Prepping for a 2021 Recovery - with Marshall Clinkscales of Colliers International

HOUSTON – (Realty News Report) – Marshall Clinkscales, a principal at Colliers International Houston, began his Houston real estate career in 1972. His expertise includes office tenant representation, land acquisitions and development. Prior to joining Colliers, Clinkscales owned and operated MSC Properties, a Houston commercial real estate company he established in 1981.

Clinkscales was a guest on THE RALPH BIVINS PROJECT, a new podcast published by Realty News Report.

To listen to the entire interview, CLICK HERE

Here is an excerpt of Clinkscales’ appearance on THE RALPH BIVINS PROJECT:

Ralph Bivins:Houston’s severe economic crisis in the 1980s resulted in thousands of layoffs, bank failures, soaring vacancies and property foreclosures. How does the Houston market now compare to the 1980s?

Marshall Clinkscales: Well, the 1980s were an extremely difficult time, one of the most unusual economic experiences I’ve ever had. It was a total meltdown of the financial industry. We wiped out the Savings & Loan industry. We came pretty darn close to bankrupting the Federal Deposit Insurance Corp. (FDIC.) There was just a period when absolutely nothing happened. It went on for several years. It was very scary, because there was no activity. As we got out of that environment, the government did a lot of auctions. At the first two or three, they didn’t sell very much, until they could get the prices down much lower.

Ralph Bivins: And today’s environment?

Marshall Clinkscales: This event, caused by a virus, is different. Thank goodness our financial institutions are still there and able to help support various businesses. The Federal Government has provided stimulus. That’s a good thing, though it has dire consequences when you allow your debt to go up so much. We don’t know how this will play out. There is activity in our market. That is an especially good thing.

Ralph Bivins:Tell me what you think about the office market?

Marshall Clinkscales: It’s a very dramatic thing to go out in our market and look for space for a client. First of all, unless you have to deal with an existing lease agreement, there is no activity. Some of the more major companies are just letting the leases expire. The heck with it, everyone is working from home anyway. We’ll catch you on the uptick. It’s not such a bad strategy. Why spend the money for space if you don’t need it?

I’m doing a (search for office space) for a client, basically on the west side, up and downtown Beltway 8 and up and down the Katy Freeway, looking for a lease of 70,000 to 100,000 SF. In rapid order, we found 15 buildings – and they had vacancies, vacancies – up to 500,000 SF. They have 100,000 SF, 200,000 SF, 300,000 SF. When you talk to their representatives about leasing, they are grateful that you are in the market. They will be aggressive in trying to land your business.

In the ‘80s, nobody needed office space. Now, we are dealing with people who will operate more conventionally. It’s going to be interesting to see how it plays out. Obviously, this is result of the oil and gas industries and the engineering companies. They are just out of business, and that’s remarkable.

Ralph Bivins: The vacancies in Houston have not resulted in many foreclosures. Are foreclosures going to break out?

Marshall Clinkscales: We’re not foreclosing any more. One reason is that Harris County is shut down and they’re not processing foreclosures. I’m working on a project now that’s been postponed twice, then restarted. They’re not going to have a crowd at the foreclosure. We’ll see how that plays out as we move forward.

This also relates to another segment of the real estate business, investment property. Everyone thinks we ought to have investment opportunities around every corner – and we don’t. The buildings that aren’t performing are not being foreclosed on. There’s just very little activity happening. You’ve got to think that some of these properties will become investment grade and be of interest. Just like in the ‘80s, you had three rounds of auctions before anyone started buying anything. You had to get the prices down until purchasing property really represented a bargain. How long will I have to hold this to get tenants and create some value? The people who had the cash could make some good bargains, but they had to hold onto the properties longer than they thought they should.

Ralph Bivins: What about the industrial sector? There’s a lot of construction.

Marshall Clinkscales: If there’s any good news out there, it is in industrial facilities. I heard an interesting statistic from last quarter that Amazon was responsible for half of the absorption in our market. Yes, Amazon was responsible for half of the absorption in our market. Yes, it’s Amazon, absorbing space and putting in fulfillment centers

Ralph Bivins: E-commerce is so powerful right now. Amazon has been going into regular, old-time regional malls that have seen better days, that have fallen on the rocks, and saying: “You want to get rid of one of the anchor stores? We’ll take it and put in one of our distribution centers.” Amazon is filling the physical space where stores used to be located.

Marshall Clinkscales:: Amazon is an incredible company. Whatever rules you happen to be using in your real estate investment or real estate brokerage company, you can throw them all out the window. A lot of new rules are being developed now that Amazon is a huge player. The smaller businesses that need industrial facilities have been reasonably effective.

Ralph Bivins: What about the retail sector?

Marshall Clinkscales :I’ve done a lot of retail – but not now. It’s heartbreaking to see so many small tenants that don’t have the capacity to keep reaching into their pockets to keep their own businesses going. These are people who dedicated themselves to having their own business, but they are beginning to fall. And when they do, they won’t reopen. This is happening to some of the big players as well. But whoever thought we’d see this happen to J.C. Penney? Business failures in the retail sector are not over.

Ralph Bivins: Apartments?

Marshall Clinkscales: In the multifamily segment, there is a big concern. Are people going to want to live in these very dense environments? When is it going to be a desirable place to live? You called this a soft spot. I’ll align with you. I hope this is a soft spot that we will soon get past..

(Edited for clarity)