The Biggest Forces Challenging California Real Estate Today

By Sarahann Shapiro, JD, Professor in Residence of Real Estate and Director of the Real Estate Center

In March 2023, The Real Estate Center at Menlo College (TREC) held a conference featuring industry professionals, including Menlo alumni, discussing the topic of “The Greatest Challenge Facing California Real Estate Today and How We Should Meet It.”

Keynote speaker Lance Gidel of Gidel & Kocal Construction, which also sponsored the symposium, discussed the challenges of construction, both for new buildings and tenant improvements. He reviewed the drawback of an insufficient labor supply, a longstanding problem that continues to get worse as more construction workers in all specialties retire and are not replaced. California is woefully short, Gidel informed us, of brick layers, sheet rockers, pipe layers, carpenters and sheet metal workers. Nationwide, during 2022, the construction industry averaged 390,000 job openings per month, the highest level on record, and it is estimated that building trades in the country will be short by 650,000 workers in 2023.

Gidel suggested that immigration reforms would allow skilled tradesmen to obtain guest worker status and immigration work visas, similar to those already granted to high tech workers to fill empty slots.

Gidel also discussed the incredible supply chain delays and scarcities that are driving up the costs of construction. This is due to both rising prices in absolutely necessary items and added costs created by the long lead times on getting fixtures and appliances. The attendees gasped at some of the delays, such as waiting four months for doors, six to nine months for HVAC components and as much as a year for dishwashers. Particular problems also arise for those seeking to increase their electrical services to their buildings, with PG&E taking eight to eighteen months to approve and install expanded service, vital for the installation of additional car charging stations and ever-increasing numbers of electrical appliances as the use of natural gas continues to be restricted. The attendees appreciated hearing about strategies to position their construction projects for minimum delay and the greatest cost savings.

Other speakers looked at the challenges in retail real estate, office workspace changes, and business analytics applied to real estate. To read more, please go to Menlo.edu/real-estate-center.

Next year’s symposium for the Real Estate Center at Menlo College will be on Wednesday, March 14, 2024. We hope you save the date and join us.