August 23, 2019
By Dennis Kaiser
A standing-room crowd of nearly 500 commercial real estate leaders gathered yesterday at The Resort at Pelican Hill in Newport Coast for the annual Connect Orange County conference. The afternoon featured a keynote address by KBS Realty Advisors Chuck Schreiber, as well as three deep-dive panel discussions.
Today, we will share the insights delivered by Schreiber. In the coming days, look for recaps of the robust conversations about financing, portfolio strategies for the future and an Orange County market overview.
Connect Media’s Daniel Ceniceros, moderated the keynote conversation with KBS Realty Advisors & KBS Capital Advisors’ Chief Executive Officer and Co-Founder Chuck Schreiber. The behind-the-real-estate perspective delivered by Schreiber covered the future of real estate, investment, and bringing institutional quality real estate to the mass investor.
Schreiber’s been in the real estate industry for 45 years, and the SoCal native who was one of five siblings attended USC. He has led KBS to become the 8th largest office-owner globally with $26 billion in assets acquired and managed. He says he got started in the business because he “loved numbers” growing up. After initially considering a career as a stock broker, Schreiber started in brokerage and made a few investments in developments. In 1988 he joined Koll Company to run investments.
He pointed out that his career has been influenced by some of Orange County’s most respected and successful real estate leaders, including Don Koll and Peter Bren. He says, both had “great imaginations and were really creative.” Since 1991 he worked alongside of Bren to build KBS. Bren, he notes, was “aggressive in ideas,” and found “great strategies to pursue.” Ultimately, that led to great success. In fact, Schreiber says one of the aspects that was consistent with both of them (Koll and Bren) was that they were “great free thinkers.”
Schreiber says faith and family are important aspects of his make-up. Pointing out that he has a “passion about” finding ways to help make the world a better place, a comment that drew applause.
Turning to where the market and industry may be headed, Schreiber doesn’t believe all of the doom-and-gloom talk. He notes his perspective is shaped by a couple of factors, one being the clients, including global investors, and the other being the tenant companies he works with.
The pension funds who have savvy financial advisors and the off-shore relationships KBS has built through separate accounts view U.S. real estate favorably. He says, they believe the U.S. CRE market is the “best on earth.” That opinion is based on the security, integrity and laws present in the U.S. that may not be found in other countries and that’s attractive to foreign investors.
Another reason Schreiber says KBS decided in 2010 to solely focus on U.S. office investments is driven by what he hears and sees from the tenant side. Today, KBS has 110 buildings in 35 markets, and that portfolio strategy is aligned with the places where companies need to be in to grow, typically near universities, so they can attract and retain talent.
The input Schreiber hears from occupiers seeking space doesn’t support the notion that a downturn is coming soon either. Schreiber notes KBS has completed lease deals with 59 different companies, encompassing roughly 3.5 million square feet, with an average term of 11 years since January 2018. He says “those companies don’t think we’re going into a recession.
One risk he does see on the horizon is a lack of employees. In some cases, growth strategies are built on taking top talent from other companies simply because there isn’t enough, or they are looking at expanding in other markets.
The focus on office assets by KBS is owed in part to the Dodd Frank rule, says Schreiber. The restrictions on construction lending has dampened development, leading to a situation where there’s not enough buildings, notes Schreiber. There is reappreciation of markets going on, he points out. For example, there’s not enough buildings in some markets such as the westside of downtown Chicago, Salt Lake City, Portland, OR, Bellevue, WA or San Jose.
Schreiber concluded his keynote, pointing out the opportunities in commercial real estate are broad and ready for smart innovative people to tackle. He notes when he got started in the business there were just brokers, developers and a handful of construction lenders. As investors began understanding the risk profile of CRE investments through better research and data, pension funds learned how to make smarter decisions on their investments. Today, Schreiber says the expertise at play across the CRE sector is encouraging. The real estate industry now offers a wide array of roles for smart people, including investment specialists, tenant rep brokers, software experts, capital markets and debt experts and analysts. He notes across this broad field there is a need for “creativity” as well as talent and ideas in order to fill the mission of maximizing return to investors.
Given the broad product types and varying strategies of companies, new ideas are needed to achieve the goals because the industry must figure out what the market will look like in 10 years. That may involve properties in the hospitality area or multifamily, retirement living or healthcare living environments. Schreiber says, figuring out what’s next is a great opportunity for today’s 27-year-old in CRE. “That will be their career,” he concluded.
For comments, questions or concerns, please contact Dennis Kaiser