Never buy commercial office space again

[Steve S.]

BACKGROUND:

COVID-19 has created a state of chaos never seen before in the modern world and as we dream of getting back to “normal” there is an unsettling reality of what exactly “normal” will look like on the other side of this tragic pandemic. With the economy at a standstill there is a massive spike in missed payments, missed rent and unemployment. There is a brave new world out there with a lot of uncertainty especially with investing in real estate.

Anyone who has 1031 exchange money right now is in the middle of a conundrum on what to do with their 1031 exchange money. Of course they want to buy into an evergreen investment strategy of acquiring a well performing multifamily or corporate office building while making a steadfast return on their capital. Here is the issue… how in the world will they be able to quantify that?

Last year you would have simply looked at the financials and reviewed the occupancy rate, rent rolls, operating statements, balance sheets and tax returns. It provides a verifiable financial picture of the previous 2-3 years where we then further extrapolate what the future financial picture is projected to look like. However, that is no longer the case. 2019 financials are pre COVID-19. They are pre-lock down orders. They are pre-recession numbers and don’t be fooled… the recession is coming.

So can you, or anyone for that matter, standby and emphatically state that making any sort of multifamily or office building acquisition is a good move for their 1031 capital? No… you can’t.

OFFICE BUIDLINGS: The entire world just figured out how to work without an office space and work from home. Everyone works from home now and even when the orders are lifted do you really think the top executives aren’t going to start unloading their over-bloated leases in order to downsize and reduce the amount of workspace and bottom-line costs? You know they are. Office space will be a dinosaur of epic proportions. It already was and now it will be a massive loss for all commercial real estate. Watch. So avoid these like the plague we are in right now… this would be the worst financial investment ever.

Don’t believe me… just read.

https://marker.medium.com/the-office-is-dead-16be89f25d01

https://www.newgeography.com/content/006597-the-future-office-space-real-estate-market

https://www.wsj.com/articles/investors-saw-office-buildings-as-safe-not-during-this-pandemic-11586260800

https://www.cnbc.com/2020/04/27/after-coronavirus-the-office-of-the-future-is-the-office-of-the-past.html

SOOOOO… yeah… you might wanna steer clear of this debacle because the office space apocalypse is just starting and it will never, and I mean NEVER, recover.

MULTIFMAILY: Who is paying rent? Who has a job? Jobless don’t pay rent. And when the world goes back to work how many months is everyone behind? How many months will it take to pay off the debt incurred by everyone making no money during the pandemic? You really wanna be a landlord right now? I sure don’t and why would your clients want to be?

Multifamily will always be around so it is a good investment for the future, but not right now. My advice… park your money for a year and make a huge return on that and then look for the correct 1031 investment next year when the real estate landscape is clearer and easier to navigate. Let other people deal with the headaches of trying to collect rent while you bank on a huge return by investing in this project with us.

Don’t believe me… just read.

https://www.theguardian.com/us-news/2020/mar/31/california-rent-strike-coronavirus-eviction

https://www.greeleytribune.com/news/renters-and-landlords-feel-pressure-with-potential-post-covid-19-housing-crisis/

https://www.lamag.com/citythinkblog/rent-los-angeles-covid-19/

Oh yeah… and there is a mass exodus of people leaving… and don’t forget that the stay at home orders are staying with us until August as well, at the very least.

https://abc7news.com/californians-moving-to-texas-california-exodus-leaving-florida/6177157/

https://www.abc10.com/article/news/local/california/691000-leave-california/103-e02662aa-dfae-46b2-b94a-f20158053e60

https://www.star-telegram.com/news/business/growth/article239570433.html

https://abc7news.com/moving-out-of-california-residents-leaving-to-idaho-people/5809250/

Soooo…. That’s a bust right there as well.

CONCLUSION:

Investing anyone's 1031 capital (or any capital at all) needs to go through a qualified opportunity zone fund right now and park their money for a year at least and then next year you can assess and invest wherever you want while making a fully informed decision. But now, don’t let make a monumental mistake by investing in office and multifamily. It’s a bad… bad idea.

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