Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: Two of commercial real estate’s hottest niches in August are competitors looking to cash in on growth in consumer spending — warehouses, that power online shopping; and strip malls, where folks go for stuff they can’t get online.

Source: Real estate tracker Green Street’s monthly report on commercial property values for August.

The Trend

Warehouses and strip malls helped push Green Street’s all-property index up an eye-catching 6% in August to a record high.

This benchmark is up 20% in the last 12 months but only up 8% compared with pre-pandemic levels. That gap is a reminder of spring 2020’s steep price declines amid the uncertainty of the early days of coronavirus’ economic chill.


In the eyes of investors, more shopping is good for anybody tied to ringing cash registers — even entities that seem like competitors. Here’s how the 11 niches tracked by the index fared, in order of August performance …

1. Industrial space: Values of warehouses and factory space jumped 17% in the month and are up 39% in 12 months. It ranks second-best among the 11 for the year and is 41% above pre-pandemic levels — the best performance of these niches. The nation can’t seem to get enough warehouse space to store all the stuff we buy. Plus, with global supply chains still broken, big inventories have become a merchant’s lifeline.

2 (tie). Strip malls: Community shopping centers rose 14% in the month and up 25% in 12 months. The segment ranks No. 5 and is 6% above pre-pandemic level — seventh-best. Today’s neighborhood shopping hubs don’t really sell many goods that pass through all the new warehouse space. This jump in values is much more about consumers finally coming back to shops for dining, beauty needs, financial services, workouts and medical services.

2 (tie). Self-storage: Rose 14% in the month and up 47% in 12 months. It ranks best of 11 and is 40% above pre-pandemic level — second-best. These mini-warehouses for individuals were boosted, in part, by a need to stash belongings as work-from-home changes commanded more living space.

4 (tie). Apartments: Rose 5% in the month and up 23% in 12 months. It’s No. 7 and up 13% during the pandemic —  fifth best. Rising rents helped here.

4 (tie). Malls: Rose 5% in the month and up 9% in 12 months. The segment is second-worst and is still down 13% in the pandemic era — worst of the niches. Top-quality malls have a pulse. The rest? Not so sure.

4 (tie). Mobile home parks: Rose 5% in the month and up 28% in 12 months. These communities rank No. 3 and are 31% above pre-pandemic level — third best. Places to live are in demand.

7 (tie). Offices: Rose 3% in the month and up 4% in 12 months. Worst of 11 niches and still down 1% vs. pre-pandemic level, third-worst. Will a delayed back-to-office trend hurt even more?

7 (tie). Healthcare: Rose 3% in the month and up 10% in 12 months. That’s No. 9 and 2% above pre-pandemic level — No. 8 of 11. It’s been a slow return to normal for these facilities.

7 (tie). Lodging: Rose 3% in the month and up 28% in 12 months. That’s enough for No. 3 spot, but the sector is still down 1% vs. pre-pandemic levels, making it No. 9 of 11. Coronavirus’ powerful delta variant has dulled any rebound hopes.

10 (tie). Net lease: Flat in the month but up 25% in 12 months. At No. 5 and 16% above pre-pandemic level — fourth best. These properties — typically, standalone, one-tenant sites — have been in high demand.

10 (tie). Student dorms: Flat in the month but up 22% in 12 months. This ranks No. 8 and 9% above pre-pandemic level — No. 6. Questions swirl about the strength of a back-to-campus movement.

Other views

A bit of perspective:

Stocks? The market’s total return in the same period, as measured by the S&P 500 index, was up 3% in the month, up 30% in the last 12 months — and up 63% compared with pre-pandemic levels.

Homes? The median sales price of an existing California single-family home increased 40% from February 2020 through July 2021, according to the California Association of Realtors.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!

Some of this real estate valuation isn’t logical. It’s more like fallout from investor thirst for risk when the bank pays 0%. Other recent gains were largely bounces up from virus-chilled 2020 lows. So overvaluation is a niche-by-niche issue.

Still, commercial real estate’s gain is roughly one-eighth the size of stocks and one-fifth of houses.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com