So, this month’s letter may be a little shorter, a little random, and a little more reflective than normal. I am writing it from my airline seat on my way to Mt. Rushmore to visit for our country’s 250th and to run another half marathon in another state (#16). And oh yes, celebrate my wife and my 40th wedding anniversary. I know, South Dakota, what a romantic guy. I told her if she stays with me for 10 more years, I’d take her to North Dakota!
I continue to be in pursuit of my three “R’s.” No, not the old reading, ‘riting and ‘rithmetic. My three “R’s” are, real estate, running and ‘riting (Still have about 15,000 words left to complete Blue Falcon – a thriller rooted in San Diego’s military, commercial real estate and technology world.
As I prepared to take off, I was reminded about how heavy my bag could be, how many I could carry on boardand where my phone charger needed to be kept. And I thought, “How many laws exist in America?” It’s been 250 years, and we’re drowning in a legal swamp so vast and bloated that even the government doesn’t know how many laws we’re supposed to follow.
Federal statutory laws, actually passed by our elected representatives, number in the tens of thousands. But federal regulations created by unelected agencies exceed one million individual rules. The number of executive orders now exceeds 14,000. State statutes top 500,000. And with over 89,000 local governments issuing their own ordinances, there are tens of millions more “laws,” “codes,” and “mandates.” This isn’t law and order. It’s legal suffocation!
Ok, now for the random stuff.
Lest you think that brick-and-mortar retail is dead and nobody should buy a shopping center ever again, I just read that in 2025, only 16% of retail sales were online.
If you think the Empire State Building was the gold standard for office buildings, I also just read that it was only 20% occupied when it opened, and it took years to lease up. In 1929, the land alone sold for $34.5 million, yet in 1952, the whole building sold for only $51 million.
I recently read Sahil Bloom’s book, The Five Types of Wealth, and in it, he talks about the “3 P’s” purpose, posse (friends & family) and play being the main contributors to a long, happy prosperous life. I couldn’t agree more!
Not to be outdone, after 65 years of life, 40 years of marriage, 4 kids and 8 grandkids, I will tell you that a sure way to have joy in those later years is to secure the “3 E’s” for your children. This is educated, employed and elsewhere!
On the subject of employment, the July report was weaker than expected, with nonfarm payrolls declining by 23,000. That is far below the 80,000 job gains expected. Downward revision for both May and June trimmed another 103,000. The number to watch though is the labor force participation rate which has declined to 61.4%, its lowest level since September 2020. In 2026, there are roughly 1.4 million fewer people working or looking for jobs. Economists report that this is due to restrictive immigration policies and accelerating baby boomer retirements.
Interesting, regardless of where you stand on the issue, since the first of the year, there have been 18,000 arrests in San Diego by ICE. Approximately 8,083 of those were listed as deported, leaving 9,786, and only 701 are listed as remaining in detention, suggesting there are about 9,000 that were released (they might still have a court date or appointment). That does not fully explain why the local labor force is now down nearly 50,000 and unemployment is at 4.7%, which is lower than the 5.1% last year at this time. Lest I ask, are we doing the same work with less people – AI?
Nick’s Numbers
Office-using job losses have contributed to San Diego’s market-wide vacancy rate climbing to the highest level since the Great Recession at 14%. Slower in-office job growth, coupled with smaller leases and lower demand, will not contribute to any material improvement for the rest of the year. The chart below highlights the struggle the job market is having.
If you would like an analysis of your property’s value or discuss what you should be doing with regard to interest rates or inflation and their impacts on your business, tenants, or property, I’d be happy to talk. (Nick Zech, 858-232-2100, nzech@cdccommerical.com).
I recently listened to a podcast of national developers, and one said they are not pursuing deals in California anymore because of all of the “extracurricular noise.”
We talk to property and business owners all day and the thing that keeps them up at night is familiar: payroll, rent, energy costs, regulation and insurance bills that all seem to rise every year. Less often discussed, but just as real, is the cost of litigation. This cost is priced into decisions to hire another worker or lease or buy more real estate or whether they can afford to keep operating in California at all.
In 2022, tort costs in the United States reached $529 billion, or 2.1% of GDP! No legislature voted for that burden. No candidate ran on it. But we all pay the “tort tax” anyway. I heard recently that 99% of lawyers give the rest a bad name. But seriously, we need to look at tort reform.
With school starting and all of these numbers to contemplate, I thought you might enjoy what is wrong with our ‘rithmetic education… unfortunately, it is not as funny as it should be…
Math is Hard
Last week, I got a burger at Burger King for $9.58. The counter girl took my $20 and I pulled 8 cents from my pocket and gave it to her. She stood there, holding the nickel and 3 pennies, while looking at the screen on her register.
I sensed her discomfort and tried to tell her to just give me back a ten and two quarters, but she hailed the manager for help and while he tried to explain the transaction to her, she stood there and cried.
Why do I tell you this? Read on…
Teaching Math in 1960:
A logger sells a truckload of lumber for $1,000.
His cost of production is 4/5 of the price.
What is his profit?
Teaching Math in 1980:
A logger sells a truckload of lumber for $1,000.
His cost of production is 4/5 of the price or $800.
What is his profit?
Teaching Math in 2000:
A logger exchanges a set “L” of lumber for a set “M” of money.
The cardinality of set “M” is 1,000.
Each element is worth one dollar.
Make 1,000 dots representing the elements of the set “M.”
The set “C, the cost of production, contains 200 fewer points than set “M.”
Represent the set “C” as a subset of set “M.”
Answer this question: What is the cardinality of the set “P” of profits?
Teaching Math in 2010:
A logger sells a truckload of lumber for $1,000.
His cost of production is $800 and his profit is $200.
Your assignment: Underline the number $200.
Teaching Math in 2020:
By cutting down beautiful forest trees, the logger makes $200.
What do you think of this way of making a living?
Topic for class participation after answering the question:
How did the forest birds and squirrels feel as the logger cut down the trees?
There are no wrong answers.
Teaching Math in 2026:
A logger sells a truckload of lumber for $1,000.
His cost of production is $1,200.
How does Arthur Andersen determine that his profit margin is $600?