Quattro Development’s Insights: Navigating the Unpredictable Terrain of Commercial Real Estate
In the ever-shifting landscape of commercial real estate, the future is shaped not by the challenges faced, but by the strategies devised to overcome them. The U.S. real estate market is currently undergoing significant adjustments, marked by rising interest rates, a contracting GDP, and reduced deal flows—a complex scenario that industry leaders like Quattro Development’s Rob Walters and Michael Liyeos are well-equipped to address.
Adapting to Unforeseen Challenges
The co-founders of Quattro Development, industry stalwarts with decades of experience, understand that resilience and adaptability are key in navigating the intricacies of a contracting market. Their journey began during the tumultuous times of the Great Recession, an era that served as a crucible, forging a stronger and more agile Quattro Development.
In the wake of the pandemic, the commercial real estate sector has undergone transformative changes that promise to redefine the industry’s future. Michael Liyeos aptly describes the current state of commercial development as being at a crossroads, demanding innovative strategies.
One pressing challenge is the persistently high construction costs. CBRE’s report predicts a 5.4% increase in construction costs for 2023. Michael Liyeos underscores the growing difficulty in repurposing existing buildings to meet the specific needs of tenants. Consequently, ground-up construction is becoming a more attractive option for brands seeking tailor-made spaces.
The landscape is further complicated by higher interest rates and an increasingly intricate construction process. Liyeos emphasizes the role of municipalities and governing bodies, which have become bottlenecks for development due to understaffing and complex zoning codes. To counteract these impediments, retailers may look to regions with more streamlined approval processes.
Supply and Demand Dynamics
Rob Walters foresees a period of supply stagnation, driven by elevated interest rates and reduced construction lending. Yet, the demand for housing remains robust, especially in multifamily and industrial segments. This demand-supply dynamic could lead to rent increases, impacting housing costs.
With loans becoming more expensive due to rising materials costs and interest rates, developers are exploring creative financing alternatives. Quattro Development’s co-founders highlight the importance of embracing innovative lending solutions, drawing from their own experiences during the Great Recession. Creative financing is expected to play a pivotal role in sustaining development projects.
The future of commercial real estate development is a terrain filled with both challenges and opportunities. As Rob Walters and Michael Liyeos suggest, the ability to adeptly navigate these complexities will determine success in this ever-evolving field.