Oroville >> Pushed by economic downturns and competition, property owners are finding new ways to use older buildings that increases their value, according to a speaker at Thursday’s annual North State Economic Forecast Conference.
California’s real estate outlook is strong, but it’s been the reincarnations of buildings that has given new life to old places, according to Todd Mirell, Union Bank business banking officer.
“California’s commercial real estate outlook is strong, but tempered. We should see valuation and income increasing, but the growth rate will slow dramatically.”
Mirell said the growth rate of 3-5 percent per year will slow to about 1-2 percent annually.
But it’s new thinking in regards to old places that is making an impact, along with traditional problems that discourage construction.
California’s favorite retail center — the shopping mall — has become archaic as the retail environment shifts and online purchasing accelerates.
Mirell offered the example of shopping malls peppered with vacancies. Owners are pushing retail use into a smaller footprint and then dedicating the remaining renovated space to infill housing. That can be either apartments or small residences. Those vast parking lots skirting the malls are being torn up for additional uses like housing.
Malls are putting in activities like fitness centers, which operate in hours different than retail sales.
“You can work out, and while you’re here, you can buy something.”
Another trend Mirell mentioned was strategic warehousing. As online ordering increases, getting products to buyers more quickly makes for happy customers and lower costs. So retailers like Walmart are leasing warehouses where they can keep products stocked and then get them to stores or customers faster than from a centralized hub.
“Sometimes it can be quicker than Amazon,” he noted.
As a help to “the mom and pops of the world,” Mirell noted that they can’t beat the likes of Walmart and Amazon on factors like price and delivery, but can provide service that mega-retailers can’t.
“It’s all about the retail experience,” which keeps the customer lingering in the store or establishes bonds with the business.
As far as the residential side of construction, Mirell sees growth in California apartments, but believes that demand will outstrip stock.
“There’s a lack of construction lending. Banks have had their hands slapped for having too many loans in certain areas.”
Environmental constraints on where construction can happen discourage the process and push up the costs as well.
However, the real estate specialist saw more growth in second and third tier apartments than in the top. If the market turns down, he noted, there will still be demand for less expensive rentals.
Mirell doesn’t see much construction in single-family housing. Factors include the same environmental constraints, construction lending as well as the new tax provisions.
“Single family construction is always hard in California. There’s regulations and the high cost.”
Pushing up demand as well are the thousands of houses lost in recent wildfires in the Bay Area and Southern California, as well as mudslides.
Contact reporter Laura Urseny at 896-775.
