The Rise of Riverside’s Innovation District
Located in the heart of the Inland Empire, Riverside is a vibrant college town that offers a wide array of lively restaurants, eclectic music venues, local craft breweries, indie shops, and quaint coffee houses, and more. Riverside boasts an astounding 24 nationally registered historic sites and more than 100 city landmarks that encapsulate the city’s rich and remarkable history.
Sitting a mere sixty miles east of Los Angeles, Riverside is a city known for its citrus industry, and has grown to be renowned as the city of arts and innovation. Visitors and residents alike enjoy all the amenities that make a college town noteworthy. From downtown museums and performing arts centers to the world-famous Mission Inn Hotel and Spa, the city is the perfect blend of small-town friendliness and big-city fun.
Riverside is flourishing and growing at a steady and exciting pace. As of the 2020 census, Riverside had a population of 314,998. As a college town and affordable Southern California market with a wide variety of social and business advantages, Riverside will only continue to grow. At Stance, we are here to help it grow. To us, Riverside is more than just a place… it’s home!
Let’s take a look at Riverside’s Innovation District.
What is an Innovation District?
According to the Brookings Institute, an innovation district is defined as a “geographic area where leading-edge anchor institutions and companies cluster and connect with startups, business incubators, and accelerators. They are also physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail.”
Innovation districts facilitate the creation and commercialization of new ideas and support metropolitan economies by growing jobs in ways that leverage their distinct economic attributes. These districts build on and revalue the intrinsic qualities of cities: proximity, density, authenticity, and vibrant places. Given the proximity of many districts to low-income neighborhoods and the large number of sub-baccalaureate jobs many provide, their intentional development can be a tool to help connect disadvantaged populations to employment and educational opportunities.
Innovation districts have the unique potential to spur productive, inclusive and sustainable economic development. At a time of sluggish growth, they provide a strong foundation for the creation and expansion of firms and jobs by helping companies, entrepreneurs, universities, researchers and investors—across sectors and disciplines—co-invent and co-produce new discoveries for the market. At a time of rising social inequality, they offer the prospect of expanding employment and educational opportunities for disadvantaged populations given that many districts are close to low- and moderate-income neighborhoods. And, at a time of inefficient land use, extensive sprawl and continued environmental degradation, they present the potential for denser residential and employment patterns, the leveraging of mass transit, and the repopulation of urban cores.
Riverside’s Innovation District
Entrepreneurship, employment, entertainment and housing, all in one place. This is the vision for Riverside’s Innovation District.
What if you aren’t an entrepreneur, does this still matter to you?
Absolutely! An innovation district not only connects cutting edge businesses with infrastructure and close-at-hand resources, it builds off of the character of historic and culturally rich neighborhoods, connects blue-collar workers to high-paying jobs, and contributes to the growth of affordable, eco-friendly public transportation. Existing community members will benefit from the diversification of housing options in their area, and the aim is to maintain affordable housing while creating opportunity for all Riversiders to participate meaningfully in our economy.
Riverside is the #4 destination for minority entrepreneurs, and the #1 destination for millennials in the entire country. Riverside's Innovation District will leverage the power of our growing population by providing education and technical training that is needed to create a bubble of green and clean air technology jobs, anchored by the California Air Resources Board.
Source: Official Riverside Website
Location
Riverside’s Innovation District consists of a 3-square-mile.
The district includes:
- Part of downtown Riverside
- An area along North Main Street
- An industrial area north of Third Street near the 60/91/215 freeway interchange
- The area with old packing houses east of downtown
- The Eastside neighborhood
- UC Riverside and the area where the California Air Resources Board is building a new facility
Numbers
- Population: Nearly 23,000
- Number of Businesses: 1,700
Four Institutions of Higher Education
- University of California, Riverside
- Riverside Community College
- California Baptist University
- La Sierra University
Entrepreneurship and Employment
Within the Riverside Innovation District, the plan includes running a hybrid electric bus on the University Avenue, close to UCR’s Center for Environmental Research and Technology also called the Innovation Corridor. The corridor will help Riverside to become a smart city in the future.
Buildings
Several vacant buildings within the Innovation District consist of old packing houses from the area’s citrus-growing days. Such structures often require extensive renovations before being occupied. The result, however, is an attractive building that can become an office, retail or live/work space, among other uses.
One such structure is the Sutherland Fruit Co. packing house at 3191 Mission Inn Ave., which is now Old Spaghetti Factory. Other former packing houses and empty lots in the district include:
- National Orange Co. Packing House
- Riverside Navel Growers Association
- Strachan Fruit Co.
- Packing House Business Center
Jobs, Dining and Entertainment Options
With four institutions of higher learning within city limits and several others nearby, Riverside is already preparing students for fulfilling jobs in the medical field, engineering, social justice and the arts. Our Innovation District will not only provide the types of jobs that we need to keep all of those graduates here, it will also provide training for and employment in quality technical careers that don't require a college degree.
Currently, Riverside’s 3-square-mile Innovation District is filled with a mix of vintage citrus packing houses, office buildings, educational institutions and residential areas. Given time, it will develop into a home for thousands of additional high-tech, high-paying jobs that will attract even more investment and also add to the quality of life for local residents.
Once the plan is fully realized, city administrators predict that the area’s diverse population will be able to live, work, go to school and play in an area that will be walkable and also have multiple transportation options.
How Stance Commercial Real Estate Can Help You
Navigating the commercial real estate market can be an intimidating task, especially in a fast-moving market such as Southern California. Any commercial real estate situation can change in the blink of an eye, leaving you to face challenges that you never anticipated. And to make a sale that meets your pricing and timeline goals, there are even more factors to keep in mind.
Stance CRE can be a great resource regardless of which type of investor you are. We have been adding value to investment decisions right here in Riverside for years. We are not just market experts, we are your neighbors! We are a local business with local interests.
In the right market, both active and passive options have the potential to generate steady cash-flow and return on investment. At Stance Commercial Real Estate, we live and breathe Riverside culture. We are not only working in the community, we live here… we love it and we want to help you succeed in it!
Call us today at (909) 772-1212 and let us help you decide which type of role is best for you!
Investing In Riverside’s Opportunity Zones
Located in the heart of the Inland Empire, Riverside is a vibrant college town that offers a wide array of lively restaurants, eclectic music venues, local craft breweries, indie shops, and quaint coffee houses, and more. Riverside boasts an astounding 24 nationally registered historic sites and more than 100 city landmarks that encapsulate the city’s rich and remarkable history.
Sitting a mere sixty miles east of Los Angeles, Riverside is a city known for its citrus industry, and has grown to be renowned as the city of arts and innovation. Visitors and residents alike enjoy all the amenities that make a college town noteworthy. From downtown museums and performing arts centers to the world-famous Mission Inn Hotel and Spa, the city is the perfect blend of small-town friendliness and big-city fun.
Riverside is flourishing and growing at a steady and exciting pace. As of the 2020 census, Riverside had a population of 314,998. As a college town and affordable Southern California market with a wide variety of social and business advantages, Riverside will only continue to grow. At Stance, we are here to help it grow. To us, Riverside is more than just a place… it’s home!
Let’s take a look at Opportunity Zones. These investment properties are unique and innovating. From local influence to tax incentives, these properties offer the opportunity to enrich the community and enhance the portfolio of the savviest of investors.
What is an Opportunity Zone?
Opportunity Zones are an economic development tool that allows people to invest in designated areas. Under certain conditions, new investments within these zones may be eligible for preferential tax treatment. The State Governor nominates a limited number of eligible tracts for official designation. The certification and designation of an Opportunity Zone comes from the Secretary of the U.S Treasury via his delegation of authority to the Internal Revenue Service (IRS).
Opportunity Zones provide a new tool for investors, fund managers and communities by utilizing privately sourced funds into eligible economic development and community reinvestment projects.
Opportunity Zones In the City of Riverside
The City of Riverside has four, state-designated opportunity zones which are ready for investments and new commercial and residential investments which can be streamlined and has community support.
One such Opportunity Zone is the Life Art Center. This event venue is designated Historical landmark #41. Located in downtown Riverside California, the Life Art Center is known for hosting enchanting wedding celebrations and other milestone events. Initially constructed in 1909 by renowned architect Arthur Benton, the building has been host to numerous elegant weddings since 1993. The venue exudes old-world charm and has become an instrumental feature in Riverside’s charming landscape. In 2021, the Stance team was enlisted to guide the prospective buyers through the process. With a successful acquisition, the new owners are enjoying Riverside’s quaint downtown culture and thriving market.
Specific Riverside, California Opportunity Zones
Zone 1 – Innovation District / Hunter Park
- Main Assets: UC Riverside, Bourns, Solarmax, CARB, Downtown Riverside, Mission Inn, Konica Minolta,
- # of Residents: 44,522
Zone 2 – Casa Blanca Auto Mall
- Main Assets: Riverside Auto Center – Audi, BMW, Mercedes, Lexux, Porsche, Harley Davidson, Carmax
- # of Residents : 2,929
Zone 3 – Arlanza
- Main Assets: Riverside Municipal Airport, UTC Aerospace Systems, Arlanza Public Library, 91 Freeway Frontage,
- # of Residents : 5,669
Zone 4 – Canyon Springs
- Main Assets: Power Retail Center – Target, Walmart, Sams Club, Best Buy, 60/215 Freeway Frontage,
- # of Residents: 3,965
Why Invest and Develop in Riverside’s Opportunity Zones?
1. Location, Location, Location
The city encompasses an expanding transit and alternative transportation network, research institutions associated with the University of California – Riverside, and the ever-expanding entertainment destinations in the downtown region. The City is also currently home to several under-utilized former industrial buildings which have the potential to serve as ideal co-working spaces for startup firms and other creative developments. The close proximity to the university will also lend itself to a steady and reliable workforce.
2. Innovation District
Riverside has created an innovation district that is ideal for attracting new investment, retain local talent, encourage entrepreneurship and create jobs. To date, companies such as Konica Minolta, a global technology firm, have relocated to the Innovation District in order to be part of Riverside’s innovation ecosystem and to be close to Riverside’s collegiate talent pool. The Innovation District also boasts several "creative" office locations including ExCITE, Spark Tank, and Mind and Mill.
3. Strategic Partnerships
Riverside is a community that puts collaboration with local businesses at the top of the priority list. The city is proud to regularly team up with a vast network of partners who work to enrich the community and make Riverside a vibrant destination to invest and develop:
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- Greater Riverside Chambers of Commerce
- Riverside Downtown Partnership
- Inland Empire Small Business Development Center
- UCR College of Engineering-Center for Environmental Research & Technology
4. Community Benefits
Opportunity Zones can be used as part of an economic development strategy to create jobs, invest in startups, stimulate housing projects, or augment other tax incentive programs.
Tax Advantages of Investing In Opportunity Zones
There are primarily three tax benefits made with the creation of OZs.
- Capital Gains Tax Deferral: An investor that re-invests capital gains into a Qualified Opportunity Fund can defer the payment of federal taxes on the realized gains of the investment as late as December 31, 2026
- Capital Gains Tax Reduction: An investor that meets timing deadlines and holds their investment in a Qualified Opportunity Fund for at least five years can reduce their tax bill on the capital gains differed by 10%. If the investor holds their investment for at least seven years, the reduction increases to 15%.
- Elimination of Taxes on Future Gains: An investor that holds their investment in a Qualified Opportunity Fund for at least ten years will not be required to pay federal capital gains taxes on any realized gains from the investment.
How Stance Commercial Real Estate Can Help You
Navigating the commercial real estate market can be an intimidating task, especially in a fast-moving market such as Southern California. Any commercial real estate situation can change in the blink of an eye, leaving you to face challenges that you never anticipated. And to make a sale that meets your pricing and timeline goals, there are even more factors to keep in mind.
Stance CRE can be a great resource regardless of which type of investor you are. We have been adding value to investment decisions right here in Riverside for years. We are not just market experts, we are your neighbors! We are a local business with local interests.
In the right market, both active and passive options have the potential to generate steady cash-flow and return on investment. At Stance Commercial Real Estate, we live and breathe Riverside culture. We are not only working in the community, we live here… we love it and we want to help you succeed in it!
Call us today at (909) 772-1212 and let us help you decide which type of role is best for you!
The Most Attractive Tax Benefits of Investing in Commercial Real Estate In 2022
The major benefits of Commercial Real Estate (CRE) - such as rental income, price appreciation, and portfolio diversification – is an attractive opportunity for many investors. Investing in commercial real estate can provide stable, long-term passive income streams, in addition to windfall profits when properties are sold. Over the course of the life of an investment, these tangible benefits can lead to a substantial difference in returns.
But, these are not the only benefits that should be considered. Even if the income and appreciation for a property are relatively limited, there are a number of significant tax benefits and tax deductions that can be realized. Understanding these tax benefits associated with CRE is more complex than it may seem on the surface, but if you are considering an investment, you need to understand the tax implications.
To help you get a firm grasp on the tax benefits involved in commercial real estate investment, the Stance team has put together a list of the different considerations to keep in mind when deciding on which commercial property deal structure is best for your financial goals.
The Two Ways Investors Earn Returns Determine Taxation
The first criteria for determining what taxes will be required on a commercial real estate investment are how the gains were earned.
The two ways investment properties earn money are cash flows and capital gains. Let’s cover the differences between the two and how each might impact you at tax time.
Treatment of Cash Flow
At its core, the premise behind real estate investing is a simple one: an investor purchases a property that produces income from tenant leases and costs a certain amount to operate. If the income is more than the expenses (including debt service), the property produces positive cash flow, which flows through the LLC to investors and is ultimately taxed at the individual levels.
The cash flow a property generates is taxed as ordinary income, so the effective tax rate will be determined by the investor's income tax bracket. Cash flow is the total rents less allowable expenses, which is the net income. As with any other income, these taxes are due at both the federal and state levels.
Treatment of Capital Gains
Income is not the only source of return for a commercial real estate property. If the supply and demand characteristics of the local market are favorable, the property will increase in value. Capital gains are simply the difference between what you paid and sold a property for. In many cases, capital gains are taxed differently than income, but not always.
For example, if you buy a commercial property for $2.5M and sell it two years later for $2.8M, you’ll have a capital gain of $300,000, taxed at a rate of 15% if filing single or married jointly. Comparatively, if this amount was cash flow income, you would pay 35% in taxes if filing as single.
One of the other major tax benefits of a commercial real estate investment is that IRS rules allow an individual investor/taxpayer to use a tax deferral strategy known as a 1031 Exchange. We will discuss this later. Employing this strategy, the taxpayer can defer the entirety of his or her capital gains tax bill by reinvesting the sales proceeds into another property of “like kind.” These “like-kind exchanges” allow an investor’s money to grow tax-deferred over time, and can be repeated indefinitely for maximum tax deferral.
Tax Benefits of Investing in Commercial Real Estate
Investors earn a return on their commercial real estate investment in two ways: the cash flow the property generates and in capital gains from appreciation. The way the profits on a commercial real estate investment are taxed depends on whether that profit is cash flow or capital gains. At Stance, our expert team can go over these tax benefits with you to educate your team on how to get the most bang for your buck!
Depreciation and Write Offs
Possibly the best tax benefit of commercial real estate is depreciation since it is a non-cash expense, providing a substantial write-off without actually having to spend any money for it. Real estate is a physical asset whose condition degrades over time. To account for this, tax rules allow a commercial property owner to depreciate the value of the property a little bit each year and list the amount as an expense on the property’s income statement (similar to interest expense or property taxes). The depreciation expense is written off against ordinary income, so any taxes that are paid on cash flow generated by the property is reduced every year the deduction is applicable.
As a property owner, one of your first and best benefits is your ability to write off the interest payments you make on your mortgage. So, not only are you using someone else’s money to buy commercial property, but you can also write off their profit for providing you with that capital.
Other write-offs include:
- Property management fees
- Property insurance
- Mortgage interest
- Property taxes
- Legal and other professional fees
- Property repairs, capital improvements, and/or ongoing maintenance
- Marketing expenses
Interest Expense Deductions
If there is a commercial real estate loan on the commercial property, an investor is allowed to write off the interest each year against their income, potentially providing a substantial write-off. This holds true especially during the early days of the loan when the mortgage payments are almost entirely interest rather than principal.
Section 1031 Exchange Tax Deferment
A 1031 Exchange gathers its name from section 1031 of the IRS code, which says:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.”
With a 1031 exchange, investors can use the capital gain to invest in another property, often one that produces income or the potential for greater capital gains at a later date. This can make a big difference in the total capital you have to invest in your next commercial property. To put it simply, this section allows you to avoid paying capital gains taxes when you sell a property and then reinvest the proceeds into a property of equal or greater value – if you locate and purchase the new property within a specific time frame.
Several reasons make 1031 exchanges attractive to investors. Here are just a few of them:
- Improved Cash Flow
- Property and Asset Management
- Estate Planning
- Asset Consolidation and Division
- Diversification
- Buying a Vacation Home
Reduced Tax Burden for Beneficiaries
Keep in mind—a 1031 exchange is really just a tax deferment, not a total tax write-off. When you do finally sell to cash out, the tax will be calculated on the cost basis of the original commercial property. If, however, the property is passed to beneficiaries, they may get some tax help with what is called a “step-up” cost basis.
A step-up in basis is applied to the cost basis of the asset transferred at death; the higher market value of the asset at the time of inheritance is considered for tax purposes. Instead of the original cost of an inherited asset as its basis, the stepped up basis loophole readjusts it to the value at their death
Opportunity Zones
One lesser known—and somewhat temporary—tax benefit of commercial investment property ownership comes from deploying capital into designated “Opportunity Zones.” Each state has nominated certain localities within its domain, qualifying those zones as Opportunity Zones if that nomination has been certified by the Secretary of the U.S. Treasury. Opportunity Zones were intended to be an economic development tool.
The idea behind identifying Opportunity Zones and giving them preferential tax treatment is simple: to define the areas of greatest need, and then create an incentive for private investment to flow into them. In doing so, the resulting projects create jobs and income that can be further reinvested in a harmonious cycle meant to lift the community out of distress.
To realize the tax benefits from an Opportunity Zone investment, investors must place their money in a “Qualified Opportunity Fund.” Once this is underway, these investors may realize reduced, deferred, or eliminated capital gains taxes on their investment, depending on how long it is held. If it is held for more than five years, there is a 10% tax reduction.
How Stance Real Estate Can Help You
Some of the greatest benefits of investing in real estate are the available tax breaks. Still, the barrier for many is being unaware of these opportunities and how to take advantage of them. Understanding which investment property tax benefits are at your disposal is one of the best ways that real estate investors can achieve long-term wealth. Take advantage of these tax breaks and ensure you stay on the path to financial freedom while protecting yourself from avoidable fees. Hiring the right team from the beginning will help you navigate the leasing process with ease as well as save you time and money. At Stance Real Estate, we live and breathe Riverside culture. We are not only working in the community, we live here… we love it and we want to help you succeed in it!
Call us today at (909) 772-1212 to see how our commercial property management strategies can help you!
Creating a Sustainable Future: Green Trends To Consider in Commercial Real Estate
As businesses grow across the Inland Empire, the need for sustainable and green commercial real estate (CRE) will also increase. The Quadrennial Technology Review from the Department of Energy reveals the true impact CRE has on the environment and climate change. The commercial real estate sector accounts for about 76% of electrical use and 40% of associated greenhouse gas emissions in the U.S. Together, greenhouse gases, water abstraction and air pollutants account for about 90% of the commercial real estate environmental impact costs— mainly due to the high cost of extracting water from natural resources. These costs create a financial roadblock for CRE investors.
While some buildings continue to be developed without the environment in mind, commercial real estate is quickly becoming greener in an effort to reduce the sector's impact on the environment. These changes are speared by government regulations set to finalize in coming years. Out of the variety of ways the industry is working to reduce its carbon footprint, there are three specific trends leading towards a sustainable future.
Solar-Powered Energy
Solar power investments are a top green trend within the commercial real estate industry. As solar power becomes more affordable, building owners are making sure new properties are solar generated. This cuts back on overhead costs of powering the buildings and is better for the environment than traditional energy sources.
Architects, engineers, and contractors are now of the opinion that net-zero buildings are achievable in the future by using solar energy and other clean forms of energy. The U.S. Energy Information Agency (EIA) projects that solar installations in 2020 and 2021 (approximately 13 GWac of utility-scale solar power and 4 GWac of small solar power) will continue to grow. Solar energy is expected to make up 39% of clean energy by the end of 2021.
In Riverside specifically, the goal of Riverside's municipal electric and water utilities was to obtain 33% of electricity from renewable sources by 2020. This year, Riverside has dedicated itself to reducing potable water usage and increasing renewable energy.
Space Design and Integration
Productive workspaces are more about the function of available space rather than the excess of space. Excess space that serves little function contributes to higher costs including extra energy to heat or cool the space, as well as to light, clean and fill the space with décor. New green commercial real estate properties are being designed with efficient space usage in mind. The environments are designed to not only cut down on overhead costs, but to also drive productivity in the workplace.
In addition to functional spaces, new environmentally friendly CRE property development is focused on providing adaptable spaces for the work-from-home hybrid model that many companies are adopting. While traditional workspaces, such as offices and conference rooms, are still needed, flex spaces for game rooms and hangout spaces are in demand.
Human and Eco-Friendly Building Materials
When it comes to green commercial real estate, building materials contribute to cost and sustainability. Traditional paint, drywall, furniture and carpeting can all contain volatile organic compounds (VOCs) that can be harmful to the environment. As a result, builders are turning to low-VOC products and other alternatives.
Builders are also incorporating architectural aluminum grills, self-mending concrete, and switchable smart glass. Architectural aluminum grills allow for airflow from the outside to be harnessed and controlled to help lower heating and cooling costs. Switchable smart glass can inhibit UV rays and deflect the heat of the sun from entering the workspace, providing for more energy-efficient spaces. Self-mending concrete contains bacteria that grow and bind into cracks and fissures in the concrete, creating more impermeability and longevity. While these eco-friendly products may cost more initially, they present long-term savings for investors considering the environmental impact of commercial real estate.
Looking Ahead
These are just a few of the trends helping to move the CRE industry towards a more sustainable future. Governmental regulations are beginning to lean towards requiring eco trends to be permanent. While the initial efforts to be sustainable can be time-consuming and costly, the results are worth it. Compared to energy-inefficient properties, new green buildings are expected to emit 40% less CO2, consume 40% less water, and up to 50% less energy.
Builders and investors are being met with the opportunity to help companies increase profitability while reducing their eco footprint. With today's market increasingly demanding environmentally-friendly products and workplaces, the profitability of green commercial real estate development will only grow.
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Contact Team Stance today to learn about available sustainable properties and other opportunities within the Inland Empire.
Commercial Real Estate Trends: Increasing Demand for Industrial Development
As technology advances and Covid-19 has forced ordinary habits to change, the demand for warehouse, distribution and manufacturing centers has increased. In the Inland Empire, industrial vacancy reached 2.7 percent—a historic low according to a JLL market report— by the end of the first quarter. As a result, industrial development has boomed in the Inland Empire. The Inland Empire East alone had 14.5 million square feet of industrial space under construction as of last quarter.
The demand seen is not surprising. The industrial real estate sector has proven its ability to weather economic downturns in the past, including with the Covid-19 pandemic. As a result, increased interest from investment groups has helped spearhead growth. The JLL market report reports that the annual total of e-commerce deliveries has more than tripled in the last five years. For the Inland Empire, this demand equates to increased industrial development, which in turn will impact residential and commercial real estate. This will likely mean a stronger economy with an expanding workforce.
The Demand for Industrial Development
The major financial institution, Deloitte, predicts that industrial real estate investment demand will increase to 14.8 billion square feet by 2023— a 850 million square feet increase. The JLL market report expects demand to surpass 1 billion square feet by 2025. The demand for industrial development is in response to the growth in e-commerce and delivery services. As Covid-19 has kept consumers in their homes, grocery delivery and online shopping have become the norm. Industrial spaces are seeing greater demand in dense urban environments so operators can get closer to the consumers and cut back on delivery times. However, locations near truck routes are also necessary to ease cross-country transportation and provide more efficient networks for goods to traverse.
Industrial Real Estate Development
To fulfill the growing demand, the Inland Empire Black Creek Group has announced 1.7 million square feet of Class A industrial space to be built in the Etiwanda Commerce Center and Riverside Logistics Centers.
In addition to building new industrial facilities in undeveloped areas, corporations are also buying abandoned retail and office spaces. With the growth of e-commerce and teleworking, office spaces and retail strip malls are sitting empty. Investors are purchasing these commercial properties, tearing the buildings down and erecting warehouse, distribution, and manufacturing centers. Further incorporating them into densely populated areas, bringing new jobs and more efficient transport of goods.
Opportunities for Industrial Real Estate Investment
For investors and developers, the demand for new industrial real estate space brings new opportunities. Particularly with last-mile facilities, locations in highly populated urban markets have a higher rent cost. However, the need for large logistical centers in suburban areas also presents an opportunity for industrial development. As demand increases, new companies are looking for industrial space, while existing companies are looking for additional locations or larger locations to fulfill the growing demand. In addition, the movement of people away from the Los Angeles area and into the suburbs of the Inland Empire means last-mile facilities in suburban areas are necessary. These factors create a fantastic opportunity for businesses looking to invest in the changing landscape of the Inland Empire.
Increased Demand for Workers
The increase in demand for space to store, process and fulfill online orders also brings a high volume of new jobs for both skilled and unskilled labor. As more able workers move out of the surrounding cities into the suburbs of the Inland Empire, the influx in workers can fill the need for industrial development. This allows for a greater economic output for the Inland Empire and a higher number of monetary resources put back into the economy.
For the past several years, commercial real estate trends have shown that the industrial market has been their top performing industry, and will likely continue to be. If behavioral changes continue as they have for the last five years, these trends will continue to work in favor of industrial real estate investments.
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Ready to see what local investment opportunities are available? Call Joe today at (909) 772-1212.
Rebuilding The Economy Through Commercial Real Estate
As efforts to end the pandemic continue, rebuilding the economy will be a long term battle. As businesses begin to reopen and people begin to get back to their jobs, the economy will begin to rebound from the strain the pandemic has placed on it. While residential real estate markets have fared well in the last year— speared by historically low interest rates— the commercial real estate market is also seeing a positive climb.
NAIOP Research Foundation Study
The annual NAIOP Research Foundation study, “Economic Impacts of Commercial Real Estate,” reports that commercial real estate development contributed $26.0 billion to the state economy, supporting 162,515 jobs, and generating 9.5 billion in wages. In addition to the number of employees these new spaces will house, the contributions to the local and state economy are unsurmountable. On the national level, construction’s percentage of total U.S. GDP rose from 19.5 percent in 2019 to 21 percent in 2020. This percentage is anticipated to increase over the next several years as state and federal infrastructure projects get underway adding more jobs and generating more wages that lead to economic recovery.
The study also provides an in-depth explanation for the changes the commercial real estate market is experiencing, as well as the possible reasons behind the changes. The study asserts that much of the commercial construction growth can be primarily attributed to manufacturing and retail companies rethinking their spaces and focusing more on creating an experience for the customer than a strict sales space. In the luxury market, these redesigned retail spaces have become the norm as brands vie for the most cutting edge retail space to draw in a consumer who can more easily shop online. However, this is a trend we are seeing in middle tier retail businesses as well. Stores redesign their spaces to appeal more to the consumer, giving them alternate reasons to come into the store.
How Offices Are Being Impacted
For office buildings, the growth hasn’t been as direct. When workers began working from home, many new office construction projects were cancelled. However, as people begin to trickle back into the office, businesses are rethinking their footprint. Some may opt to move to more affordable areas, others may downsize their spaces, and some will experience growth on the back of the pandemic that will drive them to seek larger spaces. Businesses that intend to remain in their space will ultimately begin to better utilize the space, with renovations and alterations. All of these changes though, the NAIOP report asserts, are beneficial to the commercial real estate market.
The most substantial impact coming to the industry is going to come from the state and federal levels. COVID relief packages include funds earmarked specifically for public infrastructure. This will have a positive effect on the commercial real estate market as new buildings and public spaces are created. On the federal level, there will also be an increase in infrastructure that will improve city and suburban environments bringing more businesses and people into the areas. All of these projects will have a significant impact on rebuilding the local economy in the coming years.
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Rebuilding the economy will take time. Be prepared for the slow process by knowing what to expect with the commercial market. Call Joe today at (909) 772-1212 to learn more.
How Covid-19 is Affecting Residential Migration
The Covid-19 pandemic has had a massive effect on both the national economy and local economies, like within California’s Inland Empire. Many individuals suddenly found themselves without a job. More people are working from home than ever before. Businesses are downsizing, changing location, or shutting down entirely. The job market has changed drastically, urging many to make adjustments to their careers. Part of that adjustment, in many cases, means migrating to new cities. In The Inland Empire, commercial and residential real estate markets have both seen tremendous growth spurred by the number of well-qualified candidates moving into the area.
What Reports Are Showing
The annual CBRE report provides evidence to this growth asserting that a more significant number of people moved in the last year, than in previous years. California has seen an exodus of residents into nearby states. However, while California overall experienced a decrease in residents in 2020, the Inland Empire saw an increase comparatively. Currently, businesses are now opening back up and workers are returning to their places of employment, indicating that commercial real estate market trends will see an uptick as well.
Based on the CBRE report, The Inland Empire ranked number five in the state for the number of move-ins versus move-outs. This means that more people moved into the Inland Empire in 2020 than moved out. The report suggests that this is a result of the pandemic, coupled with the normal fluctuation of residents. Specifically, 2020 saw a 10 percent increase in young, highly educated individuals moving out of the city into suburban and rural areas. Los Angeles saw a significant decrease in residents, suggesting more city-dwellers have moved into the Inland Empire and other surrounding areas. This has had a positive impact on the residential market in the Inland Empire and has also been beneficial for businesses in the area who are able to attract the incoming talent.
Moves during the second and third quarters— the most turbulent annual quarters— were higher than usual. Address changes slowed modestly during the fourth quarter, suggesting that the moves were already planned and not a knee-jerk pandemic reaction. This type of activity indicates that the movement away from cities may continue into the following years. As more businesses move towards a remote-work model, more individuals are likely to migrate to affordable areas like The Inland Empire from surrounding major cities such as Los Angeles.
What This All Means
With the upwards trend of movement into suburban areas, the following years almost guarantee new opportunities for growth. Riverside alone will see an increase in business as college students start to return to school. As a college town, the local Riverside economy relies heavily on students. Returning students combined with new residents equals the perfect time for adjustments to be made within the commercial real estate industry.
These trends and data are beneficial for the economy of the Inland Empire area. Business owners will benefit from the influx of residents moving to The I.E. Now is the time for building owners to take advantage of market shifts and consider selling or leasing their properties to new businesses or businesses looking to downsize. Some companies may even be looking to move into larger buildings in preparation for pandemic-related restrictions lifting. While the costs of commercial properties remain higher than usual, negotiations are more flexible than ever.
Ultimately, time will show what the lasting results of the pandemic will be. In the meantime, the Inland Empire is benefiting from the new, young, and well-educated residents moving into the area in both the business and residential sectors.
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Now is the time to take advantage of commercial market trends. Want to know what options are available? Call Joe today at (909) 772-1212.
Riverside Business Highlight: Push Project
Push Project is a faith-based clothing company that launched in 2017. We sat down with Owner and Founder, Josh Paat, to hear the story behind the Inland Empire-based brand.
What started out as a simple idea has evolved into a successful business venture. From adjusting to a new schedule and keeping up with content creation, Josh’s day-to-day is filled with all levels of business management.
How Push Project Began
Josh always had a dream of starting a faith-based company, but the final vision came after he and his former business partner exhausted other business ideas.
“We actually wanted to start a ramen business together," Josh says. “I wanted to market it to be on social media, but we realized that it was too ambitious. I told him about my idea of starting this clothing brand and he was down to fund it...It really just took off from there.”
Developing an overall aesthetic to model his designs after was another layer to building the brand.
“[Push] started off as what was supposed to be an outdoors brand,” Josh says. “Somehow it kind of steered away from that, which is totally okay. I wanted to tie in something with my faith, and the aesthetic of being outdoors and adventure.”
Deciding on branding wasn’t the only decision Josh faced. It took years before he was ready to manage the brand full-time.
Leading Up To The Leap
Prior to focusing purely on Push Project, Josh was working from home and juggling two jobs. Ultimately, he decided to take the leap and quit his “day job” in pursuit of full-time entrepreneurship.
“I think what was revealed to me was the fact that I don't have to do that anymore,” he says. “What led me to actually make the decision was the fact that I was already making my paycheck in a day doing Push. Eventually, I realized that working my day job was almost a waste of time. I feel like I got everything that I needed from that job.”
At first, taking the leap came with caveats.
“Leaving my nine to five meant I was also leaving health insurance, dental, and all the security. I thought to myself, I'm pretty, like self-sustaining though. I think that's the illusion that we create for ourselves that the security we have in our corporate job is what will help us live our life,” he says. “I realized that I can take care of myself. If Push has a bad month, there'll be other ways that I can provide for myself. The blanket of security that a corporate job gives, ya it's safe, but at the same time, it's not the only way.”
Despite challenges along the way, taking the leap was worth it.
“I've always wanted to have something like this that was self-sustaining, but also have the opportunity to do other things,” he says. “I have other plans to someday pursue— you're going to laugh— but maybe firefighting. I think that's one of the things that people always get surprised by, but that's something that I want to do!”
The Beginning Stages
Getting the ball rolling with Push Project took time. Step-by-step Josh made the company official.
“One of the hardest things that I feel like I still haven't fully figured out is all the legal side of things like the actual business,” Josh says. “I just did my taxes recently. I think I realized how important it is to have somebody who is either an accountant or somebody who knows taxes very well (to help). They're the ones who helped me guide it to transition from being a sole proprietor to an actual LLC, which was something we had been trying to do.”
As for getting sorting through the legalities and details of running a business, Josh says a lot of it comes down to motivation and being aware of the difficulties.
“A lot of it is just self-motivation,” he says. “I think a lot of people don't realize how much it takes to start a business. A lot of people jump into it thinking that it's just all about taking pictures and posting on Instagram. There's a lot of strategy behind it, too. Most of the time, they don't realize the actual maintenance costs behind things.”
Josh has found that navigating the metaphorical and literal costs of business ownership is made easier by a network of support.
“I think having a good community behind your mission, to help you kind of get started, really does help,” he says. “A lot of work is going to be you, but the support comes from your community.”
Lesson Learned Along The Way
Josh had to think out of the box when marketing Push Project. Rather than strictly focusing on numbers, he had to strategize different ways to reach his audience.
“I realized more and more that it wasn't just all about statistics. A lot of what made me push into it, into more marketing and tapping into like, you know, is what people actually like,” he says. “If you're doing things just based off of what you think other people are doing, that’s so cliche.”
Outside of marketing strategy, Josh also had to decide the best way to manage inventory.
“When we first started, we saw different ways that we can start this drop shipping model, where you can have other people fulfill your stuff for you. So you don't have to carry inventory. That's compared to holding everything at home, which is what we're doing now. The drop shipping model would really work for people who [don’t have storage],” he says. “Just research what makes sense in the beginning, because you have options.”
He has learned that research also can mitigate mistakes made in the beginning. For example, Josh found finances to be much easier to navigate than he originally thought.
“One of the mistakes people make in the beginning is the idea that you have to spend a bunch of money to start,” he says. “I think people make the mistake of not knowing their options in the beginning.”
Goals For The Future
As a company that sells a product, expanding into a physical space is important for Push Project. While Josh doesn’t want to switch to a drop shipping model, he does hope to expand his inventory and his team.
“I think a goal of mine would be to either find a warehouse space where we can work or maybe even a house to store everything,” he says.
As the thriving online brand continues to grow and thrive, Josh continues to look forward to new opportunities. All in all, while it took years from inception to a full-time clothing label, the process of launching a business has been a venture Josh doesn’t regret.
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Looking for storage or a space to grow your company? Our team at Stance Commercial Real Estate has helped numerous brands find office space, warehouses and other properties to fit their needs. Give us a call today at (909) 772-1212, or visit our properties page to browse available opportunities.
Returning To Work Post-Pandemic: When Work From Home Ends
With regulations loosening up around the U.S., employers are beginning to strategize returning to work and how to get workers back into the office. For California and the Inland Empire this has resulted in businesses and employees moving into new spaces, renovating existing spaces, and rethinking the functionality of their spaces. As a result, the commercial real estate market is experiencing growth that will only continue to increase as businesses continue to bring employees back.
After over a year of quarantine sparked by COVID-19, it may seem like work from home life is the new normal. While many individuals actually prefer the new virtual office set-up, a Monster.com survey shows that 69 percent of workers are struggling with burnout and anxiety. This number increased by 35 percent since May of 2020. Studies have shown that the average workday has increased 48 minutes, or 8 percent, as remote workers struggle to separate work and home life as efficiently.
Furthermore, research has shown that the increase in productivity early in the pandemic has since declined. With employees spending more time working and less time being productive, the psychological toll of working from home is abundantly apparent. Moreover, while some major companies, such as Google and Microsoft, have announced permanent or indefinite work from home, many businesses plan to bring employees back into the office when returning to work after COVID.
With these statistics in mind, companies are keen to move employees back into the workplace, providing new work environments, workspaces and new office buildings. The commercial real estate market is experiencing a spike in response to these new employer attitudes that is further spearing economic growth on the local and state levels.
As you move back into the office, whether it's a new one or a newly organized one, here's what you can expect when that day comes for you:
A slow trickle of employees returning to the office
With social distancing guidelines still in effect and the threat of COVID still alive, employers will be focusing on returning the most necessary employees to the office first. The employees who do return initially should expect to see fewer peers in the office. More workers are likely to be brought in based on COVID related data and trends in your area. Reverting to work from home is possible if the number of COVID cases increases or someone in the office discovers they have contracted it. Flexibility will be increasingly important as the pandemic wears on.
Some businesses may be looking to downsize as they allow a portion of their work force to continue remote work. For businesses that own their building, leasing the larger space while downsizing may be an option. Tenant demand will continue to rise as the pandemic ebbs and flows and employees are returning to work. Consider all options before making adjustments.
Social distancing and spacing within the office
The social distancing guidelines will likely affect the layout of workspaces within offices. Some businesses may opt to scatter employees in the office throughout the week, so no two employees are right next to each other. Other companies may opt to completely rearrange working spaces. Either way, it will be essential to remain patient if your workspace in the office changes to accommodate proper distancing. Masks indoors will also be enforced, and public break rooms may be regulated or closed altogether.
Expect new ways of working from home and in the office
Many companies have opted to invest in new software and programs to encourage greater efficiency in the office and work from home situations. After being away from the office so long, the time is ripe to revisit the standard operating procedures of pre-pandemic age and find ways to improve the processes. New automation may be a reality for your company, as well as further training and education for workers. There may be a learning curve when you go back into the office. Still, improved methods and processes will be beneficial for everyone's success post-pandemic.
As employees are going back to work, the new environments and practices will be a challenge to adjust to after over a year of working from home. However, studies show that businesses are moving towards being more accommodating to employees and their needs both in and out of the workplace. These positive changes in employer attitudes will continue to have positive lasting effects on the residential and commercial markets in the Inland Empire encouraging economic growth and development.
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For questions on current market trends, contact Joe Stance at (909) 772-1212. Ready to move into a new space? View your options now.
Local Business Highlight: MADE Riverside
MADE Riverside is a brick and mortar store located in the Inland Empire that resells handcrafted and custom-made goods created by local artisans. The store’s inception began as a family endeavor to establish a set location for makers to sell their creations without having to navigate the complications of sellers’ markets. Their store is now a well known go-to for Riverside locals and hosts over 100 local small businesses selling their products.
We interviewed MADE Riverside’s owner, Rico, to learn more about how the business came to be and what challenges his family faced when launching their vision.
What is the history behind the store?
The family behind MADE started selling handcrafted woodwork at markets like the Rose Bowl before the idea of a physical store came up.
“We had retail experience,” Rico says, referring to his dad’s experience as a business owner. “We also had market experience. So we kind of had the entrepreneur going, and then the retail thing going.”
Anyone who enters the MADE Riverside store will instantly notice a number of crafted goods stamped with the Riverside rain cross— symbolizing that MADE is truly a store for local artisans. While this wasn’t originally intended, it has become part of what makes the store a Riverside favorite.
“We're kind of known as the rain craft store in Riverside, but that wasn't intended,” Rico says. “That's just what happens having local makers that are proud of where they're from.”
What challenges did you face when MADE Riverside was first launched?
“So in the beginning, for the first two years, I was out all the time, trying to find people and trying to convince people of our resale model,” Rico says. “Since it's kind of a unique mode, it's really hard to explain to people what we do.”
The hardest thing about being an entrepreneur is the first step. For the team behind MADE, the first step was finding local artisans to jump on board.
“The main challenge was getting the makers and another challenge was actually gaining advertising and gaining notoriety and finding a way to share what we're doing,” Rico says. “The other challenge was obviously the business side. We knew how to make things, but there are a ton of things that go into just running the brick and mortar business that have to happen behind the scenes— contracts and figuring out how to successfully track inventory.”
Did you struggle to find a building that fit your needs?
“We (originally) tried to get a location downtown, but it was harder because we weren't established.”
Rico and family also found it hard to explain their business model to building owners. The family decided to take a vacation to Arizona, and when they came back, they were able to find a location within a week near the Riverside Plaza. The timing worked perfectly, and the MADE team eagerly began to set up shop.
The store now has two sides, and is continuing to expand. After a quick month of searching, Team Stance secured yet another location for MADE Riverside in the Freeway Industrial Park for Rico to expand his custom fabrications business: Alderette Designs. Part of MADE Riverside’s evolution has been to get more and more involved in the community.
How has the shop, as a local business, been able to stay involved in the community?
“I'm really big on that: keeping it local,” Rico says. “We try to buy and use local...and that's great for the community. All the small businesses helping the other small businesses— that's what's gonna help Riverside as a whole to rise, I think.”
During the pandemic, the team at MADE saw some of that community support in return. “People were buying gift cards even though we were closed. It was a really cool sense of community.”
What is the future of the store?
“We're just really focusing on trying to bring more people into the store, bring notoriety, and bring back our regular customers. We're in the rebuilding phase (post pandemic).”
After the “rebuilding phase,” Rico also hopes to continue expanding Alderette Designs and bring more small businesses into the MADE Riverside network.
When asked if he would recommend starting a business to others despite the many challenges and setbacks, Rico said “absolutely,” without hesitation.
“I've grown as a human being,” he says. “We need more small businesses and less big corporations. If people don't step up and start getting out there and (start businesses), then all we're going to have is big corporations.”
“Even if everything shuts down tomorrow, I still learned so much. (Starting MADE Riverside) is an experience I don’t regret.”
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Our team at Stance Commercial Real Estate is happy to help locals like MADE Riverside move into buildings that allow their businesses to grow. Ready to expand? Not sure if you should lease or purchase? Our team will help you find the perfect location and answer all of your questions. Call Joe today at (909) 772-1212 for a free consultation.