates the collectively-competitive infrastructure.”
When things are crumbling we also see where true structural integrity lies. Not buildings, people. And who lies to you. Unexpected friends and dormant enemies will materialize. Broaden the expanse of your eyes. Be wary of the predators in your ecosystem. If you don’t know them, then you may be the prey—praying for a chair when the music has already stopped.
The evaporating watering hole now is PPP and cash reserves. Sadly, so many more businesses will shutter. A fact of the globally infected business ecology. The allocation from the late 2020 legislation is yet to be determined. Adept-agiles will thrive. Stagnate thinkers will perish. Certain industries are just getting crushed and it’s really heart-wrenching. This will create an unforeseen default event sequence that will eclipse the volatility of the 2008 Great Financial Crisis. Crescendos of dominoes—falling. Hold on to your stylus’ and tablet with—with patience and confidence—the dust will settle, seedlings burrow and opportunities will sprout from the ashes. A novel and beautiful bloom transcending despair and gloom. 2021 will be a year of thorns amongst black roses.
Concluding Tactical Reflection:
Cobby: I want to thank Mike for hopping on this authorship journey and co-authoring this blog series with me. He was a pillar of our CRE Site Source networked-community, a soundboard and friend who supported my written ruminations from the onset—because he understands adaptation.
Mike’s social marketing prowess is becoming more agile everyday—and he’s a very astute real estate mind. We don’t just sit around every time we talk pretending we are Earnest Hemingway, Stephen King or Robert Greene. We focusing on fusing creative thinking infused with tangible knowledge. Digital Expertise+CRE.
Writing combined with tangible-applicable knowledge is anchored subject matter expertise. I will be following Mike’s musings and I suggest you do too. Thanks for reading my first article of 2021—I anticipate and await the novel and forthcoming illumination of shadows and ensuing opportunistic fruition. The blackjack year is upon us and I’m not taking insurance.
Guggs: Dave, I really appreciate you asking me to co-author this article with you. I always enjoy the creative-comradery and perspective you bring to each question. Watching you pivot and embrace the power of social marketing and your willingness to share your industrial insights has been inspiration for my engagement—ultimately helping gain positive attention market share.
Lastly, I’m excited to be a Tactical Application in Tactical LinkedIn Secrets: Rantings from a Superconnector. Dropping in late February—presales available 1/15/21. Sign up below!