What Lies Ahead
Accomplished CCIM instructor Alec Pacella, CCIM, joined CIRE podcast to discuss disruptive technology, where the market is headed, and the importance of giving back.
Welcome to the New Year! One big addition to Commercial Investment Real Estate in 2020 is the CIRE podcast, where we sit down with leading figures in commercial real estate to keep you on the cutting edge of the industry.
With our debut in January, a handful of episodes are available on SoundCloud, Spotify, iTunes, or wherever you find your podcasts. We will also include a printed excerpt of our episodes, including this issue's conversation with Alec Pacella, CCIM.
Pacella is the managing partner at NAI PVC in Cleveland. Last year, he was honored as the Robert L. Ward Instructor of the Year for CCIM Institute. We discus technological developments in the industrial sector, the reinvention of Cleveland and other Rust Belt cities, and the value of the instructor/student relationship in CRE.
CIRE: Technology is impacting all different sectors of the market. But as far as manufacturing and industrial, are you seeing one or two innovations coming in the next few years that would be especially impactful?
Alec Pacella, CCIM: I think the one that everyone's watching is this driverless vehicle idea because that could really change the paradigm. A lot of times, you just go along and see these little changes, little changes, little changes. Then suddenly something happens in a landmark way. For instance, with computing, look at the landmark change with the internet — everyone saw computers getting more powerful and automation taking effect. All of a sudden, the World Wide Web was introduced, and it's a quantum leap.
In the transportation industry, autonomous vehicles could be a quantum leap because, all of a sudden, the restrictions on how much product and how far it can move in a day are changed. Right now, that's governed by how long someone can drive. There are very strict limitations, for instance, on the amount of time someone can spend driving a truck. When all of a sudden, you switch to a driverless vehicle, those restrictions get lifted. If you think that commerce can move 24 hours a day, seven days a week, that's a fundamental change. I think everyone in the industry is watching. How much traction are driverless vehicles really gaining? Ultimately, how's that going?
CIRE: Do you see change coming in a transformational way? Will this be a situation where the dam breaks, regulations are eased, and there's buy-in from all industries?
Pacella: It's funny, because monumental change happens very quickly. All of a sudden, it's then like, what happened? Where did that come from? I think it will be quick — when it happens, we're talking a matter of a few short years.
CIRE: Do you have any advice for commercial real estate professionals to prepare? Or is that a secret you're keeping?
Listen to the full podcast episode.
Pacella: You need to be on top of things, and I think a lot of people figure autonomous vehicles could be a fad. If you see someone in a Tesla texting, you might think that's funny or isn't that crazy? You might not think, well, what could that mean to my industry? What could that mean to my business? It's important to connect those dots, to link those things and understand that, yes, there's a much broader impact. You better be aware; you better be paying attention. You better be reading, and you better be continually thinking about how a technology can impact your business.
CIRE: Do you see 5G affecting what future tenants may want in a manufacturing or industrial space?
Pacella: Oh, yeah. Absolutely. For many years, you could have a really large warehouse in Cleveland — 300,000 or 400,000 sf. In central Ohio, a really large warehouse is a million sf, but it would bring a handful of jobs. You'd have vast acres of storage and just a few people that run forklifts and help manage truck traffic. But now, look at an Amazon fulfillment center. There are 3,000 people packed into one of those. In a lot of ways, it's refreshing to see that. These big footprint industrial users can come accompanied with people and with jobs. 5G provides the ability for internal communication and picking systems within the warehouse. Still, they need people to handle, sort, process, and make sure things go to the right place. I think those technology advances go hand in hand with the enhanced job creation we're seeing throughout the sector.
CIRE: Nobody has a crystal ball, but what is your outlook on the new year? What do you expect in 2020?
Pacella: This recovery is getting a little long in the tooth, right? A famed real estate prognosticator talked about threes and eights. He said that if you look historically, if you see years that end in a three, those are usually the bottom of the trough. Then, when you get to an eight, you're usually back toward the top. In terms of recovery, I think a lot of people looked at 2018 as the top of the trough. It slopped over into 2019 and we didn't see as much momentum. But, you know, the party will slow down. This party can't keep raging.
The cycle is one of the founding principles of real estate. What goes up must come down. There's a cyclical nature to the real estate industry specifically, and we've been stuck on this roller coaster as it climbs higher and higher. I think everyone keeps saying, “OK, next year is the year.” But I don't know. Unless something fundamentally changes, interest rates skyrocket or there's some fundamental jolt to stun the economy, I see things rolling through 2020. Maybe not as briskly as they have, but I don't see the train coming off the tracks in 2020. I want it to be another solid year, again, with the caveat, so long as interest rates remain low, so long as there is no worldwide catastrophe or calamity, but it seems like we're always one tweet away from all heck breaking loose.
CIRE: You became a CCIM instructor in 2008 and were honored as the Robert L. Ward Instructor of the Year in 2019. What led you to become an instructor with CCIM Institute?
Pacella: It's funny, if you talk to most instructors and ask them, “What were some of the driving catalysts for them to be an instructor?” they will tell you the same thing. Someone impacted them at some point in the past, and that has led most of us on this teaching path. Far and away, it was an instructor that that I connected with in the beginning of my career that made a substantial impression on me. Therefore, I wanted to emulate that person and be just like him. And it's funny, years later, I had the opportunity.
It's critical for our growth. We're really some of the last Wild West cowboys who are out there. I think it's important to maintain that air of optimism and eternal success. It's critical in this type of profession to have people that you can rely on, people you can connect with, people that say, yeah, you can do this. Bottom line, that's why I do it, because someone did that for me. I want to continue that legacy.
CIRE: Was it a matter of reaching a certain point in your career where you felt able and willing? When did you realize the time was right to pursue teaching?
Pacella: It was hard. I wanted to do it right at the get-go, but I didn't have the experience. I didn't have the time with a young family at home. The demands of being an instructor are great. You have to be able to balance professional life, home life, and the CCIM Institute life.
But it was right once I had some experience under my belt and felt like I could not only walk the walk, but talk the talk. Also, my family requirements eased up a little bit. The timing all kind of lined up for me about 12 years ago.
CIRE: On social media, you've posted videos of yourself out at properties and going about your day and doing your work. what led you to create those videos that give a look inside your business?
Pacella: This all started a couple of years ago as a joke. I mean, literally, it was started as a gag. I did one video and figured my colleagues are going to see this and think it's funny. They're going to laugh - and they did. But it grew because some other people saw it, which was pretty cool. The first couple, I would just do for my office. Then I started doing them every Friday. But one week, I hadn't done one yet. I was out in the field and I'm thinking, “Oh, crap, I didn't do a video.” And I thought, “You know what? I'm just going to do it from the field. Just do it from the place I'm going to. I'll think of something to do from there.”
And people loved that. I got a lot of great comments. It was really interesting to get some insight from the real world. Then I started saying: I'm just going to do this in the field. I read things. I'll see things out here, things that aren't necessarily preplanned. I'm absolutely blown away by the people who see these things and comment.
I didn't design it to get clients; that's not really what I'm after. It's more just to deliver information. It's market information. It's market intelligence. It's maybe telling someone something that they didn't know about or they didn't hear about. That's all. Does it help branding? Does it help convey professionalism or expertise? Sure, I guess. But that's not why I'm doing it.
Editor's note: This article is an adapted excerpt from a full-length Commercial Investment Real Estate
podcast. Visit www.cirepodcast.com to listen to the full episode or stream wherever you listen to your favorite podcasts.