As our travels took us to Phoenix, Tucson and Santa Fe over the past week, I had two colliding thoughts. The beauty of the Southwest was all-consuming, and our world at this time 16 years ago was consuming as well!
As you’ll recall the commercial real estate market was sideswiped by the financial crash of 2008. I wondered if the two were somehow related and if lessons could be leaned.
So, here it goes.
If you’ve ever spent time in the desert Southwest — Arizona, Nevada, New Mexico — you know that survival there is all about adapting to extremes. In the blistering summer, temperatures soar and water becomes a precious resource. Yet life persists.
Cacti, creosote bushes and desert wildlife don’t just endure, they thrive because they’ve evolved to do so. They’ve learned to make the most out of the environment they’re in, maximizing every drop of water and adjusting to whatever comes their way.
Commercial real estate, like desert life, is a game of adaptation. Whether you’re a seasoned investor, an owner-occupant, or an industrial broker positioned in today’s dynamic market, the lessons from the desert are right there in front of us — if we’re willing to see them.
Resilience in face of scarcity
The desert’s number one challenge is scarcity, and in real estate, it’s no different.
In boom times, it’s easy to make deals: capital is abundant, credit is flowing and everyone’s eager to move fast.
But what happens when those resources dry up? Think back to the 2008 financial collapse. One moment, liquidity was everywhere; the next, it vanished. Deals died overnight, and only the most prepared, resilient players could weather the storm.
A desert cactus stores water for months, waiting for the right conditions to use it.
As a commercial real estate professional, this is a reminder to build reserves — whether that’s in capital, market knowledge or relationships. Like the cactus, don’t overextend yourself in good times. Prepare for downturns, and when they inevitably come, you’ll not just survive, you’ll thrive.
Know your environment
Brokering commercial real estate isn’t just about playing the market, it’s about knowing the environment.
The desert has very specific climates, microclimates even, and if you don’t understand those differences, you’ll fail.
Phoenix, Las Vegas and Albuquerque might all share the desert’s common traits, but each has its unique challenges and opportunities. What works in Phoenix won’t necessarily work in Las Vegas.
Likewise, industrial real estate in Southern California has its nuances.
I often remind clients that even though SoCal is a booming market, the micro-markets of Long Beach, Inland Empire and north Orange County, where I worked during the 2008 financial crisis, each require a tailored approach.
Just like a desert traveler checks the conditions before setting out, commercial real estate practitioners must assess the specific terrain they’re in. Understanding the local economic, political, and market conditions can mean the difference between a deal’s success or failure.
Timing is everything
The desert teaches patience. Rain doesn’t come when you expect it; it comes when the environment is ready for it.
In commercial real estate, timing is just as critical. Sometimes deals fall apart not because of lack of interest, but because the timing isn’t right — either for the buyer, the seller or the market itself.
I’ve seen this time and time again in my own experience.
Back in 2008, during the height of the financial collapse, a promising buyer for a large manufacturing site suddenly lost financing when their Small Business Administration loan commitment disappeared.
The market shifted almost overnight, and we had to wait until the right time to close a deal at a significantly reduced price. Understanding when to act — and when to wait — is a skill that separates the seasoned from the amateurs.
Innovation is key
Despite the desert’s harsh conditions, innovation thrives there.
Solar farms, sustainable architecture and water conservation technologies are just some of the breakthroughs we’ve seen over the years.
Similarly, commercial real estate is ripe for innovation. The industrial sector is adapting to a post-pandemic world by embracing e-commerce, automation, and green technologies.
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Whether you’re retrofitting older properties or designing new industrial spaces, the industry’s future depends on staying ahead of the curve.
Just like desert innovators seek new ways to make life easier and more efficient, those of us in CRE need to be thinking not just about the present, but about how to create spaces that will serve the future.
The takeaway
The desert may seem like an unforgiving place, but it’s also full of lessons.
Adaptability, patience and resourcefulness are key to surviving — and thriving — in both the desert and in commercial real estate.
As the market shifts, those who prepare, understand their environment, and are willing to innovate will be the ones who succeed. So, the next time you’re out in the desert Southwest, take a moment to reflect. The landscape might be more like our industry than you’d think.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.