Southern California prognosticators say expect a recession by mid-2023

This last week of October was highlighted by two key events — an inaugural episode of a new webinar series and participation as a commercial real estate panelist at the Cal State Fullerton Economic Forecast conference.

The webinar series is called Trendsday Wednesday and features interviews with service providers that advise small businesses.

My idea in hosting these was to give a spotlight to my network while providing actionable ideas for business owners. My goal is to produce a number of these throughout the year. The first episode featured my friend and colleague, Allan Siposs of Keystone Capital Markets.

The webinar is formatted to highlight three trends in the merger and acquisition world along with a bit of Nostradamus mixed in with a prediction of what’s to come in the next six months. Our maiden voyage was epic as Allan didn’t disappoint.

You may be wondering what mergers and acquisitions have to do with commercial real estate. Just this: Anytime a company is sold or a competitor is acquired, a real estate requirement occurs.

You see, if an enterprise is bought, two families of facilities, culture, employees and customers must be merged into one. Frequently, a duplication of buildings causes one or more to be jettisoned.

Consider the bank consolidation during the financial meltdown of 2008. World Savings was acquired by Wachovia which in turn was swallowed by Wells Fargo. Imagine a neighborhood center where all three former groups had a branch location. Yeah, you get the idea.

Allan’s three trends were recessionary fears, interest rates — and because of the first two — folks with urgency. Allan believes we’ll head into recession sometime in mid-2023.

Cal-State Fullerton’s annual economic forecast, hosted by the Orange County Business Council, was held at the Disneyland Hotel. It was nice to return to the “happiest place on Earth” albeit for some not-so-happy predictions.

Economists Anil Puri and Mira Farka narrated the journey through the European energy crisis, recessionary definition, consumer confidence, banking, corporate growth, inflation, fiscal spending, the outlook for a soft landing, hard landing, or something else.

There were some bright spots: our economy grew in the third quarter of 2022 and the pinched supply chain seems to have eased. Puri and Farka expect a “hard-ish” landing next year.

I must admit, my eyes were bleeding after the fantasia (sorry, couldn’t help myself) of charts and graphs. Rest assured, dear readers, I’ve kept you quite informed about the economy of things.

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Jeff Ball, the new CEO of the Orange County Business Council, spun a new twist to this year’s forecast by moderating a panel of commercial real estate experts that included Jeff Manley of Savills, Michael Nguyen of Banc of California and myself.

We discussed our perceptions of the CRE environment, the lending world and our predictions for the future. We all agreed: Industrial has been the darling, rising rates will nudge cap rates higher and limit buying power, and offices are tough assets to own these days.

Allen Buchanan is a principal and commercial real estate broker at Lee & Associates, Orange. He can be reached at 714.564.7104 or abuchanan@lee-associates.com.

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