My days are filled with consulting business owners. You see, my commercial real estate practice focuses on family-owned manufacturing and logistics companies in transition.
Often this transition leads to a decision on their whereabouts. As an example. Let’s say a company is considering a merger. When two groups turn into one, duplication of their objects occurs, and in some cases, excess capacity occurs.
Our services are designed to get rid of surplus by selling or subletting unnecessary space. Expansion to another state also requires a partnership with us. We can find vacant buildings that need a tenant and negotiate a lease or sale. A sharp increase in orders may lead to the need for a larger building.
Yes, we see this transition often these days.
But today I would like to focus on the conversations I have with entrepreneurs not related to their commercial real estate issues. After all, small business is the backbone of our economy and employs a significant portion of our workforce.
Never in my four decades of working as a commercial real estate practitioner have I heard such concern.
Hiring is difficult. As a result of the 2020 pandemic, many people are on the list of unemployed. To combat this, the state and federal governments have created unemployment benefits, which in some cases can go as high as $ 1,000 a week. In addition, the time during which an unemployed or laid-off worker could receive this benefit was increased.
Consequently, the worker could earn good money without working. Now that our economy is reopening, manufacturing and logistics companies are finding it difficult to convince workers to return to their factories.
There is an acute shortage of available job candidates. Even before the pandemic, it was difficult to find skilled workers. There was a shortage of those working in machining or other specialized equipment. Now it is simply impossible to hire these specialists. In addition, our community colleges were not created to prepare students for industrial careers.
Raw material prices are skyrocketing. Copper, oil, plastic resin, building materials, lumber and steel are all in dire shortages. I doubt it, but what am I saying? Go to your local home improvement store and check the price of a 2 × 4 piece of lumber. You may want to bring your mortgage broker with you as it may require a second mortgage on your home to purchase!
Manufacturers struggle at every step, from stocking up on components to build their product, increasing the wages of the people who operate their equipment, and higher gasoline prices that drive up shipping costs. Expect your wallet to suffer over time.
Is the grass greener? Regardless of the size of the operation, many of the people I spoke with are considering placement outside of California. But are other states really more receptive? Yes!
I have just returned from a trip to Georgia on behalf of one of our clients. They asked us to locate three sites for them at the national level – one in the west, one in the central United States, and one in the east.
We have found that Georgia and its individual communities are extremely receptive to the over 200 jobs our client will provide to the local economy. Incentives, regulatory cuts, property tax rebates, simplified building permits, sales tax cuts, industrial development bonds, employee training, and tax breaks for hiring are provided.
We were shocked by the red carpet that was laid out according to our requirements. And here I thought the red carpet was only seen at the Academy Awards. God, I was wrong!
The government is going too far. AB5, new AQMD requirements, higher minimum wages, lower noise levels and lengthy permitting processes all affect the operation of a manufacturing or logistics company.
When you add in some uncertainty about property taxes, increased long-term capital gains, potential deferred taxation cancellation, and absolutely insane commercial property prices, you can understand what keeps owners from sleeping at night.
The California I remember embraced small businesses and provided a platform for success — stepping aside. Hewlett Packard, Disney, Microsoft, Apple, and Amazon started out as a dream in someone’s garage. Oh, how far have we come.
Allen S. Buchanan, SIOR, is a director of Lee & Associates Commercial Real Estate Services in Orange. You can contact him at email@example.com or 714.564.7104.