So who’d spend $12 million on dirt, especially in the volatile Inland Empire as a global pandemic is throttling the economy?
Randall Lewis and his family have been major players in Inland Empire development for more than six decades. Since 1955, they’ve had a hand in creating almost 70,000 housing units and 20 million square feet of commercial real estate.
The novel coronavirus isn’t stopping them. Lewis Land Developers, a division of Lewis Group of Cos., just announced it bought 15 acres in Upland they hope to turn into a gated community with 250 homes.
So I had to ask Randall Lewis what his crystal ball says about the region’s real estate markets. You know, like, why now? Or what’s next?
Lewis has his hunches. “There will be better bargains three months from now,” says the company’s executive vice president.
And he knows roughly what others were thinking. “There’s a lot of dry powder out there,” meaning that despite ongoing economic turmoil there are still folks with money ready to pounce.
But many questions remain.
”Anybody that says they know, they don’t know,” he says, bluntly, of forecasting amid a pandemic.
Lewis wasn’t shy about making somewhat longer-term forecasts on how the real estate business will react to the pandemic.
“We are forever changed,” he says.
The “social distancing” concept will alter how people buy, lease and use real estate well after the coronavirus crisis has ended.
Take virtual selling and renting. It’s become a necessity when face-to-face contact is a large no-no, whether due to government edicts or consumer preferences.
Lewis thinks that while many people will still want to see where they may live, online or video sales pitches will become permanent and key parts of selling or losing housing.
Or take working from home.
That’s only going to grow in popularity, post-pandemic, now that scores of bosses and workers were forced to work remotely. Say what you want about it, there are too many positives — especially cost-savings — to ignore.
And developers and property owners will have to adapt.
Homebuilders or landlords will have to retool products to accommodate home offices and other workplace necessities. Community designers may have to juggle how work-at-home policies shape a neighborhood, including a changing demand for office space.
And Lewis thinks whatever’s built, the design will become “more disciplined” with more function and fewer frills.
“If it’s simple and saves $5,000 or $80,000, it’ll sell,” he predicts.
Decoupling, or not
It’s too early to predict other real estate changes. The industry must wait to see how consumer tastes evolve.
Lewis says he carefully watching “decoupling” rates. It’s a key factor driving the popular two-bedroom apartment.
Will folks still want to be roommates with a relative stranger, an option previously made largely for cost savings? If health fears stay high, one-bedroom units could become popular.
And all the long-running talk of affordable housing begs the question: What if house hunters had significant lower-priced choices, especially in coastal communities?
Lewis knows that could be a game-changer in the Inland Empire where the big appeal is a lower cost of living.
Plus, how will cities react? They’re the ones who’ll approve plans that incorporate all this new thinking.
“This will be an eye-opener to many communities,” he says. “They’ve got to change.”
How’s business, Randall?
Like many folks from privately-owned companies, you don’t hear many detailed numbers for publication. So Lewis says, “definitely slow.”
Homebuying at the projects his company is developing? Modest sales. “But they’re selling.”
Construction at those sites? There’s little unsold inventory, so builders “are finishing what they’ve started and shutting everything else down.”
What about rent payments at the 10,000 or units the family owns? Massive layoffs savaged many tenants’ budgets. Lewis would only say “about industry average” which is modest collection rates for April with a forecast of trouble ahead.
And how about the family’s shopping centers? The supermarkets and discount stores are doing well, Lewis says, but the rest are “basically shut down.”
Oh, and he envies the warehouse business. “There’s lots of demand for the next five-six years.” Especially close to the coast where same-day delivery needs could soar.
What’s next for the Lewis empire?
“We believe in Southern California,” he says.
As a participant in many regional planning agencies, Lewis is well aware of the region’s challenges. But the family still wants in. He thinks the current economic turmoil should create real estate possibilities in what was — before coronavirus — what Lewis calls “an overheated market.”
But that’s relative. This isn’t the early 1990s or the Great Recession where real estate’s landscape was stuffed with unsold housing, idle land, vacant apartments and empty commercial real estate. Still, Lewis says recent upheaval creating historic business interruptions and unfathomable layoffs cannot be ignored.
The Lewis quest is still all about land, and the company has the cash to spend. But, so far, there is no coronavirus fire sale.
Lewis doesn’t think big landowners will be giving anything away anytime soon. But smaller owners, perhaps with some financial challenges, or folks with one parcel, like a farmer, are possible targets.
“We will be opportunistic,” he says.