It blows my mind that so many Commercial Real Estate (CRE) experts think that everything is going to be ok.
Just this week I was pitched a manufacturing investment opportunity emphasizing “Manufacturing is coming back to America, and you don’t want to miss out!”
A REIT banker gave an eloquent argument on why malls are now a good investment, because “So few malls remain, making the existing malls more valuable.”
And a CRE expert podcast discussed the great opportunity around the corner: “Foreclosures are coming, and you can buy Class A for pennies on the dollar.”
Trust your own eyes! You’re a better expert than you think.
Back in 1988, the Talking Heads had a hit called “Nothing but Flowers.” True, the tune wasn’t as well-known as their earlier hit, “Burning Down the House.” But I can’t get the lyrics out of my head because they’re actually pretty prophetic.
In fact, I’ve added some of their foretelling lyrics here for fun. Enjoy…
The Glory Days of American Manufacturing are Coming Back! (Not). 
“There was a factory. Now there are mountains and rivers…”
I grew up in a shoe shop factory town where church bells, factory whistles and fire station horns marked our time throughout the day. World class brands such as Bass, Eastland, Merrill, Cole Hann and LL Bean were all made right in our local factories.
By the mid-eighties, all US shoe manufacturing relocated to southeast Asia – and all the once-familiar bells and whistles went silent. What was happening in my little town was happening throughout the country.
All the factories closed, never came back and will never come back.
(Most) People Are Not Returning to the Office.
“Once there were parking lots. Now it’s a peaceful oasis…”
My whole career was spent in computer rooms, office spaces, cube farms and conference rooms. Getting to work early guaranteed me a parking spot, maybe even one remotely close to the entrance.
Every day was a noisy mess of workers, managers, and executives bustling about. Hours spent scheduling conferences rooms, waiting for coffee, lines for restrooms and searching for open seats at the cool table in crowded cafeterias…
Fast forward to 2023: on a recent trip to a client office building, I drove right up to the front door and parked, walked by hundreds of empty cubes and lonely offices. I picked a conference room from a dozen that were available.
Went to the cafeteria for a cup of coffee…only to discover it was permanently closed. So I settled for a vending machine coffee. Honestly, it’s a little scary walking the halls of a mostly vacant, silent office building.
The people that once walked those halls are not coming back. And those hulking office buildings? They’re notoriously difficult to repurpose.
Retail as We Knew it is GONE… And It’s Never Coming Back.
“There was a shopping mall. Now it’s all covered with flowers…” 
One payday every month we had enough cash to go shopping. Maybe you can relate. A happy and hopeful time for the whole family.
We’d plan a full day of mall shopping: where to park, shop, meet up, and eat. We would see friends, find wonderful things, make impulsive purchases, and be entertained. I so enjoyed ending our shopping day with dinner together at a nice mall restaurant where we would recount everyone’s experiences and purchases.
On Monday morning, all my fellow workers had shopping stories to share too. There was even some mall envy, depending on where you lived. Oh yeah. The mall envy was real.
Sadly, most of the malls I remember have since been torn down and replaced with housing. The few remaining have become ghost towns, with shrinking occupancy (if there are any tenants left at all).
Dead and dying behemoth shopping centers will blight the suburban landscape for decades.
Retail is not coming back.
The 3 Main Pillars of Commercial Real Estate Are Dying
What’s the takeaway here? Do not let anyone fool you: the three main pillars of commercial real estate – industrial, retail and office – are terminally ill and will not recover.
“And as things fell apart. Nobody paid much attention. You got it, you got it…”
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