Commercial real estate feeling ‘big shocks’ amid ‘tale of two worlds’: Expert
Remote work, recessionary pressures impacted CRE in ‘big way,’ real estate expert Joel Marcus said
Alexandria Real Estate Equities founder Joel Marcus says permanent remote work transition and recessionary pressures contributing to slow property sales.
With commercial property sales dropping 16% year-over-year this April, one of real estate’s millionaire investors weighed in on the "two big shocks" shaking up the market today.
"One is the remote working situation. I actually think it's going to be permanent," Alexandria Real Estate Equities founder Joel Marcus told FOX Business’ Maria Bartiromo Wednesday. "The other big shock is recessionary pressures, both in costs and in interest rates."
"It's kind of a tale of two worlds," Marcus continued, "but you need people to come in, fundamentally, for training culture and really to work in teams. But we're never going to go back in most businesses, I think, to five days a week."
On "Mornings with Maria," the real estate expert described how companies are responding to the work-from-home realities and commercial space going unused or unsold.
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"The old economy companies, insurance companies, to some extent financial companies, are having a harder time and are trying to force people back in," Marcus explained. "The tech world – some are stay-home permanently, but many are doing hybrid."
Alexandria Real Estate Equities founder Joel Marcus said remote work and rising interest rates are the "two big shocks" to the commercial real estate market on "Mornings with Maria" Wednesday, June 8, 2022. (Getty Images)
Marcus predicted most commercial real estate growth will come from biotech, agricultural tech and health care.
"Nobody does lab work from home. So our laboratories have been working 24/7 since the beginning," Marcus noted. "And these are complicated buildings. So somebody who wants to put an office building up or a [residential] building isn't going to put in the infrastructure and the complication that is needed for a laboratory. So we've maintained a good supply-demand balance."
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Alexandria Real Estate Equities founder Joel Marcus says there’s been limited supply but consistent demand for ‘complicated’ buildings like laboratories.
Over the last five years, Alexandria Equities’ has seen an average demand of 1.2 million square feet per quarter, according to its founder. This quarter, the investment trust company expects to beat that number.
"The health care market has had a nine-year bull run. It's starting to temper a bit now, but that's a lot of money going into that system," Marcus said. "We all know people who have metabolic diseases, cancer diseases, neurosciences, the big set of diseases for the future that we still haven't really been able to address. So those are the reasons that laboratories will stay in great favor."