31: The State of Real Estate Market & Successful Commercial Real Estate Investment Strategy with John Parsons, CEO of Parsons Commercial Group

Parsons Commercial Group is a full-service commercial real estate firm founded by John Parsons in 1993. The company has grown over the years and now has 40 employees, 14 brokers, and a portfolio of over five and a half million square feet. Parsons believes in buying value-added properties that require work, rather than fully-baked deals, such as single-tenant properties with long-term leases. He sees risk in single-tenant deals, as the tenant may not renew the lease, leaving the owner with a property that requires significant investment to attract a new tenant. Parsons' reputation for closing deals and his strong tenant relationships have helped the company's success.

Parsons has experienced several market downturns, including the dot-com bust and the 2008 financial crisis. He believes that the current office market is going to be problematic for the next several years until we can figure out how to repurpose these buildings. The office market is struggling, and Parsons predicts that many office buildings, especially urban buildings, will go back to the lenders. He believes that these buildings will eventually be repurposed as mixed-use properties, such as apartments or a combination of retail and multifamily.

The demand for industrial space is still strong, and Parsons is confident they will get a full building user for their new 65,000 square foot building in Bellingham and 85,000 square feet of warehouse space in Bloomfield, Connecticut. The rent growth in the industrial market is due to a lack of speculative development in the last 25 years, leading to a shortage of space. The online economy has also increased the demand for warehouse space. Parsons predicts that the growth will continue, but he advises underwriting a deal assuming rents will plateau. He believes that buildings that accommodate users below 50,000 square feet will always win the day.

Parsons is bullish on the multifamily asset class. He thinks that the rental market will continue to be strong due to a whole generation of young people who are going to be renters. He believes that the multifamily asset class is a great place to put money because it is a highly sellable asset. Even if the interest rates move, there will always be a buyer. He believes that there might be a small haircut because interest rates move, but it's still a product that will have tenants. There's a huge tenant demand, and you're going to find a buyer no matter what.

Parsons also discusses the life science asset class, which is stimulating growth in the greater Boston area. He believes that it creates great jobs and opportunity and has investment capital behind it. However, with the recent capital markets, you're not seeing any specular lab go forward anymore. It's only if there's a tenant involved.

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