We're pleased to share this special commercial edition of “The Scoop – Power Hour” where we discussed the state of the region's commercial, industrial and retail markets. View the recording of the event below.
Our next "Scoop - Power Hour" is coming up Wednesday, November 18, at 2:00 p.m. Tune in for an exclusive update focused on San Diego's housing market and hot topics. Register here.
Highlights from Yesterday's Briefing Included:
COMMERCIAL MARKET UPDATE - Josh Ohl, Managing Analyst at CoStar
Josh Ohl provided an update on the current commercial market in San Diego. The sector of this market that is currently in the best position is industrial, he noted. Another sector that is taking off in San Diego during the pandemic is the logistics sector.
Demand varies depending on what you are looking for. If you want logistics space and you want cross- border distribution, you're going to set up down in Otay Mesa, Ohl stated. If you are a life science or tech company, you can get up into Carlsbad or further north. Demand in the UC San Diego and Torrey Pines areas remains strong. Sorento Mesa offices are also getting scooped up and turned into lab space.
Ohl said San Diego is seeing a notable downturn since September on the office side because we are just starting to see new vacancies. We are also starting to see sublet space increases and that has impacted the spaces that are on the market. Rents have gone down by about 10% as of September and October, a big hit.
On the other end, we are seeing retail rents having significant adjustments as well; 40 percent of available spaces have had about a 15 percent price adjustment over the last couple months.
Overall, commercial sales are down right now, said Ohl, and we're probably going to see more owners on the retail side that are in distress and might decide to get rid of their properties.
On the industrial side, anything that has life science tenants is doing well. Anything that can be converted into life science or lab space is going to continue to do well, but "deal flow" has fallen into a 10-year low across all sectors.
We are in an economic recession and a lot of indicators suggest we might not get back to 2019 levels until closer to 2023, after recovering what was lost in 2020, said Ohl.
EVICTION MORATORUM - Mark Feinberg, Partner at Heinz & Feinberg
Mark Feinberg discussed the eviction moratorium and the legislation surrounding it. There are very stringent rules under which residential evictions can move forward. It also made clear that the California State Legislature was not going to stand in the way of commercial evictions moving forward.
In considering whether you're going to pursue an eviction, you need to be aware that in the cities of Carlsbad, Chula Vista, Del Mar, Encinitas, Escondido, Imperial Beach and National City, there are still either eviction moratoriums in effect or a moratorium has ended. However, the payback period has not yet ended for the rent that they are allowed to defer.
So, Feinberg said, evictions need to be looked at on a case-by-case basis; we need to look at the particular city and where it is now in the courts. The court system is working, but it is working slowly. There are new forms that have been created that we must fill out that add a little more time and expense. The courts and the clerks are overburdened by having to do virtual hearings.
Retail seems to be hit the hardest, noted Feinberg. Businesses that need people to walk into them are not only suffering because lack of customers, but because government rules are preventing them from operating.
Regarding commercial, he said, we only have local ordinances. So, if COVID comes into play, even if COVID wasn't really the reason a tenant cannot pay the rent, it can potentially still impact the case.
As a tenant, if you are having a hard time financially due to COVID, communicate with your landlord or property management company, suggested Feinberg. The landlord and property management company will need to evaluate and perhaps renegotiate some rent versus making the tenant leave. It is important in evictions, now more than ever, that if you are going to pursue an eviction, you do everything just right.
SAN DIEGO RESEARCH & DEVELOPMENT DISTRICT - Brett Ward, Executive Management Director, Cushman & Wakefield
Brett Ward provided a presentation on the San Diego Research & Development District in downtown San Diego.
Amenities were an important aspect of this development: Within four blocks there are nearly 70 restaurants 3,400 residential units and 5,000 hotel rooms. All those hotel rooms run from high-end residential or high-end hotel, all the way down to the lower-end hotel.
The development is kitty-corner to the Santa Fe Depot and trolley lines which give people quick access to Amtrak and the Coaster as well as only being five-minute drive to the airport.
More people want to be downtown, but there's not a lot of opportunity to do so, said Ward. It goes without saying that for the Millennial talent this is a huge push, and this is where a lot of our young people live.
The project will have two phases. The first phase is expected to be complete by the summer of 2023. The project is more along the lines of what happens in San Francisco, Boston and New York, said Ward, adding that it really puts San Diego on the map from that standpoint.
COMMERCIAL REAL ESTATE ALLIANCE OF SAN DIEGO - Jen Schmidt, CRASD President
Jen Schmidt updated attendees on the increase of interest in Commercial Real Estate and CRASD.
The Circle of Excellence application process for the Commercial Transaction of the Year is now open until November 30.
This program has grown over the last couple of years and Schmidt indicated we are looking forward to receiving applications and encourage everyone who qualifies to apply. Due to COVID, the event SDAR would normally hold in January is being postponed until June. This will give members the opportunity to get together and network like they have in the past.
Schmidt reviewed some of the exciting things to look forward to in 2021. CRASD is partnering with other commercial entities such as CCIM, IREM and BOMA, allowing CRASD to create better relationships that will in turn provide our members more information, support, and networking opportunities than before.
CRASD will be unveiling a new platform for commercial listings in San Diego County, so be on the lookout for that. It will be one of a kind and cutting edge, she noted.
Schmidt added that we're also planning to meet with brokers and various organizations to discuss how we can help them and what support they would like to see from CRASD.