Your Business Today
Good News: The Commercial Real Estate Logjam Is Starting to Unjam, Although Very Slowly
Are you prepared to take advantage of the new opportunities becoming available to you as an investor?
Are You Investing in the New Market Based on Old Information?
Real estate investor Steven J. Fogel, cofounder and principal of Westwood Financial Corp., has been through booms and crashes in the market before. More than 30 years’ experience has given him a broad perspective and a wealth of knowledge on how to assess and best handle tough economic times. “If we were to graph commercial real estate values prior to the economic meltdown through today, we’d see more and more sales and rising values in quality properties, indicating that the market low has already been passed.”
Fogel says, “It’s time to look at the market with fresh eyes and stop making the same decisions we made in the past. The dot-com era is over, many high-priced houses are in foreclosure, and easy-to-get mortgages aren’t available, so why are we using facts based on those times and making decisions as if they were still valid?” What can a smart business investor do when the future is uncertain and the past is no longer an accurate predictor of what’s to come? How can you bring your business mind into the present?
How to Bring Your Business Mind into the Present: A Q&A with Steven J. Fogel
How does our mind’s internal dialogue run all the circumstances and relationships in our business and personal lives?
Our mind has been monitoring everything in our field of awareness since early childhood, storing its perceptions and the lessons drawn from those events for future use to keep us safe. Unfortunately, our fear-based mind has misidentified many of those situations and has often mistakenly applied those misinterpreted experiences to current business and personal relationships. It responds automatically, often unconsciously, in ways that are counterproductive to what we consciously want—and we’re not even aware of it.
Why are we more comfortable staying in situations we hate rather than looking for a better situation, and how can we change?
The voice in our head doesn’t like change. It knows that it can survive in the current painful situation, but its fear-based wiring is afraid that the unknown future situation will be even more painful. As an example, we may not like our job, but we know how to survive in it and we fear quitting because we may have difficulty finding a new job, or the new job we find may be worse than the job we now have. So we stay stuck in an uncomfortable job out of fear that quitting will bring pain that is less tolerable than the pain we are currently experiencing.
The trick is to understand that we are not the voice in our heads. That voice is past based and is always looking for land mines even where none exist. The voice in our head rarely embraces new possibilities. Ask yourself, “What is the worst that can happen?” and “What is the best that can happen?” and remember that the voice in your head isn’t you it’s just your survival instinct. That’s when you can see possibility!
What can we do to stop being controlled by what happened in the recent meltdown and learn to live in the present?
We must accurately inventory our current situation, letting go of what was. This means training ourselves to differentiate between the facts of our existing situation and letting go of “could of, would of, and should of.” Once we are living in the now, we stop being paralyzed and start taking care of business.
The first step is recognizing that fear keeps us stuck in our self-designed emotional prisons. The second step is to recognize that the “what-ifs” are only “what-ifs”; they haven’t happened and they won’t necessarily happen. The third step is to commit to the possibility of happiness by being willing to risk the “what-ifs” and move on.
As a result of the meltdown, more and more people seem to be paralyzed by fear and unable to make a decision about starting a business, buying a new home, or even taking a vacation. What causes this?
Many of us are still shell-shocked from recent financial events. Our mind is both fear based and past based and therefore unwilling to take a risk, believing that if we lose our money, everything in our life will fall apart. That keeps us paralyzed. It’s like Roosevelt said, “The only thing we have to fear is fear itself.”
What do you say to someone who claims that the American Dream of happiness and prosperity is out of reach for most people?
They are plain wrong. The future is unknown and everything is possible.
The State of Commercial Real Estate Today:
- Ever since the meltdown, commercial real estate values have been in free fall as investors stayed on the sidelines waiting for bargain-basement prices or fearing even deeper losses.
- We’ve passed the bottom of the market, and now is a good time to buy commercial real estate, specifically multifamily, industrial, and retail space.
- It’s important to reevaluate current holdings and examine what has changed. For example, has an area gone from being a new housing destination to an area so economically depressed that there is a negative population migration (as in Phoenix and Las Vegas)? How healthy is the area’s industrial base now, and what are its future prospects?
Why and What to Buy Now: A Q&A with Steven J. Fogel
What are the indicators you are looking at that tell you to buy commercial real estate now?
Our staff of acquisitions professionals are constantly in the marketplace looking for good deals. Prior to the meltdown, there were minimal vacancies and it was assumed that conditions would stay that way. Today there are substantial vacancies and the attitude is that if a building is vacant, it’s going to be vacant long into the future and therefore that vacancy is valueless. Americans tend to believe that when things are good, they will be good forever; they also believe that when things are bad, they will be bad forever. That past-based way of thinking is creating opportunities for clever investors. People should be thinking about now—the present—rather than the past or the future.
Today it’s common for properties to sell below their replacement cost due to market conditions: vacancies, financing, and most of all, fear. That makes now a good time to buy.
The Malthusian theory states that given enough time, the population will outstrip the land supply. The mantra for good real estate has always been “location, location, location.” Therefore, supply and demand will force up values; the only question is when. America is still the world’s “location, location, location,” and our prices are at modern-time lows.
Which is a better investment: multifamily housing or retail space?
Most people relate to housing because we are all familiar with it. It’s not as easy to relate to industrial, retail, and office buildings. That is why housing is the golden child and the other types of properties generally are left to the professionals. The marketplace has a rhythm, and that rhythm has put office properties at the bottom of the common desirability curve since the demand for office space is down due to both the economy and changes in work habits brought on by the digital age. In many ways, the same goes for retail properties. It looks as though our economy is poised for new industrial growth, but we still have considerable unused capacity. So for the average investor, I’d recommend residential housing because as soon as people go back to work, they will stop living in cramped spaces or living with their extended families and move back into their own homes again.
Are there any particular parts of the country where you recommend investing in property?
Our company prefers stable and still-growing urban areas close to major airports. We like infill locations—areas that are fully developed so that new competition has to tear something down in order to build a modern facility to compete—versus less-developed areas where there is still empty land to build on. We prefer the West and South United States.
Why do most investors refuse to acknowledge a bad investment and get out?
People will do anything to avoid looking stupid. They bragged to themselves about how much they were worth before the meltdown, and that critical voice in their own heads tells them that selling at today’s depressed prices will make them look stupid. The remedy for that is to be in the moment—to let go of past-based thinking and make decisions based on current market conditions. They need to value the cost of holding on to a property at a loss and letting their capital stagnate versus selling the property and making alternative investments. They can’t afford to let their financial future be ruled by past-based emotion.
Feeling Lost in the Recession? Find Yourself—and Success
Can’t find a job? Don’t know what your next business move should be? Distrust your instincts to make the right decision? Don’t know whether you should buy a house or make an investment?
Most people need to have a breakdown (the loss of a job or a relationship) before they have a breakthrough. But you can avoid a breakdown, beat the economy, learn more about yourself, and be successful? How?
- Take responsibility for everything that happens in your life.
- Don’t make the same mistakes over and over again—just because your mind is programmed a certain way.
- Move beyond the fear of your situation.
- Choose your reaction to a situation: accept it fully, change it, or remove yourself from it.
- Always operate with integrity.
These five steps will help you achieve the American Dream of happiness and prosperity and help you take control and operate your own life—successfully.
For more information on how to bring your mind into the present, purchase a copy of Steven J. Fogel’s new book, My Mind Is Not Always My Friend, available from most bookstores and through Barnes & Noble and Amazon.
