There's some really crazy stuff happening in real estate. Cause I've been a real estate investor for 20, 30 years usually was the core holding in my portfolio, but that's changed quite a bit. So let me tell you what I'm thinking. Commercially real estate is going through dramatic change. Why the pandemic change behaviors of everybody all across America.
Let's just take, for example, big office towers in New York city or in Boston or Detroit or any city. You know, before the pandemic, everybody went to HQ to go to work. Everybody said, okay, let's get in the elevator with 60 people, go up to 78th floor, but that's all changed. We've proven in this economy because of COVID that many people let's say in accounting, compliance, logistics, they don't want to work in their cubicle anymore.
They want to work at home and they've learned over the last year, they can do it successfully, so they don't want to come back. So that reduces the demand for office square footage dramatically. Think about this. You know, I know we're getting vaccinated and that is great, but there's new strains every year.
There'll be a percentage of the population that never takes the vaccine. So COVID is coming back like a flu each year. And I think people are going to be more health conscious. They're not going to want to be jammed into elevators, going up to 78 for anymore. They're going to want to work from home.
That's a bit of a trend we don't know yet the total impact of it. So you've got this. Diminishment of the value of, you know, office space in commercial real estate and retail space has a lot of stores in third grade malls, like really cheap places making any money because people are buying everything from Amazon and direct and income from companies that's called the great American digital pivot.
So there's another asset class in real estate, basically 1200 square foot strip mall stores. All kinds of other malls not doing so well. That's the bad news. Here's the good news. People want to live at home. They want to have their own space. They want to have a place. They can live and work, raise their kids, take care of their parents, whatever they're going to do.
I do. So you've got this, this two different speeds. Years of value, commercial real estate down residential real estate up. How up big time up, crazy up. Look at this city I'm in right now, taking you on a tour of Miami. This is one of the hottest real estate markets in the world. Now, before I go on, I want to talk about our sponsor this week.
One of my favorite companies, you guys know I don't endorse it. Anything that I don't use myself ever. I'm wearing a rollback shirt. I love this company. I think they sent me some shirts a couple of years ago. I started wearing them. I fell in love with them because they stretch in every direction. Check this out.
I mean, this one has long sleeves. I love this thing. It stretches it every way I throw it in the washing machine. I dry it. I don't put it in the dryer. I know you can, but I don't. And it comes back. You don't have to iron it. All right. Back to what I was talking about. So, if you really think about it, you've got this split market, you've got commercial real estate, which I think is going to go down in value over the next couple of years.
Not much, but it's going to, and I've taken my money out of that. And I've got into residential, residential, real estate is going to be really interesting for the next few years. Think about it. People don't have to work in a ratty little cubicle. They'd rather go out into the burbs and work there. It makes total sense.
Right. But it's also going to reflect in the value of residential. So, you know, if you're an entrepreneur, there's no question that trend to continue to buy homes, upgrade them, they call it flipping. I don't call it flipping. I call it investing because you're going to fix up the kitchen and the bathrooms.
So let me tell you about investing in residential. When you buy a home and it needs a renovation, the only two things you should care about. Kitchens bathrooms, building a movie theater in the basement. It's a total waste of money. You don't get any return on that. I know it sounds cool to have a man cave, but the major purchase decision is often made by the matriarch of the family.
The woman's walking in saying, where do I live in the kitchen? Where do I live? I want great washrooms. And I agree with that completely. I love to hang in the kitchen. Why that's where my family is. We're always hanging around. We're talking, we're putting the popcorn on we're grilling outside, coming into the kitchen.
We sit around the counter. That's the zone. That's the family zone. Every dollar goes there. First, every guy likes to shave in a nice bath. I like a little TV there. I like to watch the TV in the morning when I'm shaving. I like a shower. I like a steam shower. These are all great investments. I know everybody says to me, put in a bathtub.
I never was about them. I'm in the shower. I love that. That's the way I look at. So I would say that if you're thinking about investing in real estate, Go residential, not commercial. There will be a chance. Think about something like a bed bath and beyond. They closed 200 stores across America. Why? Because their online direct consumer business was up 76%.
What's going to happen the stores. They're not going to be stores anymore. They have to be converted to climate control, pick pack, and you know, facilities with robots and ship stuff out to the suburbs. Think about those crappy little movie theaters in those malls, the tiny ones, not the big ones. I think they come back.
No, the IMAX, that kind of thing, but a riddle ratty movie theater. That's not going to get any capital spends on it and your feet are going to stick on the carpet. Who wants to go there? They're going to zero another class of real estate. They probably. And I just think you have to be pragmatic. Think about the way you're going to live.
Even after we all get vaccinated, which by the way is not going to happen a hundred percent because we, a lot of people that don't want to take the vaccine. So maybe 80% get vaccinated. The other 20% keep bringing it back every time that's going to be a huge problem. I want to talk about this in the context of investing because real estate is a core holding for so many people and families.
It's your number one asset. Anyways at the end of the day, I think my thoughts are out there. No known an ad on commercial real estate. You wait 24 months, let the prices come down. Maybe go back. And then, cause I think they are coming down. Well, we have a incredible situation right now where the case thriller home price index is that its highest level ever residential.
Comments
Post a Comment