Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to firstname.lastname@example.org.
Question from Cole in CA: Hello Brian, I’m an experienced real estate investor in both the residential and some commercial sectors. I’ve built up a decent amount of capital during the pandemic that is currently sitting on the sideline. I’m a believer that real estate investors need to have the intestinal fortitude to look long-term and push through volatility. Keeping the right mindset is key to not letting your emotions and uncertainty push you into poor investment decisions. The pandemic didn’t come and go as quickly as I thought it would. I’ve concluded that over the next five or six months I need to push through this volatility and make an investment decision or two. I’m reaching out to get a few different views about where real estate is heading in general. I’d appreciate your thoughts.
Answer: Hello, Cole. It’s been a little over 18 months since COVID-19 was officially declared a pandemic. Through all the ups, downs, and uncertainty, several aspects of both commercial and residential real estate have become clearer. Most retail brick and mortar took a big and permanent hit as consumers became proficient at shopping online for everything they need and want. Recovery or expansion of office workspace remains uncertain with some but not all employees returning to group work settings. Residential real estate (both ownership and rentals) not only sustained itself throughout the pandemic but demonstrated it will remain robust for the foreseeable future, as long as low-interest rates keep pushing the edge of the affordability bubble.
One commercial real estate sector that is showing signs of robust growth is logistics for the distribution of consumer and industrial products. This is evident with the current supply chain bottlenecks. One fact we already know is that we operate with a global supply chain. The future of the supply chain will demand real estate and shape logistics for many years. Real estate supporting infrastructure growth brings substantial opportunities. Risk-takers need to figure out exactly where these opportunities will occur. That involves understanding the evolving supply chain strategies. Massive distribution centers are already a clear strategy. But these require support from many other infrastructure systems. Everything from seaports, to railroads, to air shipments, and long-haul trucking.
The geographical locations for some mega-transportation centers are already well established. Considering the enormous amount of goods coming from the Asia-Pacific market, Los Angeles is the clear leader as the busiest port in the country. But the further expansion of the port and supporting infrastructure may be limited. Other west coast locations could offer better investment opportunities from Seattle/Tacoma to San Diego.
Houston is another major transportation center that thrives on the three-way trade between the United States, Canada, and Mexico under NAFTA. But when it comes to infrastructure, Memphis plays a pivotal role due to its prime riverfront location on the Mississippi and FedEx’s SuperHub operating out of the international airport. Memphis’s infrastructure is vast with ample access to inland waterways, a web of interstate highway connections, and five Class I railroads.
Atlanta’s role as the unofficial capital of the New South has more opportunity to grow its inland transportation infrastructure. Although the international airport is best known as one of the busiest in the world for passenger traffic it is also a major cargo transportation center. Atlanta is a natural hub for trucking with access to three major Interstate highways – 20, 75, and 85. It’s already home to more than 75 Class A scheduled motor carriers, as well as more than 2,000 commodity carriers, contract haulers, and irregular route carriers. Infrastructure is also in place for the easy exchange of freight from one mode to another.
Chicago may have lost a bit of its appeal as a major transportation hub with its beginnings as a railroad center way back in the early part of the previous century, but Chicago’s transportation assets go far beyond the railroads. Located on the shores of Lake Michigan, it also accesses the Chicago and Calumet rivers. This gives Chicago easy access to a network of inland waterways, as well as access to world markets via the Great Lakes and St. Lawrence Seaway. Connecting to more inland transportation is only a short distance at the nearby Port of Indiana. O’Hare International Airport ranks among the top US airports in terms of cargo throughput, and the area’s extensive highway structure makes it a major center for over-the-road transportation. A strong addition to the mix is a solid network making it easy to move goods smoothly from one mode of transportation to another.
Cole, an entrepreneur real estate investor should do deep research into the next direction any of these mega transportation centers are headed. Real estate infrastructure investments supporting transportation in the surrounding areas can be expected to boom for many years to come. A high-risk-taking entrepreneur might want to anticipate where new mega-transportation centers could soon be emerging.
Cole, another crucial point is that patience and planning are essential. Researching possibilities is hopefully what you have been doing while your capital has been idle on the sidelines. Now is the time to fully explore the most promising opportunities, make decisions, and set realistic expectations. Opportunities will be around for years. There’s no need to rush and find yourself in a bad investment.
What is your take on the long-term outlook for real estate after the pandemic? Please add your comments.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to email@example.com.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, near a national and the Pacific Ocean.