Real Estate

In the NBC Show “30 Rock,” Tina Fey’s character, Liz Lemon, remarks to her boss Jack Donaghy (played by Alec Baldwin), “What a week, huh?” He promptly replies, “Lemon, it’s Wednesday.” This sentiment summarizes the mood of a lot of us lately, as current events seem to be throwing new twists and turns at a breakneck pace. In just half a year, we’ve seen multiple armed conflicts, international trade wars, persistent inflation, political assassinations, confrontational protests and riots, and devastating natural disasters. These incidents have led to significant volatility in the stock market and a general feeling of uncertainty among consumers both domestically and abroad.

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The California Contractors State License Board (CSLB) has long warned against the dangers of “renting” a qualifier—where a licensed individual allows their name and license to be used by a construction company without actually overseeing its operations. This practice has not only led to a rise in consumer complaints but has also drawn increased scrutiny from regulators.

With recent amendments to the law, California has strengthened its enforcement tools, redefining what it means to supervise a contracting business, imposing new restrictions on subcontracting, and extending the statute of limitations for licensing violations. Contractors and construction business owners must be aware of these changes, as failure to comply can result in severe penalties, including license revocation, fines, and even criminal charges.

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California law has long treated commercial and residential tenancies differently. Consumer protection-focused regulations enacted to protect residential tenants were legally considered inapplicable to business tenants which were considered to have a higher level of sophistication.  This is all about to change in California. As we prepare to usher in 2025, commercial property owners, brokers and property managers must familiarize themselves with new California legislation which significantly changes laws pertaining to small businesses leasing commercial property. 

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Though Halloween has come and gone, a real-life scare continues to linger: the office sector of commercial real estate. Office has been the slowest sector to recover from COVID, as companies wrestle with remote/hybrid work policies in determining their future office needs. While some businesses have relinquished their office space completely or downsized to maximize the efficiency of square footage in highly amenitized buildings, others are making efforts to bring their staff back in and negotiating the inevitable reluctance from employees who got comfortable working in their loungewear. The future of office is uncertain, to say the least.

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It is rare for the commercial real estate industry to be the target of legislative reform.  Even for a progressive state like California, real estate-focused initiatives tend to focus on promoting housing policies, residential tenant rights, and environmental protections.  This year, however, there are three pending bills which could significantly disrupt the commercial real estate sector, potentially causing substantial increase in operating costs that will either undermine already-thin margins for landlords and owners or place more stress on tenants through passed through expenses.  The three bills, each of which has passed its house of origin (either the Assembly or Senate), are summarized below.  We encourage all of our clients to contact their state legislators to provide feedback regarding the dangers of these initiatives, which we will continue to monitor through the remainder of the legislative session. 

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We’ve all read the headlines recently.  From Big Lots to Joann’s to Express, many retailers which were staples of popular retail centers at the turn of the century have succumbed to the pressures of online shopping, higher interest rates and rising costs, and called it quits (or are significantly reorganizing their companies).  So is the retail market suffering, destined to face continuing failures and leave us with empty, decaying retail centers and shopping malls?

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The Downtown Sacramento Partnership (DSP) and the Urban Land Institute (ULI) recently convened a Technical Advisory Panel (TAP) of distinguished third-party analysts from around the country to analyze and recommend growth opportunities for downtown Sacramento. The TAP’s recommendations were made public this month. As a member of ULI Sacramento’s Executive Committee, I believe in downtown Sacramento’s potential and the power of the built environment to transform the community. In case you missed it, I wanted to share a few highlights of the TAP’s findings and recommendations with the hope that its vision for downtown Sacramento will inspire us in the commercial real estate sector to embrace the opportunities ahead.

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The classic fable of The Tortoise and the Hare is well-known across mainstream culture. Yet despite the story’s reliable and surprisingly universal thesis, it appears to have become commonplace for investors to look for faster and bigger results in lieu of slow and steady returns. And with recent high rates of return triggered by sustained low interest rates and pent up demand following the Great Recession, the commercial real estate sector seems to be no exception to this hare-like approach. It should therefore come as little surprise that, given high interest rates, increased construction costs, and political turmoil, many commentators on the 2024 commercial real estate market predict negative results for the upcoming year.[1]

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There are not many things in life that are truly “one size fits all.” We certainly don’t take this approach when it comes to our clothes, our TV shows, or our lunches. Yet for some reason, we regularly employ this method in our commercial real estate transactions. Almost daily, I am asked to comment on an AIR or CAR form, usually with the caveat that one of the parties really wants to use the form and “keep it simple.” While simplicity may have its benefits, this is rarely the wisest course of action in a transaction involving multi-million-dollar assets. A custom form will more accurately reflect the parties’ agreement and, in my experience, actually be cheaper and easier for the parties to negotiate.

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