If a building is vacant during COVID and there is no one there to see it, is it still vacant?

The Blog

My 2020 New Years’ Resolution was to lose 10 lbs. I missed it by 15 pounds!”

~ Thanks, COVID-19

A recent Nature Magazine study suggests the average person considers over 6,000 individual thoughts every day. What are we thinking about? Are these positive, creative thoughts or are they ruminations over our failures and challenges, or angst over world events generally outside of our control? Dave Ramsey is known for saying; “Nothing changes until you are sick and tired of being sick and tired.”

A recent IBM survey identified creativity as the number one leadership quality (something at CDC we pride ourselves on regarding our deal-making skills!). This year our goals are to make uncertainty into opportunity. If you don’t think there is confusion and uncertainty, I refer you to these two headlines, one day apart in GlobeSt.com:

“Where the Value Declines will be the worst”

“The Economic Rebound is Coming in 2021”

We’ve had the biggest economic shock in 100 years, yet cap rates have hardly budged and housing has exploded because of low-interest rates. I know I can’t figure it out either. It will be interesting to see how quickly it comes back – some of it will be politics, some will be the vaccine, and some will be plain old economics.

Soon people are going to lose protection from evictions, lose income support, and forbearance on student loans. As we fall into this fiscal valley of support, we are going to see failure and as we learned in 2008, these failures can create problems within the financial sector.

Under a Biden presidency, investors can expect taxes to rise on corporations and high net worth individuals. Capital gains tax could change and if it does, expect a potential flurry of sales before the policy is implemented. There has been talk of eliminating 1031’s. If that happens, you may see a surge of purchases of single tenant triple net deals as owners of management-intensive properties use as their last chance to sell and exchange into a hassle-free property. Biden’s environmental agenda could have implications on commercial building costs to meet higher energy efficiency standards. However, in the end, according to Newmark Merrill, it makes little difference who is in office. In a recent report, they state that total commercial real estate returns averaged 9% under Democratic presidents and 8.2% under Republican presidents.

If you would like a deep dive into the numbers and projections of the future, I suggest you download the 2021 Emerging Trends in Real Estate Report by PWC and the Urban Land Institute.

In the meantime, here is a snapshot from Nick.

Nick’s Numbers

Hi, all, and Happy New Year! This month I thought you would be interested in how our GDP is recovering and Costars’ projection of the future growth of GDP. Although the lines point upward, you can see in both best- and worst-case scenarios we don’t close the gap for a while.

GDP recovery

GDP Returns

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).

2021 isn’t likely to be a whole lot better than in 2020. It will, however, present new challenges and new opportunities. It will be as important as ever to be mentally tough. We must be resilient and confident and project success. We live in a world that you either control the threat or the threat controls you. Having the skills to handle those threats (or hiring those that can – like CDC) is the key to your success. On the softer side, although we have a vaccine coming online, shopping, the workplace, flying, masks, and quarantine all weigh on our ability to get out, relax, or have social contact. During this time might I suggest that we make extra efforts to reach out (in person, call or Zoom as you find comfortable) to your loved ones. While wearing a mask make an effort to say hello (since we can’t see you smile), watch more sunrises and sunsets, grow and eat some of your own vegetables and finally sit around a bonfire or your fireplace and stare into the flames for a while and relax.

In the end, when you change the way you look at things, the things you look at change! I hope you enjoy the story…

A man dies and goes to hell, where he is given three choices of how to spend eternity.

In room one, it’s the classic version, the evildoers being engulfed by fire and brimstone.

In room two, people are being devoured by wild beasts.

In room three, people are standing around in waist-deep, uh, excrement, drinking coffee. The man chooses option three.

He wanders over to a big coffee urn, gets himself a cup of coffee, takes a sip, and is feeling pretty good about his decision.

And then there is an announcement over a loudspeaker: “Attention! The coffee break is over! Back on your heads!”


Happy Holidays from CDC CommercialThe Four Stages of Life:

1.    You believe in Santa Claus,

2.    You don’t believe in Santa Claus,

3.    You are Santa Claus,

4.    You look like Santa Claus.

If you had told me last Christmas that I would be walking into convenience stores with a mask on, I would have assumed I had turned to a life of crime. Nor would I have believed you that I would go to Phoenix for the 4th of July, stay in a hotel to do due diligence on a shopping center named “Little Corona” all during a COVID pandemic! Oddly what I was scheduled to do was travel to Hong Kong in February, run a marathon, and get on a cruise ship to travel throughout Asia – so much for that plan!

As brokers and agents, we all have plans. But as Mike Tyson said, “Everybody has a plan until they get punched in the mouth.” Fortunately, as salespeople we are resilient and spend our daily lives absorbing body punches and creatively solving people’s problems and overcoming hurdles all in the name of the almighty dollar. Having been in the business 35 years, I suggest to you that when you experience years like this, rather than comparing where you are to where you thought you would be, measure your status according to where you need to be. You might discover you’re in much better shape than you realized.

Here are some of our takeaways as we close out the year and move into 2021.

  • Despite continued regulatory burden from COVID-19, leasing activity is picking up – but it is uneven.
  • Despite the number of transactions tumbling, CRE pricing is rising.
  • Office leasing has fallen to 20-year lows as users “wait and see.”
  • Industrial shows no sign of slowing.
  • Renewals will dominate the leasing market next year.
  • City bureaucracy has always been a problem with deal making but has gotten worse with antiquated, non-digitized, un-supervised workers slowing the permitting process.
  • Sublease space is starting to flood the market with rents .30-.90¢ psf less than market.

While on the sublease subject, I have an interesting observation. Although, as mentioned, sale prices have not come down, nor have asking rents. However, if sublet rents are .30-.90¢ psf lower does that not indicate a value decrease of $60-$180 psf? (.30 x 12 mo = $3.60/6% cap rate = $60 psf).

Nick’s Numbers

This month’s Chart illustrates the rise in sublet space that Don speaks to above.

sublet space at a 15-year high

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).

As in my past Holiday Letters, I will still encourage you to be passionate about your life’s work. However, someone pointed out to me that passion is a noun and love is both a noun and a verb. So, this year I am going to encourage you to be a verb not a noun – take action.

Love is something you bestow on others. Love is an action. Passion is something you have. At the end of your day are you the sum of what you have or the sum of what you did. Just remember in the end, you don’t get to take anything with you (coffins don’t have pockets). Time is the most valuable asset that you possess. Don’t over think – just get out there and do it!

Regardless of what 2021 throws us, remember to exercise often, eat lean and green, take deep breaths often, love life and work.

Have a Happy Holiday and a loving and prosperous New Year…I hope you enjoy this month’s story.

A farmer had some puppies he needed to sell. He painted a sign advertising the 4 pups and set about nailing it to a post on the edge of his yard. As he was driving the last nail into the post, he felt a tug on his overalls. He looked down into the eyes of a little boy.

“Mister,” he said, “I want to buy one of your puppies.”

“Well,” said the farmer, as he rubbed the sweat off the back of his neck, “These puppies come from fine parents and cost a good deal of money.”

The boy dropped his head for a moment. Then reaching deep into his pocket, he pulled out a handful of change and held it up to the farmer.

“I’ve got thirty-nine cents. Is that enough to take a look?”

“Sure,” said the farmer. And with that he let out a whistle. “Here, Dolly!” he called.

Out from the doghouse and down the ramp ran Dolly followed by four little balls of fur. The little boy pressed his face against the chain link fence. His eyes danced with delight. As the dogs made their way to the fence, the little boy noticed something else stirring inside the doghouse.

Slowly another little ball appeared, this one noticeably smaller. Down the ramp it slid. Then in a somewhat awkward manner, the little pup began hobbling toward the others, doing its best to catch up…

“I want that one,” the little boy said, pointing to the runt.

The farmer knelt down at the boy’s side and said, “Son, you don’t want that puppy. He will never be able to run and play with you like these other dogs would.”

With that the little boy stepped back from the fence, reached down, and began rolling up one leg of his trousers. In doing so he revealed a steel brace running down both sides of his leg attaching itself to a specially made shoe. Looking back up at the farmer, he said, “You see sir, I don’t run too well myself, and he will need someone who understands.”

With tears in his eyes, the farmer reached down and picked up the little pup. Holding it carefully he handed it to the little boy.

“How much?” asked the little boy…

“No charge,” answered the farmer, “There’s no charge for love.”

Happy Holidays!


Benjamin Franklin campaigned to have the turkey named as the United States’ national bird (sure glad that didn’t work out!).

Thanksgiving was only celebrated unofficially until President Abraham Lincoln declared it a National Holiday in 1863.

Well, the election is upon us and as predicted, the fireworks keep going off! If you think this is unprecedented or this has never happened, I suggest you look at the Wikipedia entries for the Gilded Age and the 1876 United States Presidential Election. Some things never change. In the end, elections aren’t about what you think they are about, they are what you feel.

With the election only days away, I want to remind everyone that Proposition 15 is on the ballot and if passed, it will more than double the current property tax collections. This burden will not just be on property owners as most leases pass taxes through to tenants. Of course, tenants will have to pass it on to consumers (just look at the 4% COVID surcharge on most restaurant tabs now). It will truly trickle down and increase the cost of everything we buy and own.

The best gauge of economic health is employment, and, on that front, the news is not good. New unemployment claims continue at well over +1.2 million/week; the pre-virus norm is +200K. When all claims are considered, the total is more than 25 million, a real unemployment rate in excess of 15%.

  • The economy is in Recession; we just haven’t felt it because of the CARES Act stimulus, but eventually we will because we have a huge, huge unemployment problem;
  • And then there is the oncoming eviction crisis (on hold until year’s end); there hasn’t been much discussion about this, and I wonder if it is priced into financial markets;
  • The CARES Act stimulus has covered up the Recession, and another stimulus, post-election, may further kick the can down the road, but free cash cannot go on forever without dire consequences;
  • The Recession will persist if the virus persists (and we seem to be entering a second, resurgent phase). A vaccine would help but getting enough people to take it (providing herd immunity) and then returning to pre-virus behavior may take years, not quarters.

It’s becoming more and more clear that there are two recessions happening concurrently, both moving in different directions. The unique lockdown recession that greatly affected restaurant and retail workers is in recovery as the rehiring of furloughed employees continues as cities reopen. But a more traditional recession seems to just now be getting underway, as permanent layoffs continue to rise.

As I said above, some things really don’t change. Forty-four years ago, the hit movie “Network” was out in theaters (you can rent it on Amazon for $2.99), a story about a deranged former TV anchor (Howard Beale) ranting about the media, the Russians and politics. Humor me and read this quote from the movie;

I don’t have to tell you things are bad. Everybody knows things are bad It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth; banks are going bust, shopkeepers keep a gun under their counter, punks are running wild in the street, and there’s nobody anywhere who seems to know what to do, and there’s no end to it! We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TVs while some local newscaster tells us that today we have 15 homicides and 63 violent crimes, as if that’s the way it’s supposed to be! We know things are bad – worse than bad. They’re crazy. It’s like everything everywhere is going crazy, so we don’t go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is: “Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won’t say anything. Just leave us alone.” Well, I’m not gonna leave you alone. I want you to get MAD! I don’t want you to protest, I don’t want you to riot. I don’t want you to write to your congressman, because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first, you’ve got to get mad! (shouting) You’ve got to say: “I’m a human being, goddammit! My life has value!” So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick you head out, and yell: “I’m as mad as hell, and I’m not going to take this anymore! Then we’ll figure out what to do about the depression and the inflation and the oil crisis! But first get up out of your chairs, open the window, stick your head out, and yell and say it, “I’m as mad as hell, and I’m not going to take this anymore!”

In case you are feeling alone in your frustrations, I thought I would share an email I recently received from a client after submitting a property for him to buy.

Morning Don,

Thanks for thinking of me. I went and looked at the property a few weeks ago. I’m not interested. I’m having trouble these days finding tenants for similar spaces. Title 24 and wonderful California issues. I am not sure if I will buy anymore California real estate. Too many regulations here and our state is in for a rude awakening. It’s sad. From no straws, no grocery bags, Title 24, rent control, prop 13? electricity prices, water sewer prices, battery back up on garage door openers. I can’t buy good rat poison, good bug spray, the list never ends. They say government knows best. I see no reason to want to continue adding in this state. Sorry for my rant. Have a great weekend…we do have great weather here!

In case you were thinking of packing your bags, a quick check of U-Haul rates Tuesday showed someone renting a truck to move from San Francisco to Reno next week will pay $536. But those wanting to move from Reno to San Francisco with that truck will pay less than half – just $219.

If you were thinking of selling and exchanging your property out of State to avoid paying taxes they are already ahead of you! For purposes of determining California state income tax, any gain or loss from the sale or exchange of property located in California is attributed to California at the time the gain or loss is realized. Even if you do not live in California, but exchange property located within California for property located outside California, the realized gain or loss is still attributed to California.

Example: As a resident of Texas, you exchanged a condominium located in California for like-kind property located in Texas. You realized a gain of $15,000 on the exchange that was properly deferred under IRC Section 1031. You then sold the Texas property in a nondeferred transaction and recognized a gain of $20,000. The $15,000 deferred gain (the lesser of the deferred gain or the gain recognized at the time you disposed of the Texas property) has a source in California and is taxable by California.

Well, thank goodness we have college football back. I couldn’t have imagined Thanksgiving without football! Speaking of football, I keep getting asked how things are going and how business is doing? Well, I like to say that we feel a lot like Charlie Brown trying to kick the football. We have high expectations, but somebody keeps moving the ball when we get close! (And it that’s not enough, It’s the Great Pumpkin wasn’t on network TV this Halloween for the first time in 50 years! I’m mad as hell and …) I will tell you that we are working really hard right now. We spend our days careening along, veering around numerous obstacles while getting whip sawed back and forth by bureaucracy, financing, regulations, fear, and ignorance as businesses adjust expansion goals, shutter, declare bankruptcy. With all the craziness, I keep trying to remind everyone that leaping without a destination looks a lot like jumping up and down! We are working hard to help our clients identify their goals and execute on the plan to achieve them!

Nick’s Numbers

This month I am sharing a chart that shows the beginning of the price drop discussed by Don above. If you are interested in talking about selling, buying or leasing give me a call or drop me an email.

weight gain by monthpermanent job losses mounting fast

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).

The Team at CDC would like to thank all of you for your business, your referrals and your help throughout the year. We hope you enjoy the story of Thanksgiving below and if you are scrambling for a Thanksgiving Day Toast in these tumultuous times, you might enjoy this one from my Scottish Grandfather: Here’s to you and here’s to me and may we never disagree but if by chance we ever do, then here’s to me and to hell with you!

Hope you enjoy the story…

Thanksgiving History Lesson

In 1620, when the Pilgrims landed at Plymouth Colony, the colony began in pure and unadulterated communism because whatever was produced was put into a common storehouse to be distributed to each according to need. After two years, the Pilgrims dropped this ideal. Why? Because they were starving! Fifty-one of the 104 people who sailed on the Mayflower were dead by the third winter. When people are dying of hunger sometimes, they will stop and think.

From the diary of Governor Bradford, which we have today with the names and ages of the survivors, he called everyone together one evening and in effect said anyone can give out what is in the storehouse, but this presupposes there is something to distribute, however, under our system there is nothing to store.

Come spring we will try a new idea – we’ll assign a parcel and allow each to “plant for his owne perticuler” – in other words, to each according to production or merit, to keep what is produced or trade as seen fit.

When spring came, something phenomenal occurred. Previously only some of the men worked the fields. Now the women and children joined in for survival. What they did was begin to practice the idea of private ownership, not perfectly, but more perfectly than ever before. With the new system and the help of the Indians, the ensuing harvest was so bountiful that it gave us the first Thanksgiving Day. Therefore, there began an era of growth and development that sooner or later had to lead to revolutionary ideas. And it did, the American Revolution, which was a break from all previous history.

No, not that skirmish with King George in 1776 that some call the American Revolution. That was a minor fracas as such things go, for men had been killing themselves by the millions arguing over which form of authoritarian government should rule the lives of the common people.

The real American Revolution is that clause in the Declaration of Independence that states that all men are “endowed by their creator with certain unalienable rights that among these are life, liberty and the pursuit of happiness.” What this did was remove the king as “sovereign.”

Now it’s one thing to declare independence from authority, but it’s another to put it into effect. So, there followed the Constitution and the Bill of Rights. The Bill of Rights is a misnomer because it is not a set of rights but a series of prohibitions, not against the people but against their government.

There’s something like 50 “noes” and “shall nots.” The government shall not abridge freedom of speech, press, religion, right of assembly, nor shall private property be taken without just compensation. Arthur Lee of colonial Virginia declared, “The right of property is the guardian of every other right, and to deprive a people of this, is in fact to deprive them of their liberty.” Once this thing got rolling, there was an outburst of creative energy the world had never seen. People did not look to government for sustenance because the government had nothing to give. So, people turned to themselves – and became, in the words of Emerson, “a self-reliant people.” The result: more human progress has been made in the past 250 years than in the previous 2,500. This progress has evolved as the result of a limited government, a market economy and private property – the essence of Americanism.

Happy Thanksgiving America!


When this is over may we never again take for granted; a handshake with a stranger, full shelves at the store, conversations with neighbors, a crowded theater, Friday night out, the taste of communion, a routine checkup, the school rush each morning, coffee with a friend, the stadium roaring, each deep breath, a boring Tuesday, life itself.

When this ends, may we find that we have become more like the people we wanted to be, we were called to be, we hoped to be, and may we stay that way – better for each other because of the worst.

Laura Kelly Fanucci

This year is different. We are in a transition, but so much is still the same. That which isn’t the same is vague and unknown. We are far enough into the upheaval of 2020 to know we aren’t going back, but we still don’t know what lies ahead. The familiarity is gone, leaving us struggling to find our footing.

I recently read in The Atlantic that; army ants will sometimes walk in circles until they die. The workers navigate by smelling the pheromone trails of workers in front of them, while laying down pheromones for others to follow. If these trails accidentally loop back on themselves, the ants are trapped. They become a thick, swirling vortex of bodies that resembles a hurricane as viewed from space. They march endlessly until they’re felled by exhaustion or dehydration. The ants can sense no picture bigger than what’s immediately ahead. They have no coordinating force to guide them to safety. They are imprisoned by a wall of their own instincts. This phenomenon is called the death spiral. I can think of no better metaphor for our place in history.

If you think the last six months have been a trip, hang onto your seat for the next six months, because I think we have experienced a tumultuous earthquake, but we have yet to see the tsunami. I know in past letters, I have spoken about the need to adapt, innovate and overcome but this month I am going to tell you in the months ahead, that when the going gets tough, the tough get going.

When the government ends juiced unemployment benefits, the Paycheck Protection Programs (PPP) for small businesses, and forbearance plans for income strapped borrowers – when the government ends foreclosure and eviction moratoriums that unquestionably prop up the housing market – only then will we get a clearer picture where prices (and the economy) are heading.

When the tide change and goes back out, we will learn who had a bathing suit on and it might not be pretty.

The real estate market is struggling to determine if there has been a reset in property values. Keep in mind that property pricing is not the same as property value. Pricing is what someone offers the property for and another is willing to pay for it. Value is largely based upon the cost to build the property and what amount of income it produces. The disconnects right now are that some properties are not throwing off income and may never do so again, others are ticking along as if  nothing has happened. Values have fallen much faster than pricing, but we are not observing it yet because there has been a huge fall off in transaction volume. Buyers have decreased but sellers have either taken properties off market or just not been willing to put property on the market in the first place. This leaves a sort of vacuum. Many businesses and property owners went into COVID-19 in a strong position following a strong economy, meaning they are not feeling pressure to close or sell…yet…

However, we are seeing lenders starting to pivot and discount COVID impacts on income, avoid product types, and slow down their loan pipeline. Loan delinquencies have risen. FDIC reports about a 42% increase over year end 2019 with about 1% of loans now delinquent.

The food industry estimates that 33,000 U.S. restaurants and drinking establishments have permanently closed in the first five months of the pandemic. Twenty-five percent indoor capacity won’t “cut the bill” for most restaurants, especially when weather kills outside dining. Eighty-seven percent of NYC restaurants didn’t pay full rent in August.

The other phenom hitting commercial real estate now is work from home (WFH). There’s no question there are many advantages to WFH. Commutes measured in steps, fewer interruptions from co-workers, more time with family. However, the novelty may soon wear off – the honeymoon may be coming to an end. The blind spot for companies is their belief that all employees prefer working from home. However, many struggle with figuring out how to separate work from home. Employers like the WFH productivity boost and the reduction in office overhead. But it isn’t because employees are more efficient, it is often because they are working longer as the line between work and home disappears. Our beloved digital devices create an “always on duty” workplace culture. In the future, employees who have no alternative but to work from home may leave without the employer ever knowing why. Employers are not accounting for the high cost of this turnover on their hiring, training, and custom relationships. Finally, the WFH culture doesn’t account for your co-workers and managers knowing if you are having a bad day or having personal issues (cause those are just not communicated in a zoom call or text).  JP Morgan has already recognized the problem and recycled its employees back to the office. CEO Jamie Dimon told analysts that productivity was particularly affected on Mondays and Fridays. He added, “overall productivity and creative combustion has taken a hit.” I am going to tell you that the first time a company sees its competitor being more successful with an “in office” strategy, will be the end of wholesale work from home strategies. Employers had best be careful when they close the office door.

The WFH movement is affecting the home buyer market too. Buyers are moving sooner than expected and to a much broader range of geographic locations. Of course, they are seeking homes with dedicated office space. Interestingly, only 14% surveyed said they don’t anticipate ever returning to the office.

In the meantime, telehealth is a trend that I think is here to stay and will impact and reshape healthcare real estate. The pandemic and changes in insurance reimbursements have created the critical mass to make tele-medicine mainstream. Medical offices will have less need for treatment rooms but more demand for call rooms for doctors and techs, as well as remote monitoring and diagnostic equipment. Internet redundancy, appropriate lighting, screens, acoustics, and privacy (HIPPA) compliance will be critical. Smaller waiting rooms and larger common area may happen as doctors employ text and paging services like restaurants.

I try to stay as non-political as I can, but if you aren’t already aware, Prop 15 is proposing the largest property tax increase in California history. The measure is focused on lifting Prop 13 protection of commercial properties. Unfortunately, the tax increase will be passed down to tenants since most leases are triple net. Those owners without triple net leases or without expense pass thru provisions are likely to see about a 10% -20% or more decrease in your income! (Take what you think your property is worth, subtract what you paid for it and multiply by .012 and that will be the the amount of the annual tax increase that you will be passing along or deducting from your income!). Expect Disneyland tickets to skyrocket!

The groups most vulnerable to the effects of COVID-19 closures are being hit at the worst of times. With many barely hanging on, this may be the fatal blow. Be sure to let your tenants know and tenants your customers. This bill will flow the tax down to all of us in the form of higher rent and goods and services.

Nick’s Numbers

This month I am sharing a chart that shows the beginning of the price drop discussed by Don above. If you are interested in talking about selling, buying or leasing  give me a call or drop me an email.

US CRE Pricing

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, 858-32-2100, nzech@cdccommerical.com).

I hope you enjoy this month’s, tongue in cheek ultimate work from Heaven story…

What Happens when God and Staff Work from Home

If you are like me, you have been having your share of issues with companies help desks during this work from home time. I recently spent over an hour on the phone with a customer support person who assured me that they could help me with my problem. After 20 minutes they realized they needed tech support but couldn’t transfer me since they were both working from home, so we spent the next 30 minutes with them text messaging each other and relaying questions and answers to me. Upon realizing this wasn’t working, the dynamic duo suggested I needed advanced support (could have told you that), however, they were unable to connect me because everyone was working from home and very back logged. They assured me someone would call me back in 3-5 days. That was a couple of weeks ago.

All of this leads me to question, what would happen if God and his staff had to work from home…

Most of us have now learned to live with automated help as a necessary part of our lives. Have you ever wondered what it would be like if God decided to install voice mail? Imaging praying and hearing the following:

Thank you for calling Heaven.
For English press 1
For Spanish press 2
For all other languages, press 3

Please select one of the following options:
Press 1 for request
Press 2 for thanksgiving
Press 3 for complaints
Press 4 for all others

I am sorry, all our Angels and Saints are busy helping other sinners right now. However, your prayer is important to us and we will answer it in the order it was received Please stay on the line.

If you would like to speak to:
God, press 1
Jesus, press 2
Holy spirit, press 3
All others, press 4

To find a loved one that has been assigned to Heaven press 5, then enter their social security # following by the pound sign.

If you receive a negative response, please hang up and dial area code 666.

For reservations to heaven, please enter JOHN following by the number 3 16.


“This is precisely the time when artists go to work. There is no time for despair, no place for self-pity, no need for silence, no room for fear. We speak, we write, we do language. That is how civilizations heal.”

~ Toni Morrison

In 35 years in the business, I have seen a lot of crazy things, but the current market is befuddling. The word I like to use is that we are in a bifurcated market. The economy is in a strange place right now. The current environment is encapsulated in a chart that Nick shares below this month. The chart shows the homeownership rate spiking to its highest point in a decade alongside the mortgage delinquency rate also at a decade long high. How is that possible?

We are seeing this same bifurcation in our daily activity. We are seeing dozens of tenants not paying rent, going out of business, or asking for a forbearance. This is flowing through to owners who are struggling with cash flow and loan payments. At the same time, there is little inventory for sale, and we are seeing multiple offers on some sale deals. Some of this is caused by a backup of 1031 buyers, a lot because of unnaturally low interest rates, and some because of buyers who think this is their last chance to buy. In recent weeks, we have seen landlords clamping down on tenant delinquencies and this is causing more tenants to start throwing in the towel.

We are seeing office tenants who have been working from home (WFH) that are not renewing and instead deciding to make WFH permanent We are seeing restaurants, nail salons, and dry cleaners just whither on the vine. There is a wave of silent failure sweeping over 80,000 permanently shuttered businesses from March 1 to July 25th. Thirty-one percent of owners reported lower sales in the past three months.

Yet, the home improvement industry is booming, rich from refi money, new home sales, and people working from home. It appears, however, that consumers with extra money in their pockets skipped the mall and shopped at big boxes instead. According to Retail Metrics, mall-based retailers have seen their earnings plunge 256%! Yet Walmart and Target report record-breaking sales!

So, what is a person to do? In the past, I have said we profess to innovate, adapt, and overcome. I still hold to that motto. But this month I’m going to talk a little about motivation. I believe that one of the outcomes of COVID-19 seems to be dumbing us down. I call it “COVID Stupid.” I’m not talking about a mask or no mask here. I am talking about people’s lack of attention, attention to detail, and inabilities to get a job done. Bringing things to a stop has seemingly caused the inability to get things going again. I hear and see people saying, “I know what to do, but I just don’t do it!”

Here’s the thing, motivation isn’t something you’re born with. It is something that you create. This is especially important right now during quarantine as we are all in a Groundhog Day existence. Our bodies and brains are craving change and achievement because every day feels the same. So, this is not only important to reach your goals but also improve your sense of wellbeing. Remember, it is never too late to create.

Another symptom of “COVID Stupid” is free-floating hostility. Unfortunately, we have always lived with a level of angst in our society. Discourse has always been there. The problem today is technology makes it so easy, and so public and so fast. Here too, I have a story and a solution.

I am back running after breaking my toe but I have had this pain in the ball of my foot. I went to the chiropractor and explained the situation. Of course, he cracked this and pulled that, and I am now much better and back on the road. But what he told me was the real magic. He explained that once the muscle tightened the only defense it had for the next injury was to get tighter until finally, you are just one tight ball of a mess. The cure? Stretch and be flexible. Hmmm…sounds like the cause and cure of “COVID Stupidity!” Relax, be flexible, stretch outside your comfort zone!

Nick’s Numbers

housing outcomes rapidly diverging

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).

Have a great month ahead. Be creative, flexible, and motivated, I know the Team at CDC is. Hope you enjoy the story…

The Greedy King

Once upon a time, there was a very Greedy King who loved eating cream puffs. He ate them for breakfast, lunch, and tea – even dinner! In fact, he ate so many that all the bakeries ran out of pastry and the dairies out of cream.

So, the Greedy King ordered that every store in the land become a bakery or dairy. There were to be no more grocery stores, no hardware stores, and no clothing stores. You can imagine how dreadfully inconvenient it all was!

Very soon the King grew so fat that he started bulging out of his clothes – but because there were no clothing stores, he couldn’t buy any new ones. Then one day he sat on his throne, and ‘crunch!’ it collapsed under his weight. But there were no furniture stores, so he couldn’t have it mended.

‘You must go on a diet,’ said the doctor. ‘And eat fresh fruit every day.’ But of course, there were no grocery stores. The King began to realize how foolish he had been. He called back the storekeepers and told them to start their businesses again.

And after that, the King only allowed himself one cream puff a day, which he ate for dessert after supper!


“I will teach you in a room. I will teach you now on Zoom. I will teach you in your house. I will teach you with a mouse. I will teach you here and there.
I will teach you because I care.”

The San Diego real estate market continues to feel the impact of the coronavirus. Leasing, deal flow, and rents have all cooled off. It is hard to see if there is a light at the end of the tunnel or if it’s a train bearing down on us! Social distancing, further COVID flare-ups, and schools holding virtual classes in the fall all weigh on the continued uncertainty. We all thrive under a degree of predictability. Unfortunately, COVID-19 seems to be uncertainly on steroids! Alas, if you thought you didn’t have another emotion left to share in our war-torn, battle fatigue state…there will be 117 new emojis released to the world this fall!

I ended up taking running off for July. It started because we were traveling. San Diego wasn’t hot enough or COVID enough for the 4th of July, so we went to Phoenix to look at a property. We then drove up to see our new grandbaby in Utah. When I got back, there was lots of work to catch up on plus it was hot. Then it was easy to sleep in…and have an extra glass of wine at night. Then it was easy to not get started because all my races and trips had been canceled. To add insult to injury, I stubbed and broke my toe while moving around my office to quickly. This is the essence of depression, which is defined as the inability to create a future.

I then realized, my July reflected what our Country and each of us is going through. We hit the pause button, tried to get busy but stubbed our toe and now are being stymied at every turn causing a malaise or depression.

So how do we get out of this rut and overcome fear, uncertainty, and confusion? You must develop goals. I am reminded of the advice a doctor gave to a 400lb man who appeared helpless, asking where he could start. The doctor replied he could start by attaching the TV remote to the TV and walking over to it every time he needed to change channels!

* How do you lose weight? Slowly.
* How do you establish habits? Slowly.
* How do you finish long races? Slowly.
* How do you accumulate wealth in real estate? Slowly.
* How do you overcome roadblocks? You slowly walk around them.

Goals improve your confidence. Goals require developing a plan. Goals require you to be active. Goals improve your confidence. Or as Mary Poppins once said, “Intelligence can wash away confusion (and uncertainty).”

Commercial Real Estate is all about jobs and employment. In January, national unemployment dipped to 3.6%. By April, it had jumped to 14.7%. We are now down to about 11%. As with the past recessions, the less educated have suffered the most. Those with a bachelor’s degree had an unemployment rate of 6.9% compared to 16.6% for those who didn’t finish high schools. Federal lawmakers tried to create a bridge with paycheck protection and other programs. The problem is that bridge may not be long enough or strong enough. New jobless claims in late July were at 1.4 million! Just to put that in perspective, in the Great Recession the worst week we saw was 665,000 claims.

Because I am paid to be an optimist let me also share some positive and interesting news.

  1. San Diego had another record quarter of venture capital funding with $1.2 billion funded and no end in sight. 93% of the funding is in the Life Sciences. Venture capital supports real estate decisions and additional jobs allowing companies to grow.
    There were more homes sold through June of 2020 than thru June 2019. Imagine if there had been no COVID!
  2. Amazon is introducing “smart carts” that will track your basket. Dash carts will allow you to avoid lines and check out.
  3. Wal-Mart is adding health clinics. These “clinics” will host doctors, dentists, and optometrists. Medical check-up $30, cleaning $25, or $1 per minute to talk about your anxieties.
  4. Uber cops – yes, in a day where we are de-funding the police, private security guards are using Uber-like networking so that the closest one can respond to your personal needs or a call because your Ring camera has detected a problem at your property.
  5. San Diego was ranked #19 in the nation on a list of tech-attractive regions according to a report by brokerage company CBRE.
  6. Last year Amazon did a 2.6 million square foot lease in Otay Mesa, but they also just completed a 530,000-SF foot warehouse in Poway for delivery in August.

Nick’s Numbers

So, a picture may be worth a thousand words but what these pictures show are Cap rates rising (values dropping), Loan delinquencies rising, and sales transactions plummeting. Call or email me to discuss your challenge or goal.

sales/acquisitions of $2.5M+ Properties

percent of CMBS marked as 30+ days delinquent by property type

risk premium for commercial property investments up since january

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).

I am often asked what you pay a commercial broker for and why you should get paid to just look something up on an MLS service. Well, let me share a few:

  1. We know what is on the market.
  2. We know other brokers and can share information because we are trusted (some may say honor among thieves!).
  3. We know of things not on the market.
  4. We know how to put a deal together and get a deal done.
  5. We know cities, zoning, and what can be done and who to talk to, so as to get it done.
  6. We know vendors and service providers.
  7. We can help estimate costs to judge the feasibility and save considerable time, effort, and costs.
  8. We schedule and coordinate all the moving parts and solve the problems and obstacles that come up.

As your go-to Commercial Real Estate Broker, it is our job to go over, under, around, or through walls to get deals done for our clients. COVID is just one more obstacle.

So, this month we are going to try something new and share the results. Follow this link to answer our monthly survey. This month – “How long until the economy will recover?” If all works as planned, we will share the results next month.


Oh, and don’t worry, I am back running! The next goal is running to and up Mt Soledad. After that Mt. Woodson to the Beach. Great things happen when you have a goal and you get around the obstacles…hope you enjoy the story.

Never Judge a Book by its Cover

A lady in a faded gingham dress and her husband, dressed in a homespun threadbare suit, stepped off the train in Boston and walked timidly without an appointment into the Harvard University President’s outer office.

The secretary could tell in a moment that such backwoods, country hicks had no business at Harvard and probably didn’t even deserve to be in Cambridge. She frowned.
“We want to see the President,” the man said softly.

“He’ll be busy all day,” the secretary snapped. “We’ll wait,” the lady replied.

For hours, the secretary ignored them, hoping that the couple would finally become discouraged and go away. They didn’t and the secretary grew frustrated and finally decided to disturb the President, even though it was a chore she always regretted.

“Maybe if they just see you for a few minutes, they’ll leave,” she told him. He sighed in exasperation and nodded. Someone of his importance obviously didn’t have time to spend with them, but he detested gingham dresses and homespun suits cluttering up his outer office.

The President, stern-faced with dignity, strutted toward the couple.

The lady told him, “We had a son who attended Harvard for one year. He loved Harvard. He was happy here. But about a year ago, he was accidentally killed, and my husband and I would like to erect a memorial to him, somewhere on campus.”

The President wasn’t touched; he was shocked.

“Madam,” he said gruffly. “We can’t put up a statue for every person who attended Harvard and died. If we did, this place would look like a cemetery.”

“Oh, no,” the lady explained quickly. “We don’t want to erect a statue. We thought we would like to give a building to Harvard.”

The President rolled his eyes. He glanced at the gingham dress and homespun suit, the exclaimed, “A building! Do you have any earthly idea how much a building costs? We have over seven and a half million dollars in the physical plant at Harvard.”

For a moment, the lady was silent. The President was pleased. He could get rid of them now. The lady then turned to her husband and said quietly, “Is that all it costs to start a university? Why don’t we just start our own?”

Her husband nodded.

The President’s face wilted in confusion and bewilderment.

Mr. and Mrs. Leland Stanford walked away, traveling to Palo Alto, California, where they established the university that bears their name, a memorial to a son that Harvard no longer cared about.

  1. By Malcolm Forbes

I used to eat a lot of natural foods until I learned that most people die of natural causes. During this pandemic, our Country has been forced to take a hard look at lifestyle, health, and essential goods. Our society, workplace, and family are being forced to draw lines between Fear and Fed Up. The world is clamoring to “feel safe.” Unfortunately, whether it is health, the stock market, the real estate market or just driving your car down the road, being risk-free is near impossible. Everyone needs to stay home, yet it is important to go out because of the sun. Sunlight will kill the virus but not if the virus kills you first by walking in the sunlight where you may be exposed to the virus.

As you might have guessed, I am a contrarian. That is probably why I have not had any pizza in the last four months! Just like the role of commercial real estate, the role of food has not changed – we have just had to adapt quickly and figure out how to get food to people in a way that speaks to their needs. What we have seen in the market is a dramatic drop in deal activity (+/- 25%), however, we have only seen prices break about 1% – 1.5%. According to MIT researchers, the drop-in activity should equate to an 8% – 12% drop in prices. However, we have not seen it. This is causing a large gap between tenant/buyer and landlord/seller expectations.

The good news is that we are seeing some unfreezing in our market. Recent weeks have seen tenants out exploring and buyers moving ahead again. We can only hope that this continues. Unfortunately, we are coming out of the deep freeze and as the economy thaws, we will see the damage that has been done as well. I continue to be most concerned about a “W” recovery, where the economy starts looking better, and then there is a second downturn later in the year or next. Analysts from Moody’s have noted that after previous shocks including 9/11 and the 2008 financial crisis, it took 8-12 months before delinquencies rose appreciably.

Every deal we work on is a dance between risk and reassurance. Clients we want to help must have faith in us before they can believe in the value we create or the stories we tell. Let me tell you what we are seeing up close at the front. The SEAL Teams call it VUCA – Volatile, Uncertain, Complex, and Ambiguous environment.

  • Our inbound calls are down 50% but picking up in late June (We had 0 inbound sign calls in April!).
  • Some restaurants are failing but all are flailing. Many restaurants are walking dead (open but not profitable enough to stay so).
  • Churches and non-profits are marching forward with deals.
  • Many office tenants already talking about downsizing their space needs.
  • More deals with COVID caveats on opening, closing, or paying rent.
  • Lot’s more Zoom meetings and conference calls and webinars.
  • Everybody upgrading their technology skills; Zoom, DropBox, DocuSign.
  • More meetings, fewer people wearing face coverings.

So, in many ways, this pandemic has been a catalyst to shove the world forward. At CDC Commercial we feel like the rest of the world is catching up to where we have been for a while, which is forcing us to get out in front again. So, we have been focusing on things like social media marketing, Big Data Leads, new credit screening tools, Drones, and Matterport Tours. See an example here: https://www.youtube.com/watch?v=UIzXK20rjLQ&feature=youtu.be

Nicks Numbers

U.S. Composite Indices: Equal & Value Weighted

The chart above supports what Don said about price appreciation. Despite volume being off 22% in the 2nd Quarter, values were still up 3% – 5% on a year over year basis for the last 20 years.

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).

So, as you sit glued to your Twitter feed, Facebook account or TV network watching buildings defaced and statues toppled remember the old journalism adage, “If it bleeds, it leads.” Here are a few tips from Brent Gleeson, a former Navy Seal to help you navigate these volatile and uncertain waters ahead.

  • Embrace reality. But avoid obsessing.
  • Know the facts. Trust but verify.
  • Avoid knee-jerk decisions. Don’t dive in the bunker just yet.
  • Stay in your three-foot world. Control what you can, ignore what you can’t.
  • Communicate. If you can’t talk about everything, it’s not worth anything.
  • Build trust and accountability. In the absence of orders, take charge.

While one Lincoln statue is in the center of the news, I thought you might be interested in the story of this statue and the man on your $5 bill. I hope you enjoy the story…

Lincoln Statue

I haven’t told any stories from England since I got home but it seems like maybe we could all use a good story about a civil war statue, a good story about an American President, and a good story about the power of the common people against the rich and powerful, so I’m going to start with this one.  It is probably for the best that you’re reading this here because I haven’t managed to tell this story in person without crying.

I was in Manchester with a bit of time to spare on a cool, sometimes rainy morning that reminded me of home.  Since I had a minute, I turned on Pokémon Go on the off chance that there would be a Mr. Mime in range.  As luck would have it there was one only two blocks away from my intended destination!  The game led me to a small square and as I approached, I could’ve sworn that it had an enormous statue of Abraham Lincoln right in the middle of it.  Much to my dismay the closer I got, the more it looked like Lincoln.  When I was close enough to read the inscription, I learned that it was in fact, a statue of Lincoln.  What was a statue of Lincoln doing in a lonely square in Northern England?!

Then it got weirder.

There was a large blue sticker that was somewhat haphazardly stuck onto the base of the statue that said something along the lines of “talking statues of Manchester” and had a QR code with no further explanation.  There was no question, I had to know what that QR code said!  I immediately installed a QR scanner and no sooner had I clicked the shutter button then my phone rang.  That was weird and more than a little creepy, but if they say one thing about me when I’ve gone it will be that I never passed on an adventure.

I answered the phone.

There was no preamble, no explanation, just a man’s voice saying “to the working men of Manchester” he then continued in beautiful, archaic prose to praise the workers of Manchester and thank them for their courage and sacrifice.  It seemed to be a letter and when it came to an end it was signed “Abraham Lincoln”.  When he had finished uttering his name President Lincoln hung up on me.  It was a tantalizing letter to a child of Lincoln’s far future standing alone in a rainy square, 4,500 miles away from home.  President Lincoln did not bother to list the brave acts or to sum up the sacrifice.  Why would he?  The people of Manchester knew what they had done.

Luckily, after the phone call ended a screen popped up offering links to learn more.  I stood in the drizzle, read an amazing story, and wondered why I had never heard it before.

As you probably know during the Civil War the North imposed a Naval blockade on the South.  The economic hardship that this caused was an important factor in the North’s victory.  What I didn’t know was that the blockade also badly hurt the people of Lancashire, England.  At that time, the mills of Northern England produced the fabric that clothed the world.  Seventy-five percent of all the cotton grown on Southern plantations was sent to Lancashire where it was spun, dyed, and woven.

A year into the war and the embargo found Northern England in real distress.  Sixty percent of its mills were shuttered, thousands of people were without work.  The desperate wealthy mill owners started lobbying the British government to send the British Navy to break the blockade and let the cotton through.

Then an amazing thing happened.  The workers themselves organized a mass meeting in the Manchester Union Hall to discuss the matter and those working-class men, who had the very most to lose, chose to refuse cotton grown by enslaved hands.  The blockade held and the men did indeed lose.  In one town alone only five out of thirty-nine mills continued to operate.  People went without fuel for heat, there was widespread starvation, families lost their homes.  And still–an ocean and a world away from a war in a place they had never seen–the people of Manchester chose to live and die by their values.  They would not support slavery.

When the war ended that letter came from President Lincoln and it was followed shortly after by ships loaded with food and supplies for the people of Lancashire from the people of America, in gratitude.

And that is how I ended up crying in the rain 4,500 miles from home, in a square named for Lincoln in a country that he never set foot in.

I also caught my Mr. Mime.

If you are interested in reading the letter you can do so here:


If you want to read more about the history, you can do so here:


and here:



“Wars in old times were made to get slaves. The modern implement of imposing slavery is debt.” – Ezra Pound 1885 – 1972

The whole world has changed and will continue to do so. There will be things you will love and things you will hate. It is your response that matters. It is how you adapt, innovate, and overcome that ensures your success or misery. First, let me wish all the fathers out there a Happy Father’s Day later this month. I got an early Father’s Day present when my #3 son (Austin not Nick) recently announced his engagement to his long-term girlfriend. Ah…the cycle of life continues.

As I have said many times over the years of writing this letter it is ALL about jobs. The U.S. unemployment rate jumped to 14.7 percent in April of 2020 (and 15% in San Diego County). When I wrote about our last “Great Recession” in 2009, unemployment was at 7.6%. The worst in recent history was 10.8% in November of 1982. In the “Great Depression” unemployment skyrocketed from 3.2% in 1929 to 25% in 1933 (note the length of time from crash to trough). So, if you ask me “when will we turn around”. I will tell you, “show me the jobs!”

The biggest concern that I have right now is that we have experienced a traumatic earthquake with plenty of losses and damage. However, the helicopters are out and dropping money from the skies and people are so dazed and busy picking up candy that they are failing to see the tsunami that is building offshore. Further obscuring our view of the tsunami, is the fireworks of the coming election. If you think this has been a bruising battle so far, hang onto your hat, the fireworks and surprising twists have not yet begun!

Closer to home, here at CDC, we have seen our inbound call volume cut in half. Leasing has slowed to a crawl. Surprisingly, investment sales have stayed steady but many more roadblocks. Lender financing is challenging. Buyers are trying to find what is an appropriate market value. Due diligence is tricky – what is appropriate for entering tenants’ office space to inspect? Most cities are closed or with limited access. Having meetings is a challenge (Zoom is great but there are times a deal does not get done without an in-person meeting). Through all of this, I have come to realize that this is just one more thing we as Brokers at CDC Commercial get paid to do. These are just more obstacles for us to overcome to get a deal done. Our job is to go through walls for our clients (or over, under, or around if that works!).

One thing over time that is true. Creativity and aggressive innovation — in the face of hardship — will fuel a turnaround. Right now, with unemployment rising, it is hard to remember that capitalism is a creator of jobs, companies, and industries.

History shows us that between some of our worst financial panics, U.S. capitalism has built transcontinental railroads, U.S. highway systems, and the internet. The creative side of the story is hard to see in today’s moment. We are in the middle of the crisis, and growth stories are just now putting down roots. Areas to keep your eyes open to are biotech, driver-less cars, fuel cells, unmanned aerial vehicles, stem cells, and regenerative medicine (that is growing back the liver you ruined in quarantine!).

I recently read that the real estate cycle is like the five stages of grief: Denial, Anger, Bargaining, Depression, and Acceptance. While I agree wholeheartedly, I think these four quotes sum up the cycle ahead of us even better.

Stage 1: “You’re wrong about the market. My property’s worth more than you’re telling me it’s worth.”

Stage 2: “OK, I agree that the market has changed. But I still won’t sell my property unless you can get me more for it than what other people have already offered me for it.”

Stage 3: “We need to sell this property. Where do we need to price it to unload it?”

Stage 4: “I don’t think we’re ever going to see another great real estate market again.”

And Stage 4, of course, represents when we have probably hit the bottom of the market, and it is the best time to begin buying properties again.

And now from the other corner of our office, here are Nick’s numbers for the month;

Nick’s Numbers

Wow! I have a lot of charts this month, but they really tell a story and support what Don has written.

First, the commercial property price plunge by Green Street and Wolf Street.com. This is dramatic and rather startling – we have rolled back 5 years in a month or two.

Commercial Property Prices Plunge

Second is the London Groups chart that parallels Don’s stages of the real estate cycle.

Point of Maximum Financial Risk

Finally, the real estate life cycle chart should help serve as a map for your road ahead (we are blowing through some of these milestones quickly so be alert).

Real Estate Market Cycle

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).

Being as this is my fourth downturn, let me give you my first piece of advice. If you color your hair, stop it (at least now you can get it cut!). We need all that grey hair experience now! In an attempt to benefit from the collective whole of the over 3,000 readers of my monthly letter, I would like to ask you to e-mail me your ideas (what are you doing) and experience and successful strategies in these kinds of times. Help add to my list (10 things smart people did in the last downturn).

1.    Buy with positive leverage (cap rate higher than the interest rate).

2.    Buy A+ properties at distressed prices.

3.    Buy notes from lenders and foreclose and obtain an underlying asset.

4.    Buy freeway visible property

5.    Grow market share

6.    Sale Lease-backs to raise capital for Tenants





I will compile these and e-mail them back out (and post to LinkedIn). Remember, Together Everyone Achieves More (TEAM). The rallying cry now is to survive, to thrive! I hope you enjoy the story…

My Daddy’s Chair

A man’s daughter had asked the local minister to come and pray with her father.

When the minister arrived, he found the man lying in bed with his head propped up on two pillows. An empty chair sat beside his bed. The minister assumed that the old fellow had been informed of his visit.

“I guess you were expecting me,” he said.

“No. Who are you?” asked the father.

The minister told him his name and then remarked. “I saw the empty chair and I figured you knew I was going to show up.”

“Oh yeah, the chair.” said the bedridden man. “Would you mind closing the door?”

Puzzled, the minister shut the door.

“I have never told anyone this, not even my daughter,” said the man. “But all of my life I have never known how to pray. At church, I used to hear the pastor talk about prayer, but it went right over my head. I abandoned any attempt at prayer.”

The old man continued, “Until one day four years ago. my best friend said to me. ‘Johnny, prayer is just a simple matter of having a conversation with Jesus. Here is what I suggest. Sit down in a chair; place an empty chair in front of you, and with faith see Jesus on the chair, it’s not spooky because he promised, ‘I will be with you always’. Then just speak to him in the same way you are doing with me right now.'”

“So. I tried it and I have liked it so much that I do it a couple of hours every day. I am careful though. If my daughter saw me talking to an empty chair, she’d either have a nervous breakdown or send me off to the funny farm.”

The minister was deeply moved by the story and encouraged the old man to continue the journey. Then he prayed with him, anointed him with oil. and returned to the church.

Two nights later the daughter called to tell the minister that her daddy had died that afternoon.

“Did he die in peace?” he asked.

“Yes, when I left the house about two o’clock, he called me over to his bedside, told me he loved me and kissed me on the cheek. When I got back from the store an hour later, I found him dead.

“But there was something strange about his death. Just before Daddy died, he leaned over and rested his head on the chair beside the bed. What do you make of that?”

The minister wiped a tear from his eye and said, “I wish we could all go like that.”


Well, I was going to start off this month’s letter with an economist joke…but there was no demand… Maybe something more sobering from our own late great San Diego weatherman John Coleman, “The point to remember is that what the government gives it must first take away.”

The COVID-19 virus has careened around the globe. The pandemic will recede, but it will leave behind an economic disaster. I would tell you that we can now see the tunnel at the end of the light! The Great Lock Down is now leading us to the Great Re-set. The idea that laying on the couch to save the world is not the solution. We must have goals, as a country, and as individuals. As a runner, I know that the first rule of training is to have a goal. Working toward a target race can give you a tangible objective, a sense of purpose, and help fight the inertia to stay on the couch instead of going out for a run. Having sustained injuries (sometimes even life-threatening ones), I realize that you do fall back but then you improve. You do so by setting small goals, rebuild habits and sometimes being more creative (I dictate notes to myself on runs, I wore a snorkel in a triathlon because of my fear of the water). Sometimes you need the doctor or chiropractor to get you fixed. Sometimes you need to change your diet. In all cases, just like our future in the coming months, we must Adapt, Innovate, and Overcome! #beproductive.

Since I wrote my letter last month, we have lost 300,000 jobs in San Diego County! We moved from 4.8% unemployment to 20.6%. Costar reports that 17% of deals scheduled to close in April were called off. In San Diego that amounted to about $24 million in deals. Sellers have delayed disposition plans 1-2 quarters. Lenders are slowed as they mitigate risks in their portfolios. Plus, how do you value something if you are uncertain about rent being paid? The question is who is paying rent and how much. Who is forgiving rent and how much? Who is making their loan payment and who is not?

The questions to be asked and monitored now are;

  1. The percentage of tenants paying rent. The percentage paying full or partial rent?
  2. Months of lost income forecast?
  3. How long before leasing market returns and what rates will be when it does?
  4. Renewal probabilities for tenants?
  5. Which tenants will open first?
  6. What percentage of tenants will not re-open?

At this point, we are recommending to landlords and tenants to “Blend and Extend” as the way to give help on rent forbearance and get a longer lease term.

The Commercial Real Estate recovery is going to trail the economic rebound (as it did in previous downturns). It will be an 18-30-month recovery, depending on the sector. Industrial and logistics will recover quickest -6 to 12 months, followed by multi-family in about 18 months, retail, food, and hotel face a longer recovery of up to 30 months.

Ten-year treasuries sit at about .6% today but I expect they will be about 1% by year-end and back near 2.5% in 2021 and continue to 3% by 2022 and 2023. CPI will follow a similar path starting at 1% this year and growing to 2.5% in 2021 and 3% in 2022. Keep this in mind when signing leases with fixed increases vs. CPI increases.

Nick recently attended a Costar webinar and will share some of what he learned below.

Nick’s Numbers

The Costar State of the Market webinar slide deck below comes to you thanks to Joshua Ohl, Managing Analyst at Costar, with additional data supplemented by Oxford Analytics.

The most important takeaways from this webinar are rents are expected to fall across all asset classes for the remainder of 2020, leasing activity will be lower with new vacancies likely to rise, and investments are expected to slow as pricing/cap rates decline. These highlights are covered in greater detail on the slide deck below.

These somewhat obvious facts aside, it’s shocking to see how rapidly available data and the resulting models have been changing. The State of the Market webinar was presented over a 4-day period, and by the 4th presentation…Oxford Analytics had already supplemented NEW data.

retail rent growth forecast


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 impact on your business, tenants, or property (Nick Zech, 858-232-2100, nzech@cdccommercial.com).

The short term seems a bit bleak. It is a certainty that Coronavirus will change how we shop, travel, and work for years. Only one-quarter of CFO’s surveyed expect to return to the same level of office use. Telemedicine has blossomed. Online grocery shopping is up 100%. Online education has exploded (what if test scores go up?). Office electricity charges are down 25% but residential trash (and electricity) has exploded. Staples and Costco are out of office chairs countywide! Airplanes (when we start flying again) will be loaded from back to front (which I always thought was more efficient anyway). Expect more digital events. Expect e-sports to blossom (something is better than nothing).

Beyond the pent-up demand (I think barbers and beaches might be busy 24/7 when things open up), crises often produce above-average numbers of divorces, marriages, and births – all of which create demand for housing. I don’t know how soon people will want to flock to small overly dense urban housing. Maybe the new COVID generation may seek happiness in the suburbs (or further out) with the security of fast internet, a low-interest mortgage, the joy of a yard, and the cocoon of a self-driving car.

If you want some mid-month reading, look me up and connect on Linkedin. Later this month, I will be posting some interesting material on jobs lost vs lives lost and jobs lost vs shopping space loss and a bit of random information about the pianist turned politician Ignacy Jan Paderewski

In the month ahead while you are busy adapting, innovating, and overcoming, I hope that you also remember that success is failure turned inside out. The silver lining to the clouds of doubt. I also hope you enjoy the story…

Paderewski Concert

Wishing to encourage her young son’s progress on the piano, a mother took her boy to a Paderewski concert. After they were seated, the mother spotted an old friend in the audience and walked down the aisle to greet her.

Seizing the opportunity to explore the wonders of the concert hall, the little boy rose and eventually explored his way through a door marked “NO ADMITTANCE.”

When the house lights dimmed and the concert was about to begin, the mother returned to her seat and discovered that the child was missing.

Suddenly, the curtains parted, and spotlights focused on the impressive Steinway on stage. In horror, the mother saw her little boy was sitting at the keyboard, innocently picking out “Twinkle, Twinkle Little Star.”

At that moment, the great piano master made his entrance, quickly moved to the piano, and whispered in the boy’s ear, “Don’t quit. Keep playing.”

Then leaning over, Paderewski reached down with his left hand and began filling in a bass part. Soon his right arm reached around to the other side of the child, and he added a running obbligato.

Together, the old master and the young novice transformed a frightening situation into a wonderfully creative experience. The audience was so mesmerized that they couldn’t recall what else the great master played. Only the classic “Twinkle, Twinkle Little Star.”


A month ago, I thought that this month’s letter would start out with an April Fools’ joke and a few celebratory comments about me having survived 35 years in the commercial real estate business. Instead, a black swan event has taken us from a health crisis to a global pandemic to a financial crisis. These are unsettling times. The news is moving very fast and it is jarring to see schools, restaurants and stores closed or to stand in lines with six feet of spacing just to get into Costco. As I am writing this the government is stepping in with its patchwork of patches.

By now, I am sure you have been overloaded with news, talking heads, misinformation, and information bulletins. I will attempt to take a different tack. First, I will tell you that every economic shock leaves a legacy. The Coronavirus will be no different. Second, unlike previous disruptions, we know how this one will end. There are over 35 companies (many in San Diego) racing to develop a vaccine and treatment remedies according to The Guardian. Between us slowing the spread of the virus and promise of a vaccine, the population will eventually develop herd immunity. But it will take time.

As mentioned above in April, I will be celebrating 35 years in the business. I thought a little outline of that history might give you some perspective on our current time.

I graduated college in 1983 to work for General Dynamics making nuclear-tipped cruise missiles at the height of the cold war. In 1987 Regan said, “Mr Gorbachev tear down this wall by 1997 it had happened. In 1985, I bought a house and started into the 100% commissioned world of commercial real estate with John Burnham & Co (now Cushman & Wakefield). There I was told that times had been slow for the last seven years. I put my head down, was Rookie of the year, got married and had our first child (Nick who now works here). And I kept running (now with my wife at my side).

Two years into the business, we had the stock market crash of 1987, followed by the Savings and Loan crisis followed by a slumping recession. I kept working (finishing in the top three most years), buying some rental property and having three more children and oh yes, I kept running.

In 1996, I started CDC Commercial as we crawled out of the recession. In an era before iPhones and the cloud, I was working from home and had a private cloud server and had my phone forwarding to me wherever I was. In 2000, we all faced a different virus – the Millennial bug! That turned out to be a big nothing. However, 9-11-2001 brought buildings and our economy to its knees. Besides still running, I went out and sold apartments I owned (because they were in demand) and I bought a large custom home at a 30% discount (because they weren’t in demand at the time).

In 2007/2008, we got hit by the Great Recession. I had two kids in college and two still to go. What to do? Kept working and yes, kept running. And one more thing, in 2009 I hired Nick. I told him this would be the best time to learn the business.

As many of you know (if not google Don Zech Heart), in 2016 I had a heart attack followed ten days later by cardiac arrest. Each event had a 99% fatality rate. Me, I just keep on working and running.

Meanwhile, last month I was supposed to run a marathon in Hong Kong (to get my 5th of 7 continents) and then jump on a cruise ship to tour Asia. Needless to say, we didn’t go. Instead, we closed escrow on our big custom home, moved to a fully furnished townhouse at the beach where I continue to work every day and oh yes, keep running! I have entered the Singapore marathon in December and have reserved a cruise to Antarctica to run the Antarctica marathon in 2022.

So, as you know, I love my stories and the moral to this one is, when the going gets tough, the tough get going and Luck is when preparation meets opportunity.

Real Estate is dependent upon gathering and social interaction. The United States is now largely a service economy (100 million employed). The Coronavirus is hitting the service economy hardest. The pundits are questioning if this will be a “V” shaped recession with a deep dive and steep recovery or a “U” shaped one where we dive down and stay mired for years before recovering. I believe it will be more of a “W” shape. We have had the dive, will get a little bounce, bump along the bottom a bit and then a steep recovery from there as confidence returns. I am going to speculate this will take about 18 months. What should you do? As in the story above, keep running and keep being productive (if you can’t work, clean the garage!)

Nick’s Numbers

This month in lieu of my Numbers, we have created a Covid-19 Resource Page for owners and tenants. Many of you have asked for or received requests for rent relief, are looking for government resources or financing or are simply looking to learn what others are doing. We have assembled this page and posted it to our Web Site and will continue to update it as we receive worthy information to pass on. Please feel free to share with others or give us your thoughts or resources that we can post for all.


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).

In the months ahead, we at CDC are here to help you find what is safe and where there is an opportunity. Many of you will want to discuss what to do and how to handle no pay and slow pay tenants. It is important during times like these to realize that these are the times when generational wealth is created. It is also a time for all of us to pull together and not a bad time to have a little sense of humor…hope you enjoy the story…

Why Worry?

In life there are only two things to worry about:

Either you are well, or you are sick.


If you are well,

there is nothing to worry about.

If you are sick,

There are only two things to worry about:

Either you get well, or you will die.


If you are well,

there is nothing to worry about.

If you die,

There are only two things to worry about:

Either you will go to Heaven, or you will go to Hell.


If you go to Heaven,

there is nothing to worry about

If you go to Hell,

You’ll be so damn busy shaking hands with your friends,

That you won’t have time to worry!


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