Blog Archive

Monthly Letter

The first Independence Day celebration took place in Philadelphia on July 8, 1776. This was also the day that the Declaration of Independence was first read in public after people were summoned by the ringing of the Liberty Bell. Today on the 4th of July, The Liberty Bell is “tapped” 13 times in memorial of the original 13 colonies.

Democracy has always been a successful system because it is the fastest way to process data. Now democracy is being threatened by technology because technology can process data faster than Democracy.

On July 5th, 1994, Jeff Bezos incorporated a company in Washington State by the name of Cadabra Inc. A few months later he changed the name to Inc because a lawyer misheard the original name as “Cadaver.” In September of 1994, Bezos purchased the domain name and briefly thought about naming the online business Relentless. The domain is still owned by Bezos and redirects to Bezos picked Amazon because it was exotic and different just as he envisioned the internet. The Amazon River was the biggest river in the world, and he planned to make the biggest bookstore in the world (talk about exceeding expectation!). Funny, they used to ring a bell after every sale (they abandoned that idea quickly!).

Well at the half year mark, I am pleased to note that we have had a great first half of the year. But I have to say it has been highly unorthodox and I wish I could explain it in any other way then being “relentless.” To illustrate my point let me highlight some of the deals we have done.

  • We had a church go out of business and found a church to buy the building.
  • Despite COVID closures we have done 4 or 5 restaurant deals.
  • We have sold two motels (had not sold a motel in 36 years before that). One to re-purposed as homeless/transitional housing. The other to be torn down and rebuilt as condos.
  • We had a tech company downsize from 7000 sf to 1000 sf over the last 18 months as they moved everyone to work from home. Amazingly, all of their square footage was absorbed immediately by an engineering company and administrative offices. Meantime vacancies from 18 months ago stayed un-tenanted.
  • We have had users buying buildings taking advantage of low rates.
  • We have had lots of 1031 buyers triggered by selling properties. Many trying to position if capital gains, step up in basis or 1031’s gets axed by new legislation.
  • Leasing and development have struggled.

Meantime, we just keep our heads down and work relentlessly to solve the challenges that get thrown at us. I was looking at our website last week ( and I re-read the header which says, “A Relationship is more than a history of doing business. It is a link based on mutual understanding and trust.” It is with great pride that we have had and known so many of our clients for 25-35 years. I also reflected on the fact that I have only had two barbers in 36 years. I have had the same bank account for 44 years (the bank has changed twice but not me!). I have had the same cell phone carrier for the last 25 years (carrier has been merged three times but not me). I had the same gardener for 20 years. Relentless relationships I guess that is us!

As employers and employees come back to the office, some things will change. Combining work from home and in office will be the hybrid model for many. Office employers will have to work hard to entice employees back to the office. Hold onto your hat but here are some of the ideas being tried, including, wellness and yoga studio, interactive equipment like Peloton bikes, 1Fit treadmills. Juice and coffee bars with lounge seating and breakout areas, outdoor areas for communal meetings, dog friendly offices or patios, mother’s rooms, daycare, and concierge to help manage daily tenant needs. If you would like to look at what this looks like check out The Alexander.

I do not know about you but my experience with companies with employees working from home has been just plain stupid. Examples:

  • Called a company to request some work in North Escondido. They then asked what city?
  • It has taken me 14 months with Fidelity to straighten out an error. Each time I call I get a different person who takes five minutes to read the file history who then say they must call an analyst. I ask if I can speak with the “analyst” or have an email. Of course, neither can be accommodated.
  • I ran into a leasing agent on a deal who said he does not do leases.
  • I saw where a bunch of French soccer fans showed up in Bucharest instead of Budapest for a soccer game.

Ok, the last one was not work from home related but still has to classify as “COVID Stupid!”
The other thing that is driving me crazy is inflation. I am sure hoping what we are seeing is transitory and caused by supply chain disruptions. The Fed believes inflation will cool down in 2022 when the economy if fully open. I’m worried that you can’t increase the national debt like we have and keep a lid on inflation.


This month I have two charts to look at. The first illustrates the point Don makes above about inflation. The second shows just how much our National Debt has grown.

highest inflation rate since sep 2008

150 year view of the U.S. national debt

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,

Hope everyone has a great 4th of July and are proud to be Americans. Hope you enjoy the story…

Robert Whiting,

An elderly gentleman of 83, arrived in Paris by plane.

At French Customs, he took a few minutes to locate his passport in his carry on

“You have been to France before, monsieur?” the customs offer asked sarcastically.

Mr. Whiting admitted that he had been to France previously.

“Then you should know enough to have your passport ready.”

The American said,

“The last time I was here, I didn’t have to show it.”

“Impossible…Americans always have to show their passports on arrival in France!”

The American senior gave the Frenchman a long hard look. Then he quietly explained,
“Well, when I came ashore at Omaha Beach on D-Day in 1944 to help liberate this country, I couldn’t find a single Frenchmen to show a passport to.”

You could have heard a pin drop.


How good can it get! The Stock Market is through the roof. The Padres are in contention, local hero Phil Mickelson becomes the oldest golfer in history to win a major and the U.S. Open comes to San Diego this month. On top of all that, lipstick sales are up 80%!

I recently visited downtown San Diego’s Port Side Pier project, the Padres were in town and tourists and fans were in the streets, in lines and spending money despite the 50% capacity caps (at least until June 15). The question remains, as masks come off and caps lift, foreclosure stops, evictions start, and unemployment and PPP come to an end, will the boat stay afloat, and the music keep playing?

Thus, far this year existing SFR inventory is down 56% and the median SFR price is up 22%. Yet, 5.2% of all mortgages are delinquent. Ten percent of all American families are at risk of foreclosure or eviction. The average renter who is behind is over three months late and owes over $5,000 in rent and utilities – how does $1,400 fix that?

The question I keep asking myself is what does it sound like when the music stop playing? What does a stimulus-free environment look like? When does assessing and understanding what real value is win out over FOMO (Fear of Missing Out)? The Great Recession of 2008 was fundamentally about two things?

  1. Leverage illiquid products, that were poorly understood, which blew up and in turn,
  2. Led to a lack of trust across the board, which spilled over into the “real economy.”

Between 1990 and 2000, 4700 companies went public through the IPO process. There are now over 5000 cryptocurrencies that are created on the ICO – an initial coin offering. It is crazy but at the height of tulipomania in 1637, a tulip bulb was worth the value of a house. It is worth noting that in 2013, the head of the central bank in the Netherlands said that bitcoin was worse than tulipomania when bitcoin was …$50…as of this writing it is …$38,000, a month ago it was double that. Some Bitcoin speculators are leveraged 100:1!

While commercial real estate investment property has increased a comfortable 6.7% over the past 12 months, the crazy “virtual property world” has seen astronomical growth. Games like Decentraland and Upland allow you to buy virtual property with cryptocurrency like bitcoin, UPX and NFT (nonfungible tokens). If you haven’t heard about this phenomenon, it is where players can buy something like San Fransisco’s Ferry building that is worth almost $300 million in real life, for as little as $8,321.00 . . . for the virtual version! Sure, you can charge game players to visit or tenants to rent space. But nobody seems to be too concerned that a virtual property drops to zero when people lose interest or move on – can I say Betamax or floppy disk or CD. I recently heard a quote from one of these virtual property company representatives who said, “It is not necessary for investors to understand how to play the virtual worlds out there, this is all handled by us.” May I refer you to 2008 recession cause #1above!

Although I think it was more noteworthy that Phil Mickelson was the oldest player in the history of golf to win a major, for the first time in 85 years Monopoly is changing its community chest cards. Cards about beauty contests, holiday funds and life insurance are soon to be replaced with things like, shop local, rescue a puppy and help your neighbor.

Speaking of neighbors, have you noticed you have less of them? California lost population for the first time in 171 years since it has been a state. San Diego is not immune to this trend – In 2019, the county lost 2000 residents growing back 1968 residents in 2020. I will leave it to Nick and his numbers to better illustrate the issue.


This month I have two charts to look at. The first illustrates the point Don makes above about our slowing population growth. The second shows how much worse the migration is if you take away the natural increase (babies being born).

population growth in san diego

San Diego population growth make up

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,

If you had not read, there were two blockbuster deals done in San Diego last month (I would have settled for a commission on just one of them!). Blackstone Group agreed to buy 5800 apartment units for over a billion dollars adding to their 1000-unit portfolio in San Diego not to mention owning the Hotel Del and Legoland (a big vote of confidence in San Diego.) Elsewhere, Realty Income Corporation (NYSE:0) bought VEREIT another REIT for $50 billion dollars (yes, that is with a “b”!). Although not in the billions, we have seen a recent surge in activity. Not all of it is positive as we see companies and owners selling or exiting leases and other moving into smaller spaces or backfilling recently vacated property. All of this is causing us to be nimble and creative as we try to fit round pegs into square holes.

We strive to be heroes in this bifurcated marketplace. Real heroes are people who see things for what they are and respond regardless of their environment and what others may think. I hope you enjoy this months’ story…play ball!

August 8, 1982. A line drive foul ball hits a four-year-old boy in the head at Fenway. Jim Rice, realizing in a flash that it would take EMTs too long to arrive and cut through the crowd, Rice sprang from the dugout, and scooped up the boy. He laid the boy gently on the dugout floor, where the Red Sox medical team began to treat him.

When the boy arrived at the hospital 30 minutes later, doctors said, without a doubt that Jim’s prompt actions saved the boy’s life. Jim returned to the game in a blood-stained uniform. A real badge of courage. After visiting the boy in the hospital, and realizing the family was of modest means, he stopped by the business office and instructed that the bill be sent to him.

This is what a sports Hero looks like!


“It is impossible to increase taxes. Disastrous to keep on borrowing. And inadequate to merely cut expenses.” ~ Charles Alexander de Cologne, French Finance Minister 1786

Why do you have to “put your two cents in … but it’s only a “penny for your thoughts?” Where’s that extra penny going?

The above question and many others have me thoroughly perplexed these days.

Last month I spoke about accomplishing the impossible of putting toothpaste back in the bottle. This month I was able to accomplish another impossibility! I was able to be in two places at one time! Yes, I logged into a Zoom conference call on my phone and a Zoom class on my laptop. So, through the magic of technology, I was effectively in two places at one time! Now many of you will rightly argue that I could not possibly give both Zoom calls my undivided attention. I agree! Unfortunately, this seems to be the hyper state that many of us are living in today. I call it the state of perpetual distraction. It has been proven that this state even causes our breathing to become shallow and erratic. It is also known as “email apnea” or digital exhaustion.

Well, I am glad to report that business and markets are crawling back to normal. We are finding ourselves very busy at CDC, however, converting this “busy-ness” to closed deals and income is quite another challenge. I feel like there is money sloshing around the economy and at the same time I am exhausted. I fear that the government may be creating too much demand when and where it may not be needed. When demand runs away from supply, you get inflation.

This demand-driven inflation is starting to show itself in the construction industry. Construction industry employment is at 7.5 million which is fast approaching its pre-pandemic peak of 7.6 million workers employed. With the latest $2.3 billion proposed infrastructure bill, the downside is that this is likely to put upward pressure on the cost of construction materials and labor. We are already experiencing a 400% spike in lumber prices in the last 12 months. This spike has added $24,400 to the cost of an average new home! As the world starts to get in their cars again, you have probably noted that gas is about a buck and a quarter more this year than last. Now with money to spend (pent-up demand) and stimulus checks, expect to see an even bigger leap in inflation numbers next month.

Nick’s Numbers

Here is a chart that shows just how crazy the spike in lumber prices is.


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,

So, what happens to over 100,000 U.S. gas stations if the new infrastructure plans, tax credits, etc.… move us to an EV world? I think you will see “gas” stations move to charge stations but also shift to be more experiential. I see workstations, Zoom rooms, brewpubs. If it takes 30 minutes to an hour to charge your car, you are going to have to use technology to be in two places at once (or at least do two things at the same time!)! Seven-Eleven is already paving the way with their new “evolution” stores. These new stores still serve Big Gulps but also frozen margaritas on tap. They have cigar humidors, taco shops, fancy coffees, fresh bakery, and patio seating.

The workplace continues to be in flux. No longer is everyone working remotely. Now the key in the workplace is “flex.” We live in a “phygital ” workplace that blurs the lines between work, home, and the web. In the office world, the emphasis is on an agile, adaptable workspace. Think space age cubicles – enclosed telephone booths, pop-up tents, tables, monitors, desks all on wheels. Office space will need to be laid out for safe collaboration as well as allow for individual focus but reconfiguring an office in minutes not months.

Speaking of returning to work, Apple recently announced its plans to hire 5000 employees in San Diego over the next five years. All the news was about a 1 billion square-foot campus for 3000 workers in North Carolina, but in San Diego, we are getting 5000 jobs! This is Apple laying down the gauntlet against Qualcomm in the cellular silicone turf war.

Besides feeling like we are running around like a chicken with its head cut off, I am very concerned about the impending tidal wave of distressed mortgages. Specifically, the response of the mortgage companies who could face penalties if they do not help prevent foreclosures or face gigantic losses if they do not proceed to mitigate these losses. The same goes for the eviction moratorium for residential and commercial. While no one relishes evicting a tenant, the industry has little choice given the complete lack of support offered by the government to landlords. This is an area that requires diplomacy, delicacy, and empathy. With this in mind, here are some ideas;
Keep the lines of communication open.
Be sure tenants have and are securing their PPP loans (which can be used to pay rent).
Look to secure early renewals in return for some rent forgiveness.
Look at amortizing unpaid rent across the balance of the term.

Of course, there is the risk that delaying an eviction will just get you deeper in the hole (The first rule of getting out of a hole is to stop digging!). On the other hand, if you evict and re-tenant you could end up in the same hole. It is always best to retain a good tenant who is going through a tough time.

In breaking news this week, the President has proposed limiting 1031 Exchange tax deferral to a maximum of $500K. The administration says the drastic change is part of the plan to “pay for” the cost of the $1.8 trillion American Families Plan.

This is a direct threat to Section 1031 Exchanges and the proposed limitation will have a severe negative impact on investment real estate and the economy.

You can help. Tell Congress to keep 1031 Exchanges.

Click on the link below to send an electronic letter to Congress. Every letter makes a difference.


Though we may all feel that we are working ourselves to death. We are told there are only two certainties in life – Death and Taxes. Now we already have one Death Tax (also known as an estate tax or inheritance tax – currently an estate worth $11.7 mil or more). However, there is a rumor that the government is exploring the elimination of step-up in basis at death, which would result in a mandatory capital gains tax at death. Stay tuned and educated. This could be a whopper for the real estate industry.

In the meantime, I think I have found the cause of my tiredness and I thought I would share it with you…I hope you enjoy the story…

C.A.A.D.D. Covid Activated Attention Deficit Disorder

This is how it manifests:
I decide to water my garden.
As I turn on the hose in the driveway, I look over at my car and decide it needs washing.

As I start toward the garage, I notice mail on the porch table that I brought up from the mailbox earlier.
I decide to go through the mail before I wash the car.

I lay my car keys on the table, put the junk mail in the garbage can under the table, and notice that the can is full.

So, I decide to put the bills back on the table and take out the garbage first.

But then I think since I’m going to be near the mailbox when I take out the garbage anyway,
I may as well pay the bills first.

I take my checkbook off the table and see that there is only one check left.

My extra checks are in my desk in the study, so I go inside the house to my desk where I find the can of Pepsi I’d been drinking.

I’m going to look for my checks, but first I need to push the Pepsi aside so that I don’t accidentally knock it over.

The Pepsi is getting warm, and I decide to put it in the refrigerator to keep it cold.
As I head toward the kitchen with the Pepsi, a vase of flowers on the counter catches my eye–they need water.

I put the Pepsi on the counter and discover my reading glasses that I’ve been searching for all morning.
I decide I better put them back on my desk, but first I’m going to water the flowers.

I set the glasses back down on the counter, fill a container with water and suddenly spot the TV remote.
Someone left it on the kitchen table.

I realize that tonight when we go to watch TV, I’ll be looking for the remote, but I won’t remember that it’s on the kitchen table, so I decide to put it back in the den where it belongs, but first I’ll water the flowers.

I pour some water into the flowers, but quite a bit of it spills on the floor. So, I set the remote back on the table, get some towels and wipe up the spill. Then, I head down the hall trying to remember what I was planning to do.

At the end of the day:
the car isn’t washed,
the bills aren’t paid,
there is a warm can of Pepsi sitting on the counter,
the flowers don’t have enough water,
there is still only 1 check in my checkbook, I can’t find the remote, I can’t find my glasses, and I don’t remember what I did with the car keys.

Then, when I try to figure out why nothing got done today, I’m really baffled because I know I was busy all the damn day, and I’m really tired.
I realize this is a serious problem, and I’ll try to get some help for it, but first I’ll check my e-mail….


“Inflation is like toothpaste – once it is out, you can’t get it back in again.”
 ~ Karl Otto, German-Swiss Economist, 1929-2014

These continue to be crazy times. The U.S. is still restraining the supply of essential goods via tariffs and COVID restrictions while printing money for stimulus. This is a recipe for inflation. The $1.9 trillion-dollar federal stimulus package will help many families, businesses, and state and local governments hard hit by the pandemic. But it is also fueling concerns about ballooning federal debt, inflation, and how we can protect ourselves financially. The new stimulus spending package, on top of trillions already spent to revive the economy, is driving the national debt to unprecedented levels.

Isn’t it appropriate that the month of paying our taxes begins with April Fool’s Day and end with cries of May Day!?!

San Diego’s unemployment rate has started off the new year heading in the wrong direction. The latest job reports show January at 8.1% up from December’s 8%. Let’s hope that the new red tier is good for employment. Under the “crazy” category we’ve been hearing from restaurant operators gearing up to re-open or staff up and they are finding it hard to find employees. Under the same crazy category, I just had a client get three bids for an ALTA survey. They came in at $3300, $8800 and $12,500. All for a job that until recently ran $1200-$2500.

The housing market continues to be white-hot. Nationally, home prices rose 14% from last January, but the average monthly payment only rose by $5 – $10. At the same time, the Mortgage Bankers Association reported the number of serious mortgage delinquencies has risen by approximately 160% since the beginning of the pandemic. In the rental market, it is even worse. More than one in four renters with incomes below $25,000 are behind in rent.

To continue on my “crazy” rant, CalMatters reported that applications for new business licenses rose nearly 22% in California in 2020. And despite the unemployment plunge in 2020, the number of personal and business bankruptcies fell from 775,000 in 2019 to 545,000 in 2020 (That’s a 30% drop! Crazy!). How does this happen? Well, some of it is all of the toothpaste stimulus that has been handed out and some undoubtedly is bankruptcy courts being slowed by the pandemic.

I recently read a study by the rating company, Fitch who estimated that going forward, employees will work from home (WFH) on average of 1.5 days per week. This would result in a 20% decline in office workers and a 10% decline in office space demand (its severe scenario doubles those assumptions). Under this scenario, Fitch estimates that WFH can lead to an approximately 44% decline in value. For comparison, office properties saw a 43% decline in the 2008 Great Recession. The recovery took over three years.

Nick’s Numbers

One area that has held up better than most over this last year has been fast food. Particularly with a drive-thru. Although I have to say I look forward to going out to a nice sit-down restaurant indoors again. Fun Fact: there were 9,700,000 pizza payments made on Venmo last year! Thought you would be interested in the chart below.

fast food leasing leaders

Please give me a call or email me if you would like an analysis of your properties’ value or 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,

The past year has been one of transition in the national and local market. Economic dislocation has spread across the region. Businesses have dealt with the regulatory burdens placed on businesses by local, state, and federal authorities to combat COVID. Hotel occupancies and tourism have cratered. Closures will continue to ripple across the region as we recover, resulting in higher vacancies and negative absorption. The pandemic has in many ways accelerated the insolvency of many businesses.

As I have mentioned, these are crazy times and things don’t always appear as they seem (maybe this is why we at CDC are finding ourselves more in demand than ever – helping people find the ball and keep their eye on it). Tom Robbins, the American Novelist said, “the trick is to keep your eye on the ball even when you can’t see the ball.” Until recently, I never believed you could put the toothpaste back in the bottle, but as you can see at the top of the page. I proved that you can. Furthermore, earlier this month I found that I could be in two places at the same time when I sat in on two zoom calls at the same time! This continues to prove our motto this month. Agility – focus, pray and run like crazy. I hope you enjoy the story…

On November 20, 1820, an 80-ton sperm whale rammed and sank a Nantucket whaleship named Essex.

Twenty of the crew escaped in open boats, but only five survived the three months adrift, while three others were rescued off an island.

Herman Melvin based his novel, Moby Dick, on these real events but changed the name of the ship from the Essex to the Pequod.

One hundred and fifty-one years later, a Seattle English teacher, A History teacher, and a writer approached a bank about a loan to start a coffee house. They wanted to call the place “The Pequod,” but the bank would not lend them money on that strange name, so they changed it to “Starbucks” – the name of the first mate in Herman Melville’s Moby Dick tale. The rest is history . . .


“This is the government our founders warned us about.” ~ Thomas Jefferson

I recently completed Thomas Jefferson’s biography and saw the above quote which brought home the point that some things just never change. What I also found interesting is that in 1793 Jefferson wrote about Yellow Fever saying, “It is called Yellow Fever, but it is like nothing known or read of by the physicians.” It’s funny, people covered their faces with handkerchiefs and avoided shaking hands. Nearly half of Philadelphia vacated the city. Again, history may not repeat itself, but it sure does rhyme.

In April of last year, I said I thought we’d have a vaccine by September and moving forward by the first of 2021. Well, the virus was worse than I thought, the vaccine was slower to roll out and the politics of an election year all made things slower. However, I think with the vaccine rolling out we should reach herd immunity by summer, and then the long process of digging out will begin and we will rebuild the occupancy stack of commercial property. For the moment, the hard part is determining who is going to re-open or who is open but not paying rent. I call these zombie stores and offices. What I can tell you is that the backbone of this country is made up of small businesses. Small business owners are Republican, Democrats, and Independents of all colors and creeds. We need to save small businesses and I don’t think we fully understand what that means yet.

San Diego’s 3rd largest industry is tourism and tourism is off by 50% in San Diego. Industry projections are that it will take up to five years to return to pre-pandemic levels. However, I don’t know about you but everyone I know seems to be chomping at the bit to go somewhere.

There remains an ongoing debate in the office sector on whether the pandemic-driven shift to work from home (WFH) strategies will drive long-term structural changes. Will office tenants require more or less space? When will Zoom fatigue hit? Will the out-migration from urban centers be permanent? Can a company keep its culture with a partial or fully remote workforce (BTW – the answer is “No”). How much will the sublease glut affect rents? With vaccinations rolling out, the “new normal” should be only months away. However, the uncertainty is manifesting in many tenants opting for shorter-term leases, which is creating underwriting challenges for both investors and lenders.

On the subject of lenders…Although rates remain low, we have seen the bond market start pushing rates higher. Many of us thought that a wave of distressed property would hit the market by now. But the swift injection of $2.2 trillion last year and another $1.8 trillion going through now has propped up prices for now. The $30 trillion question is when does the lender cut you off? It has already happened to Trump and Puerto Rico, could it happen to the US? The reality is that what happens is first they raise your interest rates then they cut you off.

So far lenders are holding up for the most part. However, it is time to pay attention to a thing called the Texas Ratio, which is the percentage of a bank’s capital tied up in bad loans. A healthy bank should have a ratio of less than 5%. However, COVID and a disproportionate number of natural disasters this year have left some banks with ratios reaching 30%.

While the world was mesmerized by Robinhood fluctuations in GameStop and AMC Theaters, I gave some thought to what really happens to the theater business. My prognostication is that many won’t survive, and the movie delivery system will forever change. I think some theaters will be repurposed as churches, schools, and gyms. Others will be redone as dining theaters, a trend we have already seen. The bigger leap is that we may see one of the big entertainment conglomerates (Netflix, Amazon, ATT) buy one of the chains and offer the theater experience as part of your monthly subscription (sort of Netflix meets movie pass). Meanwhile, gaming headsets like Occulus will become commonplace as we wear them at home for a theater-like immersive experience in our living rooms.

Nick’s Numbers

This month’s chart is courtesy of CoStar and shows the build-up of the sublease space that Don mentioned above.

San Diego Sublease Market

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,

I recently saw a job opening for the Director of Remote Work and I thought to myself, that today, isn’t that synonymous with CEO?

I also have noticed a lot more people on the roads and beaches and I contemplated as to who is going to be last to return to the office and how is that going to be seen by employees and their competition. Will we have COVID guilt, or will there be a COVID Renaissance?

As mentioned above, with the government and the press seemingly are in total disarray. I have redirected my reading to history and specifically the time of our country’s founding. I highly recommend Jefferson the Art of Power. Also, Jefferson and the Tripoli Pirates. Both will amaze you that our country ever survived and how things really don’t change. If you’re not up for the read (I actually listened on Audible) then maybe, you’ll enjoy my summary below. If that still doesn’t do it for you, grab a couple of Jefferson’s ($2 bills) and spend them at a small business…

Thomas Jefferson was a very remarkable man who started learning very early in life and never stopped.

  • At 5, began studying under his cousin’s tutor.
  • At 9, studied Latin, Greek, and French.
  • At 14, studied classical literature and additional languages.
  • At 16, entered the College of William and Mary.
  • At 19, studied Law for 5 years starting under George Wythe.
  • At 23, started his law practice.
  • At 25, was elected to the Virginia House of Burgesses.
  • At 31, wrote the widely circulated “Summary View of the Rights of British America” and retired from his law practice.
  • At 32, was a Delegate to the Second Continental Congress.
  • At 33, wrote the Declaration of Independence.
  • At 33, took three years to revise Virginia’s legal code and wrote a Public Education bill and a statute for Religious Freedom.
  • At 36, was elected the second Governor of Virginia succeeding Patrick Henry.
  • At 40, served in Congress for two years.
  • At 41, was the American minister to France and negotiated commercial treaties with European nations along with Ben Franklin and John Adams.
  • At 46, served as the first Secretary of State under George Washington.
  • At 53, served as Vice President and was elected president of the American Philosophical Society.
  • At 55, drafted the Kentucky Resolutions and became the active head of the Republican Party.
  • At 57, was elected the third president of the United States.
  • At 60, obtained the Louisiana Purchase doubling the nation’s size.
  • At 61, was elected to a second term as President.
  • At 65, retired to Monticello.
  • At 80, helped President Monroe shape the Monroe Doctrine.
  • At 81, almost single-handedly created the University of Virginia and served as its first president.
  • At 83, died on the 50th anniversary of the Signing of the Declaration of Independence along with John Adams

Thomas Jefferson knew because he studied the previous failed attempts at government. He understood actual history, the nature of God, his laws, and the nature of man John F. Kennedy held a dinner in the White House for a group of the brightest minds in the nation at that time. He made this statement: “This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone.”

“When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe.”

“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”

“It is incumbent on every generation to pay its debts as it goes. A principle which if acted on would save one-half the wars of the world.”

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” — Thomas Jefferson

“My reading of history convinces me that most bad government results from too much government.”
“The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.”
“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”
“To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.”
Thomas Jefferson said in 1802:
“I believe that banking institutions are more dangerous to our liberties than standing armies.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.”
Those who expect to reap the blessings of freedom must undergo the fatigues of supporting it.
~Thomas Paine, September 11, 1777
Happy Heart Month! (note the double entendre!) Every year more than 600,000 Americans die from heart disease. It is the number one cause of death in most age groups. To put that in perspective, the total U.S. Covid death rate in the last 12 months was 410,000. In terms of having “Happy Hearts,” we didn’t fare any better. In fact, the U.S. dropped to 28th (out of 163) in the World Happiness Index.
Since the pandemic took hold in the U.S. in March of 2020, job loss has been one of the most significant consequences. Along with job losses, the GDP is estimated to have taken a hit of $7.6 trillion! Unemployment, uncertainty, lost loved ones, and lost social connections, have led to spikes in depression and anxiety. In a recent survey, 40% of U.S. adults reported having at least one mental illness. Based on the sheer number of people struggling, the cost of mental health impairment could be as high as $1.6 trillion.
Although human life is priceless, insurance companies and lawyers, and politicians have a notion called “statistical lives” which assigns a value of $7-10 million per life. Armed with this metric, the cost of premature death by COVID is over $5 trillion. Another $2.5 trillion for the lifelong impairments like respiratory and cardiovascular issues.
When you add up the lost GDP ($7.6T), premature deaths ($5T), health impairment ($2.6T), and mental health impairment ($1.6T) you get a WHOPPING $16.8 Trillion! This is a stunning number, especially when you compare it to all the fiscal spending on all wars since 9-11 – $6 trillion.
But we are getting a shot in the arm (pardon the pun!). Vaccines are rolling out along with stimulus checks. However, I think that once the vaccine and stimulus and forbearance (evictions, foreclosures, etc.) wave finishes and the tide goes back out we are going to find out who doesn’t have a bathing suit on anymore! I told a lender the other day, “The king has no clothes, and I am just waiting for someone to tell him.”
Most of what I am reading is saying that there is cautious hope. The virus will be tamed. The GDP will grow at 5.5%, interest rates will stay unchanged and monetary policy will remain stimulative and the dollar is expected to weaken. On the other hand, my job is to spot and anticipate bubbles and I see four of them currently with us.
  1. House Prices – pandemic-driven boom, fueled by artificially low-interest rates.
  2. Stock Prices – the Dow is overvalued based on Dow’s historical low dividend yield to value.
  3. BitCoin – $30,000+ for a unique number. . . please refer to Tulip mania in Holland in 1637.
  4. Cost of College Education – $100K – $500K for watching Zoom/YouTube. The only thing you get when you go back is beer and football. Please refer to – the king has no clothes.
Of course, if I knew how and when these bubbles might burst, I wouldn’t be spending my Saturday afternoon writing this letter. However, these are where I would start:
  • COVID is not going away.
  • New President – new issues/problems/decisions.
  • Lifting of a foreclosure moratorium. – in 2008 $7 million lost homes to foreclosure. I think we will double that when the moratorium is lifted.
  • Lifting of evictions moratorium 25% of renters in the US are not behind in payments. That is 10 mil renters and 57.3B behind!
  • Bond market – will the bond market try to reign in the staggering amount of debt on the books. I have a client who said, we are one interest rate hike away from a bubble pop.
  • China – so goes Hong Kong so goes the U.S.
Hopefully, we will reach herd immunity soon. Just watch out to not get caught in the herd mentality!
Below is a link to a very informative Economic Forecast. Alan Nevin is one of the top economists for the San Diego region. 2021 Economic Forecast by Alan Nevin.
Nick’s Numbers
This month’s chart is courtesy of Costar and shows the retail vacancy rate rising from the continuation of the predicted fallout of tenants. If you would like to talk about your vacancy of struggling tenant(s), give me a call or drop me an email.
San Diego Sublease Market
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,
Commercial real estate powerhouse CBRE recently announced its move from Los Angeles to Dallas. It was funny to me because they started as Coldwell Banker which was owned by Sears. Sears spun them off in 1989. Today, they have 100,000 employees, $16.4 billion in market capitalization, and are in the Fortune 500. Meanwhile, Sears is ….
You may or may not have heard about AB802 which requires you to disclose your commercial property energy usage (benchmarking) by June 1 or get an exemption by March 1st. As I understand it, it is still only for buildings 50K square feet or larger, but I am guessing that this will trend smaller in time. Here are links to the San Diego site and a webinar you might want to watch.
I wish you all a heartfelt Happy Valentines Day and if you think it’s bad that Big Tech is censoring people at least you can still mail racy Valentine’s cards. I hope you enjoy the story…

During the late 1800s, postage rates around the world dropped, and the obscene St. Valentine’s Day card became popular, despite the Victorian era being otherwise very prudish.
As the number of racy valentines grew, several countries banned the practice of exchanging Valentine’s Day cards.
During this period, Chicago’s post office rejected more than 25,000 cards on the grounds that they were so indecent, they were not fit to be carried through the U.S. mail.

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

“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,

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,

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,

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,

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.


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