The 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
What other time of the year do you sit in front of a dead tree and eat candy out of your socks?
Real estate investor sentiment has dropped to the lowest at the start of the pandemic. With current interest rates above cap rates and fear of a recession ahead, investors have had a drop in confidence. With inflation, an inconsistent tax system and so much political rancor, there isn’t a lot of stability to be found. Investors are like families, if you’re uncomfortable about something, you wait and that’s the pattern we are seeing now. However, in this type of environment, there will be big buying opportunities. I like to say that luck is when preparation meets opportunity.
As you know we don’t sell residential, but I read an article that said for affordability to come back to 2020 levels at current interest rates, housing prices would have to decline more than 40%! On the commercial side I am reading to expect a drop in transaction volume of 7 – 19% and price drops of 16 – 32% compared to 2019 numbers.
Declining market confidence is making asset valuation more difficult. The situation is magnified by steep inflation and interest hikes. I expect interest rate hikes to continue until rates are higher than the inflation rate.
Having worked in the field (that’s what it was called before “remote” and “hybrid” and “digital nomad”), I am a big fan of not being tethered to the office. However, I am afraid that much of the workforce do not have the discipline or ability to sustain productivity without being in the office on a regular basis. Below you will see the canary in the coal mine showing the dramatic decline in productivity we are facing.
“A back-to-the-workplace movement will increase our overall productivity and competitiveness. It will help preserve urban small businesses and stabilize the threat to the property tax base of municipalities throughout the nation” says Jeffrey DeBoer, CEO of The Real Estate Roundtable. Real estate owners are going to have to “activate” their real estate. We need to keep what worked best but also incorporate what makes working from home desirable. Reimagined work environments but also wonderful people environment! WeWork and creative executive suites are on the rise. I recently saw a storage facility combined with office space. A building budding with entrepreneurs working in an open floor plan but running to their storage unit to fulfill their order, work on prototypes or grab tools of their trade to go to a job site.
Nick’s Numbers
Here’s a chart showing the downward pressure on pricing that is starting.
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 interest rates or inflation and their impacts on your business, tenants, or property (Nick Zech, 858-232-2100, nzech@cdccommerical.com).
As we recuperate from the COVID pandemic, it seems that our society has become increasingly frightened of social interactions – unless they are with a smartphone. I am afraid that we are becoming insensitive to those around us. Are we too busy to be a friend? Greg Anglea, the CEO of Interfaith Community Services (and a client of ours) recently posed this question in an opinion piece in the San Diego Union-Tribune. “If there were simple reasonable steps you could take to end homelessness in your community, would you take them? (Article Link) He does a great job of enunciating the balance between an unsheltered person sleeping on your sidewalk, storefront or building and realizing that they are someone’s son or daughter and faced with the daunting reality of the average two-bedroom rent of $3,186 per month in San Diego in a 1% vacancy market. One of the most disturbing numbers that I have read is 1 in 10, 18–24-year-olds have experienced homelessness.
In an effort to help all of us with the homelessness issue in our community, I have attempted to put together a practical list of ideas to better address the crisis in our midst. These have been accumulated from conversations with Greg and other homeless agencies, as well as property managers, owners and police departments.
1. Always smile, look people in the eyes and say hello. Often being ignored or cursed at just worsens the homeless person’s self-worth and makes everything worse.
2. Anytime but especially during hot weather, offer people a bottle of water.
3. Carry a pack of Subway gift cards to hand out. Add a card with the address/phone number of Interfaith or other homeless agency in your community.
4. Be sure your lighting is in good working order. Timers, protective housing and cleaning assists with protecting against vandalism.
5. Shrubs should not exceed 2-3’ in height and should be flush to the building. Tree canopy should start no less than 6’ from ground level.
6. Consider river rock low maintenance landscape. Saves water and makes overnight stays difficult.
7. Consider the myriad of camera options that allow you to monitor your property.
8. Encourage tenants or neighbors to immediately report squatters as soon as seen.
9. Remember housing ends homelessness. Be supportive of ways to create more supply, 28% of consumers earning more than $200,000 report living paycheck to paycheck. Most people are a paycheck away from homelessness.
10. Make a donation to Interfaith to help them help you by providing services and counseling to help people escape homelessness and return to being productive community members.
If you are looking for a feel good movie in time for the holidays and to inspire you regarding the homeless cause you might want to try 5000 Blankets showing December 12th and 13th only. It’s a story of a husband who has a mental breakdown and goes missing. His wife and young son set out to find him on the streets, sparking a movement of compassion and inspiring a city!
From all of us at CDC Commercial, we wish you the happiest of holidays! May you find time for family and friends. May you all remember Helen Keller’s quote during this season, “God puts us in each other’s lives to impact one another in some way. Look for good in others. The best and most beautiful things cannot be seen or touched – they must be felt with the heart.” Hope you enjoy the story…
One day a teacher asked her students to list the names of the other students in the room on two sheets of paper, leaving a space between each name.
Then she told them to think of the nicest thing they could say about each of their classmates and write it down.
It took the remainder of the class period to finish their assignment, and as the students left the room, each one handed in the papers.
That Saturday, the teacher wrote down the name of each student on a separate sheet of paper and listed what everyone else had said about that individual.
On Monday, she gave each student his or her list. Before long, the entire class was smiling. ‘Really?’ she whispered, ‘I never knew that I meant anything to anyone!’ and ‘I didn’t know others liked me so much,’ were most of the comments.
No one ever mentioned those papers in class again. She never knew If they discussed them after class or with their parents, but it didn’t matter. The exercise had accomplished its purpose. The students were happy with themselves and one another. That group of students moved on.
Several years later, one of the students was killed In Vietnam and his teacher attended the funeral of that special student. She had never seen a serviceman in a military coffin before. He looked so handsome, so mature. The church was packed with his friends. One by one those who loved him took a last walk by the coffin. The teacher was the last one to bless the coffin.
As she stood there, one of the soldiers who acted as pallbearer came up to her. ‘Were you Mark’s math teacher?’ he asked. She nodded; ‘yes.’ Then he said: ‘Mark talked about you a lot.’
After the funeral, most of Mark’s former classmates went together to a luncheon. Mark’s mother and father were there, obviously waiting to speak with his teacher.
‘We want to show you something,’ his father said, taking a wallet out of his pocket They found this on Mark when he was killed. We thought you might recognize it.’
Opening the billfold, he carefully removed two worn pieces of notebook paper that had obviously been taped, folded and refolded many times. The teacher knew without looking that the papers were the ones on which she had listed ail the good things each of Mark’s classmates had said about him.
‘Thank you so much for doing that,’ Mark’s mother said. ‘As you can see, Mark treasured it.’
All of Mark’s former classmates started to gather around. Charlie smiled rather sheepishly and said, ‘I still have my list. It’s in the top drawer of my desk at home.’
Chuck’s wife said, ‘Chuck asked me to put his in our wedding album.’
‘I have mine too,’ Marilyn said. ‘It’s in my diary’
Then Vicki, another classmate, reached into her pocketbook, took out her wallet and showed her worn and frazzled list to the group. ‘I carry this with me at all times,’ Vicki said and without batting an eyelash, she continued: ‘l think we all saved our lists.’
