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5 Foolish Questions with CREXi's Michael DeGiorgio

Jun 06, 2020 by Marc Rapport

CREXi was launched in 2015 as an online marketplace for commercial real estate brokers and property managers. Since then, the Los Angeles-based digital auction service has added marketing automation, lead analytics, and transaction tools as it grows a nationwide user base.

Here, founder and CEO Michael DeGiorgio, CREXi's founder and CEO, answers five questions about what he sees now and looking ahead at the pandemic-roiled marketplace

Check out our in-depth interview with CEO Michael DeGiorgio.

How would you describe the current commercial real estate market in America?

Somewhat paused but holding strong. While some obvious asset classes and markets are getting clobbered, rent collection in most cases has been better than projected. Distressed landlords are mostly finding temporary relief from lenders, giving them time to hopefully recover operations and catch up on missed debt payments.

What is your prediction for where activity will be, say, in the fall and at this time next year?

I believe by fall of next year, we'll have a climate similar to fall of 2019. Some proverbial medicine will have been taken and some corrections will have occurred, but I think the economy and real estate market will generally be in a healthy, albeit occasionally delicate, place.

The world will have changed, but in a less pronounced way than I think many others are predicting. Much like the aftermath of 9/11, some healing will need to occur and our nation's psyche will have changed some, but life will resume in a manner not too dissimilar to life prior to the pandemic.

What local markets do you see as being particularly attractive to commercial real estate investors right now, and which ones do you see as being in particularly rough shape?

I believe secondary cities with affordable costs of living, business-friendly tax environments, access to talented labor, proximity to an airport, often temperate climates, and amenities for both millennials and the upcoming wave of baby boomer retirees will prosper over the next 10 years.

In the West, that includes markets like San Diego County, Phoenix/Scottsdale, Salt Lake City, and Austin. In the East that includes Charlotte and Raleigh, Nashville, and several cities in Florida.

Meanwhile, some of the old-school iconic markets of the Northeast are really straining residents with population density, incredibly high housing costs, cold weather, and unfavorable tax codes. Same can be said (other than the weather) for parts of the Bay Area and Southern California.

That said, a little price softening will be quickly backfilled by demand to work and live in these great international cities, and I believe they will do just fine after some potential correction.

How about sectors? What are the most attractive to you now, and what sectors not so much?​

I still like all the sectors and property types when properly valued, but in the current climate, industrial remains favorable for a variety of logistical reasons. The same can be said for data centers. I believe offices may emerge as a surprising star as companies seek more space, not less, to ensure proper employee distancing and to decentralize operations.

Retail has some challenges, but I smell a big opportunity here for those who learn how to cater to new customer demands and who can use their real estate as more than just a place to sell items and house inventory.

An obvious answer, too, is hospitality, which faces an uncertain near-term future. I would only be wary in the sense that an investor is forced to speculate how quickly a rebound will occur. But a rebound will occur, nonetheless.

Finally, what's your best advice about what not to do in this market?

Don't panic, follow the herd, lose discipline, or trade and make major investment decisions based on the news. Careers can be made in markets like these. Develop your thesis and find your niche.

This email interview was edited and condensed.

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