The first meal eaten on the moon by Neil Armstrong and Buzz Aldrin was roast turkey in foil food packets. It wasn’t Thanksgiving Day but after their long path to the moon, they sure had a lot for which to be thankful. All too often we don’t look at the path of our life and stop long enough to be thankful for it. The picture above is from a hike we recently took in Acadia National Park in Maine. A little downtime to reset and commune with nature wads truly appreciated. I also had a chance to get caught up on a lot of reading and made a lot of observations, some of which I will share here with you.
- Domino’s Pizza posted its first sales drop in decades. Is this a sign of the end of the pandemic as we move on from our pandemic habits?
- Chick-fil-A’s CEO reported that a third of their customers drive away from the drive-thru because of long lines.
- Airlines are replacing first class with a new generation of super business mini suites. They are more spacious than regular business class and have a privacy door, but without the over-the-top luxury of first class (will trains and cars be far behind?).
- Closer to home, Costco Business Center announced it will be taking over the closed Fry’s Electronics store in San Marcos. This 144,000 sf deal goes down as the largest retail deal in San Diego this year and the second business center site in San Diego for Costco.
- ICSC (International Council of Shopping Centers) has changed its name but kept its acronym. It has rebranded itself as Innovating Commerce Serving Communities (ICSC). Interesting pivot by the leader of the shopping center industry.
- Amazon backed out of a deal to lease a distribution facility (142,000 sf) in El Cajon. The reason given was a county proposal known as “The Working Families Ordinance” which calls for prevailing union-level wages including 56 hours of paid sick leave on projects built on county-owned land. The ordinance won’t be approved until next year, but sadly it just cost over 400 jobs.
- Meantime, Amazon will be opening an Amazon Fresh store in a 45,000 sf former grocery store in Poway (Twin Peaks Plaza). There are currently 17 such stores across the nation. Expect to see all kinds of cool technology like “Amazon Cart” which keeps track of your shopping list, tallies the total in your cart and avoids the checker by just charging your credit card as you exit.
- Storage is hot. We are regularly getting calls and emails from developers looking to build more. A friend of mine told me that storage is really just an aboveground landfill! Seriously though, we are seeing many “gig workers” running small businesses from home (or Starbucks) and using storage for product, completely avoiding retail, office, and industrial traditional leased space.
- Speaking of calls we are getting – the County Board of Supervisors just voted to allow cannabis businesses to expand in the unincorporated portions of the county – up to 10,000 sf without special environmental approvals. A word of caution, most lender still won’t loan on cannabis stores and most loans have a default provision around it. Even if you own for cash, the marketability might be impinged because a buyer may not be able to get a loan. I do think it is high time we get this sorted out! (pardon the pun!)
- While headlines blare that office leasing is coming back and San Diego leasing activity is booming, I am afraid much of it is made up of mega deals with Apple, Amazon, Microsoft and the life sciences industry as a whole. The third quarter saw a 15-year record – 2.2 million square feet absorbed. While the County workforce declined by 10% in 2020, the life science field grew by 6%. Apple has been gobbling up office space in 70-100,000 sf bites at a time (or should that be bytes?).
- Sam Zell, the billionaire real estate magnate said he expects normal office usage to return within a couple of years. But his best quote was, “Need for in-person interaction will eventually win out: How do you motivate by modem?” The University of Michigan (Sam Zell’s Alma Mater) Consumer Sentiment Index has taken a steep drop. Ordinarily, this would indicate a recession, but employment and wage growth would indicate otherwise. In the meantime, keep your eyes on inflation, supply chain disruptions and what happens to Evergrande in China.
NICK’S NUMBERS
Here’s the University of Michigan chart that Don mentions above. The current administration is still considering the elimination of 1031 exchanges and raising capital gains rates. If you don’t see a property you own as being held for the long term, we should talk right away. If you don’t exchange, the tax treatment you’ll receive today is likely the best you’ll see for the foreseeable future.
Please give me a call or email me if you would like an analysis of your properties’ value or to discuss what you should be doing with regards to the Coronavirus pandemic and its impacts on your business, tenants, or property (Nick Zech, 858-232-2100, nzech@cdccommercial.com).
We here at CDC Commercial Inc would like to extend to all of you a very Happy Thanksgiving. No matter where we all are on our paths, we hope you are happy. We know we are, and we are thankful to you for your business, our relationship, and the trust you put in us. We hope you enjoy the story…
Glass Of Milk
One day, a poor boy who was selling goods from door to door to pay his way through school, found he had only one thin dime left, and he was hungry.
He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door.
Instead of a meal, he asked for a drink of water! She thought he looked hungry so she brought him a large glass of milk. He drank it so slowly, and then asked, “How much do I owe you?”
“You don’t owe me anything,” she replied. “Mother has taught us never to accept pay for a kindness.”
He said … “Then I thank you from my heart.”
As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Many years later that same young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease.
Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes.
Immediately, he rose and went down the hall of the hospital to her room.
Dressed in his doctor’s gown he went in to see her. He recognized her at once.
He went back to the consultation room determined to do his best to save her life. From that day, he gave special attention to her case.
After a long struggle, the battle was won.
Dr. Kelly requested the business office to pass the final bill to him for approval. He looked at it, then wrote something on the edge, and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all.
Finally, she looked, and something caught her attention on the side of the bill. She read these words …
“Paid in full with one glass of milk”
(Signed) Dr. Howard Kelly.
