Happy Ground Hog Day! And while I am at it Happy Chinese New Year. This year is the year of the sheep. Well, in fact, it is the year of the goat. Political correctness and spin tells us it is the year of the sheep because the sheep is one of the best loved animals and is gentle and calm and we use its fleece to keep us warm. We have all heard of the story of the wolf in sheep’s clothes – so beware. Now the Ram is also part of the goat and sheep family. So it could be the year of the ram as well. Well I think our economy and real estate market is going to be the year of the ram (hero) or the goat (not the hero). Meantime our politicians will exacerbate the problem through legislation, regulation and hyperbole as we approach the 2016 election. You might say they are putting lipstick on a pig – or in this case a goat!
The USD Burnham-Moores Index of leading indicators for San Diego rose again in November and December. Job growth for 2015 is expected to be equal or better than last year. Sectors expected to do well are professional, scientific, and technical services, healthcare, leisure and hospitality. American Express ranked San Diego 5th amongst meeting destinations and several local hotels were in the top 10 in the nation.
Optimism amongst small and mid-size businesses has reached levels last seen during the pre-recession years of the early 2000’s according to a new survey by San Diego based Vistage International. However, in the same survey, 40% of CEO’s said that local government is negatively impacting their business. Thirty-seven percent said healthcare reform is impacting their business.
With thanks to Integra Realty-Appraisers, below is a market snapshot of San Diego Commercial Real Estate:
Market Snapshot (courtesy of Integra Realty – Appraisers)
| CAP | Rent | Vacancy | |
| Office | |||
| CBD A | 7.0% | $2.45 | 12.1% |
| CBD B | 7.0% | $2.04 | 21.3% |
| Suburban A | 7.0% | $2.92 | 10.5% |
| Suburban B | 7.0% | $2.19 | 13.7% |
| Industrial | |||
| Class A | 7.0% | $.69 | 3.2% |
| Flex | 7.0% | $1.33 | 11.7% |
| Retail | |||
| Region | 6.5% | $2.50 | 0.5% |
| Community | 6.5% | $1.58 | 5.5% |
| Neighborhood | 6.5% | $1.75 | 7.4% |
You will soon see some of your local Vons and Albertsons stores changing to become Haggen’s Grocery. Haggen is a grocer from the Pacific Northwest and is taking the stores so Vons and Albertsons can complete their merger.
As we approach our rainy season (for what little that is) you should be aware that local government is cracking down on storm water runoff. Rain water that “runs off” of building roofs, property hardscapes and through uncovered dumpsters into the storm drains instead of seeping into the ground on site. It ends up in the nearest waterways and eventually drains into the ocean. New federal and county regulations impose $5000 fines on property owners who fail to address storm water runoff.
So whether you choose to be a ram or a goat this year or snuggle up in your wool blanket and wait out the ground hog, it always pays to have good advice and that is what we are here for at CDC Commercial. Perhaps some of the best advice that we have heard and have been giving out is;
“Live where you want, and invest where it makes sense with turnkey, positive cash-flow properties whose Cap Rate is higher than your long-term fixed interest rate financing.” A turnkey property is a new or like-new property you understand and is hassle-free.
I hope you enjoy the story!
NOAH
It is the year 2015, and Noah lives in the United States. The Lord speaks to Noah and says: “In one year I am going to make it rain and cover the whole earth with water, until all is destroyed. But I want you to save the righteous people and two of every kind of living thing on the earth. Therefore, I am commanding you to build an Ark.” In a flash of lightning, God delivered the specifications for an Ark. Fearful and trembling, Noah took the plans and agreed to build the Ark.
“Remember,” said the Lord, “You must complete the Ark and bring everything aboard in one year.” Exactly one year later, a fierce storm cloud covered the earth and all the seas of the earth went into a tumult. The Lord saw Noah sitting in his front yard weeping. “Noah.” He shouted, “Where is the Ark?” – “Lord please forgive me!” cried Noah. “I did my best but there were big problems. First, I had to get a permit for construction and your plans did not comply with the building codes. I had to hire an engineer and lawyer to file an environmental impact statement on your proposed flood, over the entire Earth.
They didn’t take very kindly to the idea that they had no jurisdiction over the conduct of the Creator of the universe.
Then the Army Corps of Engineers demanded a map of the proposed new flood plain. I sent them a globe. Right now, I am trying to resolve a complaint filed both with the ACLU and the Equal Employment Opportunity Commission that I am practicing discrimination by not taking godless, unbelieving people aboard! The IRS has seized all my assets, claiming that I’m building the Ark in preparation to flee the country, to avoid paying taxes. I just got notice from the state that I own some kind of user tax and failed to register the Ark as a recreational water craft. Finally, the ACLU got the courts to issue an injunction against further construction of the Ark, saying that since God is flooding the earth, it is a religious event and therefore unconstitutional.”
