I recently had the pleasure of interviewing Jake Harris, the Managing Partner at Harris Bay. Jake uses his superpowers of passion and ability to methodically sort through vast amounts of data to make real world decisions on investments, development, and the management of real estate.
Jake got his first taste of real estate when he and his family helped to restore an old house that was built in 1888.
As a serial entrepreneur, Jake has been starting and running businesses for most of his life. For Jake, real estate has always been his passion and he feels blessed to have the opportunity to manage, run, and execute several operations that allow him to embrace that passion fully.
Harris Bay uses fundamental, opportunistic, and value-add investment strategies that combine with our experience in real estate and capital management, to deliver returns that outperform established benchmarks.
Jake also recently published a book called Catching Knives: A Guide to Investing in Distressed Commercial Real Estate. In his book, Jake discusses how his various successes and failures in real estate and added perspective from those experiences can help someone navigate an uncertain market.
His inspiration to write his new book came during 2020 when the COVID-19 pandemic was in full swing.
To quote Jake directly. “I actually thought, “Oh, man. This is it. There’s gonna be massive distress. The market’s gonna need to correct, and I was wrong, you know? Haha, Real Estate tripled in value. The government went and printed 20 trillion dollars, and, uh, everything went the opposite direction.”
Jake had very early success in real estate and was a millionaire before the age of 30 before losing it all (and more) in the sub-prime crisis.
Jake’s experience during this crisis and the onset of COVID-19 inspired him to create a book that focuses on the importance of various fundamentals.The book focuses on how having an executable business plan and understanding investment theory before you buy assets is critical.
Jake goes on to emphasize that his education by trial and error was an effective teacher but wasn’t entirely necessary.
Wisdom is seeing other people’s mistakes and avoiding those, and growing from those experiences. So, I was a little bit dumber… and had to go slam my fingers in the drawer, and go touch the hot stove, and make those mistakes, and I’m just saying that, you know, again, that is a very effective teacher. You don’t have to do that. This is a little bit of my advice to younger Jake, or other people that are looking to invest and do commercial real estate.
Jake and I also discussed:
- How recent world developments, such as the Russian invasion of Ukraine can have a significant yet stabilizing impact on commercial real estate.
- How the federal reserve printed over 20 trillion dollars, which has pushed the US into an inflationary economic environment as opposed to a deflationary economic environment which likely would have occurred without government intervention.
- How federal PPP loans are potentially just kicking economic repercussions down the road and that if one is going to try and model the future of real estate, it may be better to just ignore 2020 and 2021 entirely.
- How PPP loads affected hospitality services and restaurants and how those industries are dealing with major employee shortages due to the pandemic and over inflation of unemployment funds.
- Whether we think there will eventually be any true economic fallout from all these unprecedented events (pandemic, bailout, supply chain issues, war in Ukraine etc.).
- The war in Ukraine and how recent supply chain issues could cause North America and South America to become closer economic partners in the next few years.
Unfortunately, there are so many factors at play right now, so it’s impossible to accurately predict any sort of future economic landscape as it pertains to commercial real estate.
To finish our in depth conversation on the state of commercial real estate, we discuss how many real estate projects across many industries have been approved but have been held up due to a dynamic set of reasons. For example, material costs have been fluctuating so rapidly many contractors will actually lose money if they start on a project.
Commercial real estate in 2022 is in one of the most unprecedented, unpredictable and unique positions given all the recent developments in the world since 2022. Whether it is the pandemic impacting the supply chain or the Russian invasion of Ukraine, uncertainty and unpredictability seem commonplace in the near future for our overall economy and for commercial real estate.