02 Nov / 2017
- Fast Food Restaurant – 3 years (yes paying option payments monthly) and still waiting for city and one property owner approval.
- Sale of a restaurant/building as part of a larger development 4 ½ years. Waiting for city approval, land swap, lot line adjustment, buyout agreement of business.
- Charter school buying a building – 3 years. Plans, permits, CEQA, traffic study, board approval (seller & buyer), price changes, doubling of TI costs due to regulations.
- Raw land – 7 years. Rezone (4 years), marketing to find a buyer who can wait 2-3 years to get thru plans, permits, city requirements (undergrounding utilities – $1 mil, signal $250K, curbs, gutters, sidewalks – $1 mil).
- 1500 SF clothing store into a 1500 SF space – 3 ½ months. Drywall, paint, stairs to a mezzanine, 2 months in plan check, 45 days to build (inclusion of multiple inspections of the threshold being a ½ inch too high and requests for engineering redo of the stairs and storage mezzanine).
- Depreciation from 30 yr to 20 yr
- Estate tax elimination
- Eliminate interest deduction
- Reduce tax rate on pass-thru business income
29 Sep / 2017
Zen teaching: “Always remember you are unique just like everyone else.”
We seem to be living in a divided time unless you have just faced a natural disaster, then we seem to all band together regardless of color, politics or socio economics. In the past, we could escape to sports or Hollywood but alas even those have become politicized. After watching the “No Fans Left (NFL)” games last week, I was less surprised by the protests and backlash than I was by the amount of “Fake News.” One report was that the Steelers were suspended for three games. Another was that the L.A. Changers…I mean Chargers were on their way back to San Diego. So, is this Russian influence?
I am glad that we were able to survive the end of the world which was predicted for September 23rd. None the less, it has been disturbing to see the damage from hurricanes and earthquakes. God forbid what nuclear explosion or an EMP (Electromagnetic Pulse) could or would do. This is a good time in history to look at how and what your response can or would be to a cataclysmic event (can you secure your property? Tenant contracts available? Records backup? Insurance contacts available?) Think thru the scenarios and your responses to each.
Speaking of unwinding disasters. We all need to carefully watch the Fed to see how they are going to unwind its 4.5 trillion-dollar balance sheet. Or more simply said, time to pay off the credit cards. Or should we call it quantitative un-easing? Bottom line is that rates have to rise and that will cause some slowing. It isn’t the Fed raising rates as much as it is them selling the bonds the hold. The more they flood the market the higher rates have to go to attract enough investors.
The Fed says a tightening labor market has put pressure on wage costs (ie. higher wages). The Fed has hiked interest rates once this year and are expected to do so again. Yes Amazon (and others) use of automation looms as a long-term factor in restraining job and wage growth. Amazon has arguably done as much as the Chinese to kill jobs and keep a lid on inflation by enabling anyone with a cell phone to price or buy a product. Just as we are hearing about the end of the bricks and mortar mall, China’s Alibaba (their Amazon) is reported to be building its own 5-story shopping center called “more mall.” The idea is a mix of online, off-line, logistics and high tech all coming together. The new, “retail interactive store” is the wave of the future.
Commercial real estate price growth is expected to flatten in large markets but continue in smaller markets according to the latest quarterly report of the National Association of Realtors (NAR). Despite the rise in prices, investment sales volume is slowing down and the gap between ask and offer is widening (ie. people are offering less). Today, the negotiating process is tougher. Also, lender underwriting process is getting tougher and taking longer.
We are also noting on the leasing front that although vacancy continues to shrink deals are getting harder and harder. We are often in the situation where we have a square peg and a round hole. The tenant likes the building and needs 2500 SF but there is only 1300 SF. So we have to move the 1200 sf tenant next door. So, we end up doing two deals to get one. We are facing more and more situations where we have to move someone, find them temporary space while theirs is readied, sublease their old space etc.. If they want to build new, it is a 2-3-year process.. Often it seems a lot like pulling the thread on your sweater, the more you pull the worse the problem gets. This is how we try to be dealmakers not order takers. We pride ourselves on being excellent communicators and impeccably honest. We negotiate with confidence yet never forget the emotional implications of a sale or lease. We try to respond to challenges quickly, deliver disappointing news gently and never lose sight of those pesky details that can loom large if left undone. “Life stagnates without challenges…bring us your challenges.”
It was troubling that the NFL game in London last week had players standing for Hail to the Queen but taking a knee during the Star-Spangled Banner (perhaps they should have read this story or visited Lincoln’s statue in England!). Well before we tear down anymore statues or if you think you are unique or that this is a unique time in history, I hope that you enjoy the story and that you will be proud to be a red blooded American.
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’s 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 wide spread 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:
01 Sep / 2017
As many of you know or remember, I had a bit of a health scare last year at this time. I’m thrilled to report that a year later, the doctors have given me a clean bill of health, we’ve closed more deals than the previous year, my golf handicap is down 5 strokes and I have run 4 half marathons. I even had the honor to visit the Navy Seal Obstacle Course. The first thing I realized was that “America’s Finest” are stunningly gifted. They are world class athletes and I am proud to have them defending us. The second thing I realized was their success on the O-course is based on speed, force, strength (some bruises) but most of all a 100% commitment (That’s easy to give lip service to but you just try to jump at a rope from three stories with no net!).
Speaking of being proud and fit. I was excited to see Los Angeles announced as the host of the 2028 Summer Olympic Games. As in 1984, this will have a spillover effect into San Diego with many events actually being hosted here, not to mention tourism. In the immediate future, preparation to host the Olympics will proliferate and hasten the influx of funding for commercial real estate and infrastructure. Los Angeles (and Southern California) will finally be catapulted to being a world city (also called a global city or world center).
Speaking of visiting San Diego, passenger traffic at San Diego International Airport rose 5.3% from a year ago for the January-to-June period. For the month of July year over year, the passenger count was up 11.1%. Passenger traffic is a strong indicator of a healthy economy.
So Charles Schwab recently asked how much does it take to be wealthy in San Diego? The answer – $2.7 million.
The top five definitions of wealth among 500 San Diegans surveyed are:
- Having a lot of money (30 percent)
- Enjoying life’s experiences (25 percent)
- Being able to afford anything they want (24 percent)
- Living stress-free and having peace of mind (19 percent)
- Having loving relationships with family and friends (13 percent)
While 36 percent of those surveyed say they are already millionaires or believe they can reach that level, the majority (64 percent) say they don’t have any hope.
When asked to compare two opposing ideas of wealth at a more personal level, San Diego residents lean into things that money can’t buy:
- Fifty-seven percent say wealth is about having gratitude vs. having money (43 percent)
- Sixty-six percent equate wealth with having good physical health vs. having lots of money (34 percent)
- Seventy-four percent believe wealth is about spending time with family now vs. leaving an inheritance for them (26 percent)
Well the first step to becoming wealthy is to have a job and the economy is certainly helping that by adding another 209,000 in July. Locally, however, even though there was job growth, the restaurant industry had its first drop since 2010. This is largely due to the minimum wage increase to $11.50 an hour and influx of more efficient menu ordering (iPads, robots no table service etc…).
Speaking of jobs – Steve Jobs that is – it is hard to believe that he brought us the first iPhone just 10 years ago and the galactic shift it has caused in our lives over that period. Having just read his biography I was struck by how much of a pot smoking, persistent, charming jerk he was. Those around him used a term that came from Star Trek to describe him – they said he had a Reality Distortion Field (RDF). In Star Trek, the menagerie episode, the aliens created their own new world through mental force. In Job’s case he used it to distort peoples sense of proportion and scale of difficulty and make them believe that the task at hand was possible. He would also use RDF to appropriate other’s ideas and repurpose it as his own weeks later.
Now Apple is on to the iPhone 8 and driver-less cars. Projections are 54 million on the road by 2035. While countless companies are trying to prove that cars can drive themselves, I am more interested in what we’ll actually do while the car is driving us around. Self-driving cars will allow you to eat, talk on the phone and do your make up (or shave). Actually, people do that now so why wouldn’t we want help. Geez, I still remember my dad telling me a car radio was a distraction.
For those of you who like more number and details you should really enjoy the UCLA Anderson school/Allen Matkins, California Commercial Real Estate Survey and Index – The Turn of the Cycle. For those who want a simple graphic of where we stand you need to go no further than the San Diego Housing Inventory and Price Index Charts below.
Let me be the first to tell you that trees don’t grow to the sky and markets walk upstairs and jump out of windows.
Speaking of trees, we have a big problem in San Diego and you need to watch for it at your house and commercial properties. Insect and disease are hitting sycamores and willows throughout Southern California. I am talking about 100,000 willows in just the SD County Tijuana River Valley that have died. The shot hole borer beetle could kill could kill as many as 27 million trees in SoCal. That’s 8% of the regions trees. This starts having an effect on weather, property values, HVAC costs and wildlife. The replacement cost alone could be 36 billion. Watch for Oak Borer Beetle, Asian Citrus Psyllid, Glassy Winged Sharpshooter (oleanders), South American Palm Weevil. If you have trees – watch them, treat them and replace them if they die.
Now the “other green,” Pot. Despite Steve Jobs smoking lots of it and it becoming legal in California, owners need to take note. First, if you have a pot use on your property, it probably voids your loan and certainly makes you unable to finance or refinance one. Second, the San Diego appellate court recently affirmed a $175K judgement against a Landlord for allowing a dispensary on his property. The city attorney stated, “Landlords who rent to operators of illegal dispensaries have committed a crime and will be held accountable.”
I have come to the pinnacle of success in business.
In the eyes of others, my life has been the symbol of success.
However, apart from work, I have little joy. Finally, my wealth is simply a fact to which I am accustomed.
01 Aug / 2017
Since the late 1960s American astronauts and Russian cosmonauts have used Fisher’s pens. In fact, Fisher has created a whole line of space pens. A newer pen, called the Shuttle Pen, was used on NASA’s space shuttles and on the Russian space station, Mir. Of course, you don’t have to go to space to get your hands on a space and earthbound folks can own one for the low, low price of $50.00.
05 Jul / 2017
It seems that Jeff Bezos has experienced the same problem as many Amazon customers with having Echo ordering inappropriately:
If you really like charts, numbers and big data then you will really enjoy the Cycle Monitor by Dividend Capital Research and Glenn Mueller, PHD.
- Our corporate cultures or perfectly aligned. The New York Times revealed that every Amazon employee has cried at their desk, and I personally made a Whole Foods employee cry when they couldn’t correctly identify their process for ensuring single-source coffee beans throughout the roasting process. It was an uncomfortable 38 minutes for both of us, but I think an experience so many of you can relate to.
- Improved Echo functionality. Whole Foods has maintained a laser-like focus on organic foods and sustainable facilities and I’m excited to bring that same vision to Echo. Starting next week, when customers ask their Echo to order non-organic food products that receive a 12-minute lecture on the benefits of organic and local source products while our top-notch product matching software will send them the closest available organic item. Users on our website will find the “Customers Also Bought…” section replacing unhealthy items with notes such as, “Cookies That Went Straight to Their Thighs” and “Beef Produced By Clearcutting Rain Forest.” Needless to say, those products will not be available for purchase.
- Drone changes. All Amazon drone teams will immediately switch to bio-fuels rather than battery packs.
- Senior leadership. Once the acquisition is complete, John Mackey will take a new position as financial analyst and social media community outreach for the Washington Post. Synergy!
- Location changes. Since Whole Foods is headquartered in Austin, Texas, I’ve asked EM to build the first hyperloop route between our offices here in Seattle and the Blue Bubble of Texas. All Amazon/Whole Foods employees Will office in Austin for the one week of good weather they have in late February, and in Seattle for the one week of sunshine we have an August (or May… or October… or whenever). The remaining 50 weeks of the year are up to you. Because I believe all Amazon employees should be free to cry at their desk no matter where that desk is located.
- Product expansions. Amazon will soon carry all of the 365-branded products Whole Foods has developed in all Whole Foods stores we’ll be adding aisles for garden equipment, household electronics, sportswear, handbags, pet supplies, golf clubs, video games, plumbing supplies, luggage, headphones, and climbing gear. To start.
- Cruelty free. We will be adopting Whole Foods policy of only purchasing products that are certified cruelty free. Please note this does not apply to any software we developed ourselves.
02 Jun / 2017
According to her biography, Barbara Millicent Roberts grew up in the mythical town of Willows, Wisconsin. For a period of time she attended Willows High School but later moved on to Manhattan International High School in New York City. Over the years, she has had more than 40 pets including cats, dogs, various horses, a zebra, a lion cub, and a panda. She has held dozens of professional positions including doctor, pilot, astronaut, veterinarian, and flight attendant. Her taste in cars is legendary. Her favorite color is bright pink. That color has become known as Barbie Pink. On March 9th, the folks at Mattel celebrated Barbara Millicent “Barbie” Roberts’ 58th birthday. No matter what you think about this cultural icon, you have to admit that she’s looking good for her age.
The ubiquitous Barbie doll made its debut on March 9, 1959, at a toy fair in New York City. She was an instant hit. About 350,000 dolls were sold in the first year of production. Since then, it is estimated that more than a billion Barbies have been sold worldwide.
Negotiating the emotional minefield between whims and dreams is a difficult task for any parent (or consumer for that matter). The marketing machines of companies flash shiny objects in our eyes forcing us to make tough decisions, ones that don’t always leave us happy, satisfied or popular.
I once read that in a grocery store there are over 100 salad dressing choices. With so many to choose from we are never able to be satisfied since we can’t try all of them. Whereas with only 3 or 4 choices we can be sure of our favorite. Could this be the root of IN-N-OUT Burgers grand success?
I remember a bumper sticker that used to say “I want to be like Barbie…that bitch has everything.” Well before you become rich you must decide whether you want to be secure, comfortable, or rich. These are called core values, or the reasons you want to invest.
The first reason most people invest is because they want to feel more secure That’s why Social Security or a retirement plan is very popular with people whose core value is the need for security. Security is a very important aspect of investing. You don’t want to be a destitute out on the streets with nobody taking care of you.
Unfortunately, many people who are counting on government or their employer to provide for their retirement will be sorely disappointed. A person who invests to be secure or values security will always say, “Well, I have to have a roof over my head and I need to put food on my table.” Their whole orientation is security or survival.
The next level above security is to be comfortable. They say, “I just want…” They want the house, the second vacation house, or the extra car. They want to take a cruise every now and then. Their highest priority is the need to be comfortable.
The third core value that motivates people is wanting to be rich. Most people dream of becoming rich but if the dream of becoming rich disturbs any of the lower core value of security or comfort, they’ll forsake being rich.
They’ll dream of being rich but if it means giving up a safe, secure job, then being rich remains a dream. If it’s just too much trouble to become rich and they’re comfortable at the moment, then they won’t pursue becoming rich. Those are the three core emotional reasons why certain people chose certain investment paths. Money is just an idea. It’s a formulation of the mental, emotional, and spiritual ideas inside of you that determine what you ultimately become. In the end, you need to fight for the future you want.
Today Big Data is to commerce what oil was in the past. Data helps retailers interpret what consumers will buy and when and for how much. The data comes from everywhere. Indoor tracking systems like Bluetooth beacons or Philips lighting or facial recognition. From web browsing and app use. From transaction data aggregated by Visa and MasterCard. Even from Uber, who knows that riders spent 2 billion directly after getting out of an Uber. How about the father who got a call congratulating him on becoming a grandfather before his daughter told him she was pregnant – all courtesy of Big Data and browsing history!
In 1890, Samuel Warren wrote a paper called, “The Right to Privacy” and in it he cited “recent inventions and business methods” – including instant photography and tabloid gossip – “have invaded the sacred precincts of private domestic life.” In the paper, they called for the “right to be left alone” and what they called, “the right to one’s personality.”
Although technology may be making our lives more public than we want, loneliness seems to be an epidemic. The number of Americans who say they have no close friends has nearly tripled in the last decade. While technology offers us an easy way to keep in contact with friends and meet new people, technology encourages shallow conversations that can distract us from meaningful, real life interactions. Smartphones have transformed grocery lines from a chance for small talk with neighbors to an exercise in email checking. Starbucks has sealed the fate of the coffee shop as nothing more than a place of mutual isolation.
So what does this have to do with commercial real estate? Shopping centers? Office buildings? Well let me tell you. Successful real estate in the future is social real estate. Location, location, location brings new meaning in a social setting. The best location is where people will want to live, work and play. Shopping centers will be social centers.
Although you may buy your Barbie dolls now on Amazon, most of you still go to the grocery store to buy your groceries. The grocery store has been largely immune to the ravages of online shopping. But a war is coming. Beside the current intense competition of Vons, Ralphs, Wal-Mart, Target and Costco, you have the growth of niche players like Trader Joe’s, Whole Foods, and Sprouts. Soon you will see the growth of ALDI, LIDL and Grocery Outlet. Not to be outdone, Amazon is stepping up its grocery delivery business and is now rolling out stores that will just deduct your purchase from your credit card as your walk out the door – no cashier needed. To make things harder, struggling brick and mortar retailers such as dollar stores and pharmacies have increased their inventory of grocery items (can you image Amazon buying Rite-Aid or CVS? Amazon delivering your drugs and an Amazon store on every corner.)
Like the grocery business, our activity has increased but business has gotten harder to close. Although we are working hard to get rich we are trying to be happy being satisfied. We have ventured into the Big Data market and done a Barbie analysis of the San Diego market (I apologize ahead if you or your neighborhood is insulted).
La Costa Barbie – this princess Barbie is only sold at the brand new La Costa Forum. She comes with an assortment of Kate Spade handbags, a Lexus SUV, a long-haired dog named Honey, and a cookie-cutter house. Available with or without tummy tuck and face lift. Workaholic Ken sold only in conjunction with “augmented” version.
Rancho Bernardo Barbie – this modern-day homemaker Barbie is available with Ford Windstar minivan and matching gym outfit. She gets lost easily and has no full-time occupation or secondary education. Traffic-jamming cell phone included, headset sold separately.
Escondido Barbie – this recently paroled tattooed and nose pierced Barbie comes with a 9mm handgun, a desert/river ready lifted Chevy truck with dark tinted windows, and a methlab kit. This model is only available after dark and can only be paid for in cash, preferable in small, untraceable bills. Unless you are a cop, then we don’t know what you’re talking about.
Del Mar Barbie – this yuppie Barbie comes with your choice of BMW convertible or Hummer H2. Included are her own Starbucks cup, credit card, and a country club membership. Also available for this set are Shallow Ken and Private School Skipper. You won’t be able to afford any of them.
Santee Barbie – this pale model comes dressed in her own Wrangler Jeans, two sizes too small, a NASCAR shirt, and Tweety Bird tattoo on her shoulder. She has a six-pack of Coors Light and a Hank Williams, Jr CD set. She can spit over 5 feet and kick mullet-haired Ken’s ass when she is drunk. Purchase her pickup truck separately and get a confederate flag bumper sticker absolutely free.
La Jolla Barbie – this collagen injected, rhinoplastic Barbie wears a leopard-print bikini outfit and drinks cosmopolitans while entertaining friends at the beach house. Percocet prescription available.
Lakeside Barbie – this tobacco-chewing, brassy-haired Barbie has a pair of her own high-heeled sandals with one broken heel from the time she chased Beer-Gut Ken out of Lemon Grove Barbie’s house. Her ensemble includes low-rise acid-washed jeans, fake fingernails, and a see-through halter top. Also available with a mobile home.
Leucadia Barbie – this doll is made of actual tofu. She has long, straight, brown hair, archless feet, hairy armpits, no makeup, and Birkenstocks with white socks. She smokes good sinsemilla buds and prefers that you call her “Willow.” She does not want or need a Ken doll, but if you purchase two Leucadia Barbies and the optional Volvo wagon, you get a coupon for a free wheat-grass smoothie at any Whole Foods Market.
National City Barbie – this Barbie now comes with a stroller and infant doll. Optional accessories include a GED and bus and trolley pass. Gangsta Ken and his ’79 Caddy were available, but are now very difficult to find since the addition of the infant.
Chula Vista Barbie – this Spanish-speaking-only Barbie comes with a 1984 Toyota with expired temporary plates and three baby Barbies in the back seat, but no car seats. The optional Ken doll comes with a pickup truck loaded 10-feet high with mattresses. Green cards are not available for Chula Vista Barbie or Ken.
Hillcrest Barbie/Ken – this versatile doll can be easily converted from Barbie to Ken by simply adding or subtracting the multiple “snap-on” parts. Bonus: free rainbow flag with proof of purchase sticker.
01 May / 2017
Customer service is always a tricky thing. In today’s world of instant communication and streaming video it is increasingly challenging – take the United Airlines debacle as an example. That was tough to see but especially for me who grew up in a United Airlines family – dad spent 30 years trying to make “the friendly skies of United.”
In the commercial brokerage world, I have found that the best brokers are, first and foremost, excellent communicators and impeccably honest. They negotiate with confidence yet never forget the implications of a sale or a lease. The best brokers are flexible and creative, yet practical. They respond to challenges quickly, deliver disappointing news gently and never lose sight of those pesky details that can loom large if left undone.
Truly, brokers need to be nearly superhuman! With typical aplomb, the best salespeople don’t linger on this fact. They just go out and do the work, day in and week out. Perhaps the dedication is most important of all. Some say “passion” is an overused word. However, it is critical in commercial real estate sales and leasing. Passion – not money – is the fuel that keeps us going and is the thing that pulls us out of bed each morning.
Well, rising rates and a wait-and-see stance regarding tax reform, regulatory easing and infrastructure spending proposed by the Trump Administration have created a pause in the commercial property sales market. Sales declined 15% in the fourth quarter of 2016 and continued slowing in the first quarter of this year. Although rates rose, lender spreads tightened, absorbing much of the real increase. As rates continue to increase they hopefully will do so in line with job and rent growth. Despite the slowing of sales, occupancy levels continue to rise in most product types (apartments, industrial, office and in many cases retail). As these markets tighten, terms (free rent, TI’s, etc.) and rent will rise. Can you spell I-N-F-L-A-T-I-O-N? In fact, Zillows recently reported that a San Diego apartment renter will need a $648 a year raise just to keep up with rent increases.
New construction will satisfy some demand and mitigate some increases. However, keep in mind something I learned early in real estate, “value of existing real estate increases to reach the replacement cost.” In other words, when rents or sales get too high, people will build new. So as construction costs rise, existing rents and sales will also rise. Can you spell I-N-F-L-A-T-I-O-N?
Now, speaking of construction costs, the General Contractors of America has reported double-digit increases for key construction materials. Among the most widely used materials in construction, there were price increases over the past 12 months totaling 19% for steel mil products, 17% for copper and brass, 8.8% for aluminum, 7.6% for gypsum products such as wallboard and plaster, and 7.3% for lumber and plywood. In addition, the price index for diesel fuel, which contractors use directly and also pay for through surcharges on the thousands of deliveries to construction sites, soared 35%.
Of the top 10 states with the most new construction, California was #3 behind New York and Texas.
Of concern is the accelerating demise of the retail industry. The Wall Street Journal reported that since January, 2,880 retailers have shuttered – Bebe, Radio Shack, Rue 21, Payless Shoes, Limited… On top of that mergers like Walgreens and Rite Aid will cause more than 1,000 stores to be closed or retenanted.
Jamie Dimon, Chase Bank CEO, says, “The retail business has always been violent and volatile, with half the retailers that were around 10 years ago now gone.” Other say that the exit of one retailer can present an opportunity to boost rents and lease space to a higher-quality store. Still others say we are over-retailed and under-demolished, presenting their case for redevelopment. I think the key in the future for retailers is to have great customer service, a great physical and online experience (Home Depot and Road Runner Sports are classic examples of this). If you are a property owner, you have to realize you no longer own a shopping center or an office building but instead an “Activity Center” or “Community Center” and you need to manage it as such.
So like most things in life, it comes down to “people skills” and making people happy. Whether you are an airline, a broker or property owner, customer service is king. I hope you enjoy the story and in some small way it makes up for having had to watch countless reruns of someone being dragged off an airplane.
My lead flight attendant came to me and said, “We have an H.R. On this flight.” (H.R. Stands for human remains.)
“Are they military?” I asked.
‘Yes’, she said.
‘Is there an escort?’ I asked.
‘Yes, I already assigned him a seat’.
‘Would you please tell him to come to the flight deck. You can board him early,” I said…
A short while later, a young army sergeant entered the flight deck. He was the image of the perfectly dressed soldier. He introduced himself and I asked him about his soldier.
The escorts of these fallen soldiers talk about them as if they are still alive and still with us. ‘My soldier is on his way back to Virginia,’ he said. I asked him if there was anything I could do for him and he said no. I told him that he had the toughest job in the military and that I appreciated the work that he does for the families of our fallen soldiers. The first officer and I got up out of our seats to shake his hand. He left the flight deck to find his seat.
We completed our pre-flight checks, pushed back and performed an uneventful departure. About 30 minutes into our flight I received a call from the lead flight attendant in the cabin. ‘I just found out the family of the soldier we are carrying, is also on board’, she said. She then proceeded to tell me that the father, mother, wife and 2-year old daughter were escorting their son, husband, and father home. The family was upset because they were unable to see the container that the soldier was in before we left.
We were on our way to a major hub at which the family was going to wait four hours for the connecting flight home to Virginia. The father of the soldier told the flight attendant that knowing his son was below him in the cargo compartment and being unable to see him was too much for him and the family to bear. He had asked the flight attendant if there was anything that could be done to allow them to see him upon our arrival. The family wanted to be outside by the cargo door to watch the soldier being taken off the airplane. I could hear the desperation in the flight attendants voice when she asked me if there was anything I could do. ‘I’m on it’, I said. I told her that I would get back to her.
Airborne communication with my company normally occurs in the form of e-mail like messages. I decided to bypass this system and contact my flight dispatcher directly on a secondary radio. There is a radio operator in the operations control center who connects you to the telephone of the dispatcher. I was in direct contact with the dispatcher. I explained the situation I had on board with the family and what it was the family wanted. He said he understood and that he would get back to me.
Two hours went by and I had not heard from the dispatcher. We were going to get busy soon and I needed to know what to tell the family. I sent a text message asking for an update. I Saved the return message from the dispatcher and the following is the text: ‘Captain, sorry it has taken so long to get back to you. There is policy on this now and I had to check on a few things. Upon your arrival, a dedicated escort team will meet the aircraft. The team will escort the family to the ramp and plane side. A van will be used to load the remains with a secondary van for the family.
The family will be taken to their departure area and escorted into the terminal where the remains can be seen on the ramp. It is a private area for the family only. When the connecting aircraft arrives, the family will be escorted onto the ramp and plane side to watch the remains being loaded for the final leg home. Captain, most of us here in flight control are veterans… Please pass our condolences on to the family. Thanks.
I sent a message back telling flight control thanks for a good job. I printed out the message and gave it to the lead flight attendant to pass on to the father. The lead flight attendant was very thankful and told me, ‘You have no idea how much this will mean to them.’
Things started getting busy for the descent, approach and landing. After landing, we cleared the runway and taxied to the ramp area. The ramp is huge with 15 gates on either side of the alleyway. It is always a busy area with aircraft maneuvering every which way to enter and exit. When we entered the ramp, and checked in with the ramp controller, we were told that all traffic was being held for us. ‘There is a team in place to meet the aircraft’, we were told. It looked like it was all coming together, then I realized that once we turned the seat belt sign off, everyone would stand up at once and delay the family from getting off the airplane. As we approached our gate, I asked the copilot to tell the ramp controller we were going to stop short of the gate to make an announcement to the passengers. He did that and the ramp controller said, ‘Take your time.’
I stopped the aircraft and set the parking brake. I pushed the public-address button and said, ‘Ladies and gentlemen, this is your Captain speaking I have stopped short of our gate to make a special announcement. We have a passenger on board who deserves our honor and respect. His Name is Private XXXXXX, a soldier who recently lost his life. Private XXXXXX is under your feet in the cargo hold. Escorting him today is Army Sergeant XXXXXXX. Also, on board are his father, mother, wife, and daughter. Your entire flight crew is asking for all passengers to remain in their seats to allow the family to exit the aircraft first. Thank you.’
We continued the turn to the gate, came to a stop and started our shutdown procedures. A couple of minutes later I opened the cockpit
door. I found the two forward flight attendants crying, something you just do not see. I was told that after we came to a stop, every passenger on the aircraft stayed in their seats, waiting for the family to exit the aircraft.
When the family got up and gathered their things, a passenger slowly started to clap his hands. Moments later more passengers joined in and soon the entire aircraft was clapping. Words of ‘God Bless You’, I’m sorry, thank you, be proud, and other kind words were uttered to the family as they made their way down the aisle and out of the airplane. They were escorted down to the ramp to finally be with their loved one.
Many of the passengers disembarking thanked me for the announcement I had made. They were just words, I told them, I could say them over and over again, but nothing I say will bring back that brave soldier.
I respectfully ask that all of you reflect on this event and the sacrifices that millions of our men and women have made to ensure our freedom and safety in these United States of AMERICA.
20 Apr / 2017
Freestanding Office Building
1725 S. Escondido Blvd, Escondido, CA – $500.00/month (includes utilities)
Rent includes utilities. Small, quiet professional office. Some covered parking. Plenty of on-site parking. Easy access to I-15.
For more information contact:
19 Apr / 2017
Dunn Edwards Paint Center for Lease – $1.50 psf NNN
505 N Broadway, Escondido, CA 92025 – End Cap Space
Great street visibility. Easy access to Highway 78. Window frontage. Remodeled strip center.
For more information contact:
14 Apr / 2017
Retail Strip Center in Norco for Sale – Fully Leased
313 6th Street, Norco, CA 92860 – Investment property located at signalized intersection.
100% leased investment property. All tenants with 3-5+ years remaining on lease. Highly trafficked strip center. Approximately 6,000 sf with dedicated parking lot. 5.75% CAP. Property will be delivered clear of any existing debt at COE.