This week's newsletter CEO column features local commercial real estate guru Don Zech's insightful missives.
Enjoy,
Cheers, JR
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California produces 60% of American roses but the vast majority sold on Valentine’s Day in the U.S. are imported from South America. One hundred and ten million roses will be sold and delivered this Valentine’s Day – another sign of California losing some of its lovin’ (and jobs).
On the subject of jobs, it is really a mixed picture. San Diego ended 2022 with an unemployment rate of 2.9% which was the second lowest rate in the past 20 years! Yet according to the census, 300,000 Californians left the state in 2022 (That’s with births being more than deaths and all of the international migration!). This is the third year in a row of declines. Even Governor Newsom’s in-laws fled the state! U-Haul ranked California as the #1 state in the nation for outbound one-way trips. Many of you will remember I preach that the fundamental rule of real estate is not location, location, location but more people moving in than moving out.
Much of our mixed dynamic can be attributed to continued spending by consumers – unmatched by incomes or savings. In other words, even if an official recession declaration could not be made in 2022, the economy is on borrowed time heading into 2023.
Here’s a personal mixed dynamic that we experienced in the first week of the new year. Last year was a very good year and this year was looking to be 1.5x or 2x better. We had over $13 million of deals all fall out of escrow in a week! Though not unusual to have deals fall out, all of these had been in escrow for 9-18 months and had large amounts of non-refundable money committed to them. Last year if you told me that we’d lose $13 million of deals in the first week of the year, I would have told you that it sounds like it’s going to be a lousy year. However, the other side of the coin is that we have or are about to close $5 million in the first month and a bit. If you had told me that last year, I would have told you that we are about to have another great year. So, is a cup a third full or two thirds empty? What I can tell you is that the deals falling out were around three basic things...
