United States:
Strategic Real Estate Decision Making In 2022
01 April 2022
Masuda, Funai, Eifert & Mitchell, Ltd.
To print this article, all you need is to be registered or login on Mondaq.com.
Annually chief corporate real estate officers must make numerous
long range planning decisions based upon multiple micro and macro
factors. In 2022, perhaps more so than in recent memory, navigating
the myriad of macro factors impacting corporate real estate
decisions presents a daunting decision-making landscape. While
crystal ball gazing is at best perennially speculative, predicting
real estate market forces in the current economic, political, and
public health environment is tantamount to coin tossing.
Nevertheless, there are for this year certain virtually inescapable
assumptions which can be made, including:
- Demand, Absorption, Occupancy and Pricing for
virtually all manner of industrial property, or property which can
be readapted to industrial use, will remain at historically high
levels and such levels will likely continue to rise, albeit not at
the stratospheric rates experienced in 2021. Consequently, the
corporate real estate executive who has delayed or may be
considering delay of an expansion, purchase, or relocation in hope
of a cooler market will likely have a long wait. - Costs of Borrowed Funding will, relatively
speaking, increase in 2022, though still remain at near historic
low levels. - Land and Construction Labor and Material Costs
will continue to dramatically increase, though not as much as 2021,
notwithstanding likely continued, but lessening, land and
construction labor and material shortages and long delivery lead
times. - Inflation will not likely cool significantly
anytime soon and in any event stay at levels far above those
experienced in recent years. - The failure of the current administration to advance the
Build Back Better Legislative Agenda along with
its potential significant tax law changes, which could have
negatively affected the real estate sector, has all but assured the
continued availability of existing favorable corporate tax and
capital gains rates. It’s also significant to note that the
IRC Section 1031 tax deferred exchange will continue to be
available to support the sale of appreciated real estate and
acquisition of replacement properties while sheltering the sale
gains. - Lastly, Employee Costs will rise in most
markets along with employee expectations for work environment
flexibility and quality of life amenities. These factors will not
only affect employee hiring, but also retention and should be
considered among the key relocation and site selection criteria of
corporate real estate users.
The bottom line for 2022 as to corporate real estate decisions
may very well be that it is unlikely macro conditions will make
things easier, less expensive, or quicker and that procrastination
will really provide no overall benefit.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Real Estate and Construction from United States
Incentivising Subcontractor Performance
Haynes and Boone
In any large construction project there is likely to be a chain of subcontractors beneath the head contractor, and even the smallest link in that chain may have the power to…
Construction Law Seminar Offerings
Benesch Friedlander Coplan & Aronoff
The construction claims process is a complicated exercise where superior internal legal knowledge often rules the day and can help you to avoid protracted litigation.