CDC Commercial Inc

July 2014 Monthly Letter

The number one issue affecting commercial real estate in the near and long term? America’s growing energy independence – this according to Chicago based Counselors of Real Estate. Energy’s implications are twofold. Rising energy costs act like rising interest rates and put a damper on the economy and rent and real estate value. On the other hand it is creating a boom in employment in many markets from Houston to the Bakken oil fields of North Dakota. Also low natural gas prices improves our competitiveness in manufacturing, as well as being a potential export which helps rail and ship building.

Well San Diego lost an icon in the passing to Tony Gwyn this month. Tony was a great baseball player but more importantly he was a great man. His work ethic was legion but his kindness and jovialness were what made him genuine. I had the good fortune to not only watch him play but to cross paths with him at spring training, in the stands at high school basketball and at the local Circle K. He was always happy and always kind. In today’s world of social media and tweets I am reminded of this recent quote I heard, “The way to gain work is not through a lot of followers. A lot of followers doesn’t get you work. Doing good work gains you a lot of followers”. We at CDC try to live by this motto!

Well whether is was the passing of Tony (only a year older than me) or a family vacation with three generations of family or the most recent Father’s Day, but I looked around and realized we have a lot for which to be thankful. Despite the rising price of oil & gas, tension in the Middle East and Ukraine I find that business, un-employment and the real estate market are a lot better than it has been for the last five years. I read that 60 is the new 11. It used to be we averaged 11 months out of a recession. The ’81-’82 and ’90-’92 recessions took 36 months for us to return to normal (same unemployment as pre-recession). On June 6th, 60 months after the start of our recent depression/recession we have recovered the jobs lost (the scary part is how many of these jobs are now part time vs. full time). As they say at PIMCO, “The new normal is the new neutral.” The unemployment rate in San Diego in May was 5.8% down from a year ago at 7.3%. The employment increase added 29,300 jobs. The largest gain (6200) was in leisure and hospitality (more of those part time jobs).

Amazon recently rated San Diego the most well-read major city in the United States. In other news, Amazon announced its new Fire phone. Although they are late to the game they may still be a game changer. Malls and others are social spaces and so is the Fire phone. It has five cameras and assorted sensors. If you see a jacket on an actor in a movie – capture the image and you can buy it on Amazon. The next phase is “augmented reality” shopping. Want to see that chair in your living room and with new paint on the walls? Lowe’s is rolling out “Holoroom” where you can do just that.

In the retail grocery business there is also a new shift occurring and it is price not technology. For years, grocers pursued a mid-market strategy – don’t price too high and offer good value. Today Americans are choosing to go either up or down. Value shoppers are forsaking quality to meet budgets (Food 4Less, 99 cent) while other mid-market shoppers are trading up for quality and variety (Whole Foods, Trader Joe’s).
In all of my thankfulness, this month I was thrilled to have Nick and I featured in a recent real estate trade paper about father and son teams. It was especially fitting that it was published on Father’s Day and Nick’s 5th year anniversary with the company. In lieu of a story this month I have attached the article below. . In the meantime have a Happy 4th of July and be thankful for family, friends and Country!

real estate bisnow

Einstein had his theory of relativity, and so do we: The commercial real estate biz is full of people who are related. So, in honor of Father’s Day (it’s this Sunday; you still have time to run out and get a tie) we recently chatted with some of the industry’s dads and sons.

don and nick zech

Don Zech and son Nick work together at CDC Commercial, which Don founded in 1996. Don, the firm’s president, has been in commercial real estate since 1985, having launched his career at the old John Burnham & Co. Nick estimates he’s been in the biz in one way, shape or form for seven years now. As a college sophomore in Denver, he began internships with various firms, and by his senior year of college, he was working full-time for Dad. While Don says Nick was never pushed into the business, Nick says he knew from an early age that he wanted to be a broker. As a kid, he played on basketball, baseball and soccer teams and most of his peers’ dads barely made it to any games. “Conversely, my Dad was the coach and was there at every game and practice.” He decided he wanted a job with that kind of flexibility and be able to support a family.

nick zech

Here’s where you say “Awwww.” (We asked Don if Nick would mind us running this pic. His response: He’ll get over it.) According to Don, commercial brokerage is the closest thing to a contact sport that you can find in the business world. Kids of pro sports stars often become athletes; that’s partly due to genetics, but also, having a parent already there helps to clear the path a little bit. That said, brokerage is a commission business, so they sink or swim on their own. Nick adds that brokerage is a small community and it’s hard to get your foot in the door. “You’ll know real quick if you’re going to make it.” Having family or friends in the business gives you a chance to get in and prove yourself. A few years ago, Don hosted a get-together at his house for fathers and sons in commercial real estate. for the guests, it was an opportunity to learn who else has a kid in the biz, and to “let everybody know that the next generation has arrived.”

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