As noted in previous posts, commercial real estate has a number of subcategories that are each very different from one another. For example, retail centers and office parks were two of the hardest hit sectors during the recession. On the other hand, fast food-restaurants, convenience stores and gas stations/convenience stores, were able to quickly rebound from the recession and perform quite well.
As we continue to move forward – leaving the worst days of the recession in our wake – it has been interesting to note which sectors of the commercial real estate industry have come out ahead.
A recent article from The Wall Street Journal described how the recession resulted in an increase of for-profit college student enrollments and an expansion of buildings designed to house classrooms and training facilities.
According to the article, schools are making these expansions in order to keep up with demand from “out-of-work adults seeking new skills in the health-care, automotive and technical trades…” This trend stands in stark contrast to periods of economic prosperity when prospective students would choose immediate employment over further education thanks to a promising job market.
But even more arresting is the fact that these for-profit colleges are not simply developing properties from the ground up; they’re renting empty mall anchor stores, grocery stores and office space and renovating them as education facilities. In some cases, the article notes, “landlords are offering concessions such as free rent and money toward renovations…”
The point is that commercial real estate, like every other industry, experiences unpredictable trends in which specific sectors find themselves on opposite ends of the spectrum. It is a multi-faceted industry where the valley of one sector is sometimes the peak for another. While it can be impossible to predict which areas will struggle and which will prosper at any given time, you can always count on the fact that the tides will change – and with those changes, there will be new windows of opportunity.
