James P. Lighthizer, SIOR, CCIM, Principal, Managing Partner, Chesapeake Real Estate Group (CREG) shared trends in his industry as well as surprising insights on the future of office space. CREG is a full-service commercial real estate development, management, and brokerage company headquartered near BWI Airport in Hanover, Maryland.
“I started my career as a commercial real estate broker specializing in the industrial warehouse asset class leasing and selling for Fortune 500 companies and institutional investors. After that, I started CREG in 2004 and we evolved from a boutique, third-party broker to a principal that bought and developed properties for our own account with our institutional investors and private equity partners.
Growth of Combo Industrial + Office Space
CREG focuses on the industrial asset class. Online retail purchases have doubled, from seven to 15% over the last seven years. As e-commerce has continued to heat up, it has put a huge demand on different types of industrial buildings and larger buildings that are fully automated.
Most communities like them. They have many jobs, including picking and packing the products to ship. The trend is they’re replacing traditional stores and malls. As things get more automated, there are fewer unskilled workers, but a certain element of middle management and semi-skilled office workers is still needed. Industrial buildings have a lot more office space than before. E-commerce businesses have many people managing such tasks as website, purchasing, receiving, sales, and customer service spread throughout 30 to 50K sq ft of office space. A lot of the demand for separate offices and retail are now in one warehouse.
CREG has been at the forefront and we’re a leader in this space both regionally and nationwide. I’m also the president of the National Association of Industrial and Office Properties (NAIOP), which includes participating in a group sharing best practices.
Surprisingly, the percentage of office tenants who continue to pay their rent is extremely high, around 95%. That tells me that office tenants generally plan to come back to work. Clearly some businesses have found working remotely is an acceptable alternative, particularly in urban areas. We’re seeing a flight out of cities across the country. The cities have a tall order regarding office employees coming back. People don’t want to do it.
Suburban offices will continue to be in high demand, specifically those with private control of door entry, and no common spaces such as lobbies, elevators, and restrooms. I expect multistory suburban offices to fall somewhere in the middle. Offices are a mixed bag, and the jury is still out. You’ll probably have some stress and some slowdown in growth.
The Benefits of Face-To-Face Interaction
Many people agree with me that there’s no substitute for face-to-face human interaction. This time of being remote is showing people they have to get together more often. There’s more energy, synergy, community, and better speed, enabling you to compete better. We didn’t go in for a few months and productivity, responsiveness, speed, and communication suffered, but it was like a flywheel- moving fast when we got back together.
Growing the Chesapeake Real Estate Group to a Sweet Spot
We grew in 2006, reaching 23 employees, and we found that there’s a sweet spot, which I’ve also heard from others. When you grow too big, margins shrink, opportunity costs go up, and you become less efficient and more stressed.
We’re interested in diversifying, which requires a different marketing strategy. We don’t want to be doing development forever. Those cycles end, and we don’t like the stress and uncertainty. We’ve worked on buying and managing existing buildings and we’d like to do more. It’s difficult now that values are high, and interest rates low. We also have a self-storage project that will break ground in a year.
What Do You Enjoy Most About Your Work?
The opportunity to do a little bit of everything. So, you’re not pigeon-holed into one thing like accounting, legal, sales, or marketing. I like the balance the day provides.
What Advice Would You Give Yourself 20 Years Ago?
I don’t like to look back. You can’t change the past, although you can learn from it. I would say, surround yourself with a team that complements you. It’s healthy to let go and delegate. Looking at the bigger picture can be hard for many people; it was for me. But with the right team, great things can happen. My advice to myself would be to try to do that earlier.
About James P. Lighthizer, SIOR, CCIM
Principal, Managing Partner, Chesapeake Real Estate Group
Mr. Lighthizer started Chesapeake Real Estate Group, LLC (“CREG”) after spending 16 years at CB Richard Ellis, where he achieved the titles of Senior Vice President and Partner, and was a consistent “Top 5” producer. His past institutional landlord clients include RREEF, Ohio Teachers, First Industrial, Opus, Invesco, Cabot, and CalEast/LaSalle Advisors. He also served as a tenant representative leader with the National CB Global Logistics Practice Group.
Since starting CREG, Mr. Lighthizer has negotiated some of the region’s largest industrial transactions, including developing the 1 msf Brandon Woods III, with Best Buy and Amazon as tenants. CREG also developed the 1 MSF Port 95 Logistics Park, Penn 95/Thompson Creek Park, and co developed 750,000 sf in White Marsh, which is also partially leased by Amazon. CREG started off by representing General Motors in the sale of their Baltimore Van Assembly Plant, which consisted of 182 acres and two million square feet of industrial space to Duke Realty for $33 million. Mr. Lighthizer previously represented GM with their acquisition of 80 acres in White Marsh, Maryland for their 800,000 square-foot Allison Transmission Plant. Mr. Lighthizer also negotiated the purchase of a 240-acre, 1.5 million square foot planned business park known as Baltimore Crossroads @95, which is currently in its final stages of development.
Under Mr. Lighthizer’s direction, the company has purchased numerous properties as part of the company’s initiative to both own and broker commercial real estate. CREG has acquired, developed and/or has or held ownership in over 20 industrial, office, and retail projects that total over $300 million in value. The company’s partners include or have included Prudential Real Estate Investors, USAA, The Carlyle Group, Atapco Properties, Osprey Property, Somerset Construction, and Hostetter Construction.