How we think about location
Real estate markets are all different, but a few of simple principles guide us in the search for areas with strong potential for growth, limited and defined downside and positive long-term fundamentals.
We are in the business of supplying space for our tenants to use for their homes, offices, stores, farms and other uses. For each market and property type, a thorough understanding of what drives demand for space is essential. A diversified economy driven by entrepreneurship helps keep Bay Area rents high in the good times and resilient in the bad ones. Low tax rates and a business-friendly environment have made Reno a hub for job growth in recent years. A long history of trade and manufacturing help keep industrial space in Portland in high demand and short supply.
The flip side of demand is of course supply. Supply constraints can be natural, like the waterways of Seattle or the hilly terrain of the Bay Area. They can be regulatory like the maze of red tape it takes to get projects approved in San Francisco. Or they can be market-driven, like rising construction costs which make building anything but sprawling industrial complexes uneconomic.
We are long-term holders of real estate, and as such take the long view on any investment we make. Even if we end up selling earlier than expected, we underwrite to "hold forever." We find that thinking about how neighborhoods will remake themselves, industries will change and cities will evolve helps us not only make good long-term decisions, but the ones right in front of us as well.
Weather matters. Taxes matter. Quality of life matters. Real estate is a long, slow-moving animal where a identifying a single demographic shift ahead of the crowd can create generational wealth.