San Diego Appraiser Blog

2015 Is Looking Bright For The San Diego Economy

The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose a strong 1.3 percent in November and followed it with a solid 0.8 percent gain in December.  

Both months featured big positive moves in initial claims for unemployment insurance and help wanted advertising and gains in all the other components except for building permits.  November benefited from a sharp increase in local stocks prices and a smaller drop in building permits.  

With the gains in November and December, the USD Index has increased for seven consecutive months, and November’s gain was the largest monthly gain since February 2011.  San Diego’s economy did well in 2014, with jobs increasing by about 34,000 (before revisions).  

With the strong uptrend in the indicators and with most of them positive, the forecast is for continued growth in the local economy at least through the end of 2015.  The forecast for the year ahead is for job growth in the 35,000 to 40,000 range, which will drive the seasonally adjusted unemployment rate below 5 percent.  Sectors expected to do well are professional, scientific, and technical services, health care, and leisure and hospitality.   

Highlights:  A bad year for residential units authorized by building permits ended with a string of nine straight monthly declines and drops in 11 of the 12 months of 2014.  For the year as a whole, residential units authorized fell by 17 percent.  Whereas multi-family units led the gains in this component in recent years, they were responsible for much of 2014 losses.  Multi-family units authorized were down almost 23 percent for the year, while single-family units were down less than 4 percent. . . Both initial claims for unemployment insurance and help wanted advertising were extremely strong in November and December.  

This strength on both sides of the labor market resulted in the seasonally adjusted local unemployment rate falling to 5.6 percent in December, which was down from 5.9 percent in November and from 6.9 percent in December 2013.  It was the county’s lowest seasonally adjusted unemployment rate in six and a half years (since June 2008).  

Although the gain was not large, consumer confidence increased for the 11th consecutive month in December.  Good news in the labor market and falling gas prices likely contributed to the improved outlook by consumers. . . 2014 was a good year for local stock prices, which gained 9.20 percent.  By comparison, the Dow Jones Industrial Average, the Standard and Poor’s 500 Index, and the NASDAQ Composite Index were up 7.52 percent, 11.39 percent, and 13.42 percent respectively. . . The national Index of Leading Economic Indicators was up in 11 of the 12 months of 2014 and was unchanged in the other month.  After a weather-influenced decline in the first quarter, GDP growth has been strong, with the third estimate for the third quarter coming in at a robust 5.0 percent, which follows strong growth of 4.6 percent for the second quarter.  

December’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 132.4, up from November’s reading of 131.4.  Revisions in the national Index of Leading Economic Indicators reduced the previously reported Index levels for July and August and the previously reported change for October from +0.6 percent to +0.5 percent.  For revisions to the previously reported values for the Index and for the individual components, please visit the Website address given above.  

Posted by Jennifer L. Chandos on February 9th, 2015 1:02 PMLeave a Comment

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June 24th, 2014 10:33 AM

Apartment vacancy fell to 2.8 percent this year, according to the San Diego County Apartment Association (SDCAA). That is down from 4.5 percent in 2013. This is the lowest rate since 2002, when it was at 2.5 percent. The current average rent rate for a studio apartment is $901, for a one-bedroom it is $1,092, for a two-bedroom it is $1,347, and for a three or more bedrooms it is $1,716.

The favorable demand for rentals has attracted increased investment.   Below is the most recent multi-family data for San Diego County.


Posted by Jennifer L. Chandos on June 24th, 2014 10:33 AMLeave a Comment

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The retail commercial real estate market is showing consistent improvement. We are seeing reduced vacancy, upward pressure on rents, and higher prices per square foot being paid along major commercial streets in the Spring of 2014. The most recent graphs from Voit Commercial illustrate the gradually improving market conditions throughout San Diego. We are also seeing significant downward pressure on the capitalization rates of triple net leased investments. Capitalization rates for fast food restaurants are currently under 5% for well located national chains in San Diego County.



Posted in:Commercial Appraiser Blog and tagged: Retail
Posted by Jennifer L. Chandos on May 21st, 2014 6:54 AMLeave a Comment

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The San Diego Multiple Listing Real Estate Data Service, SANDICOR, has successfully launched its new system Paragon this week. Paragon was designed to be mobile friendly, work on all kinds of devices and browsers, allow for multiple searches at one time, the uploading and display of slide shows, and new tools that allow appraisers to analyze data in greater detail. The new MLS system includes embedded training videos and they will do training sessions at larger real estate sales and appraisal offices on request. My appraisal office started using and testing the system when they rolled it out as a transitional system. Paragon has worked very well on our new computer systems using multiple browsers and is a major improvement over the prior MLS real estate data portal in terms of the new search tools and speed. Congratulations and our thanks to SANDICOR for such a successful and well planned launch.

Posted by Jennifer L. Chandos on May 21st, 2014 6:47 AMLeave a Comment

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April 4th, 2014 2:15 AM

Cassidy Turley Commercial Brokerage has released its San Diego 2014 Commercial Real Estate Forecast publication. This real estate market forecast discusses industrial, office, retail, apartment, hotel, and investment market trends for San Diego County. The report goes into detail about vacancy rates, absorption, and commercial rental rates. Because the report includes year end statistics, compiled from many sources, this publication is typically released in the Spring. Their Research Department always does an excellent job and this publication is constantly improving. Below is a synopsis from this report and a link to the complete report.

Commercial Real Estate Market Forecast Synopsis

Office: In 2014, the negotiating power between landlords and tenants in the Class A central core submarkets is expected to shift further supported by strengthening leasing fundamentals and moderate new construction. Countywide office vacancy is forecasted to decline 40 bps to 14.3% by the end of 2014 and Class A vacancy is expected to drop below the pre-recession level of 11.7%.

Industrial: The industrial market continued its growth in 2013 with its 10 consecutive quarters of positive net absorption. Until new speculative construction returns, the steady absorption of existing available inventory will continue to drive vacancy rates lower. The countywide direct vacancy rate is forecasted to decrease by 120 basis points to 5.9% by the end of 2014 and fall below the pre-recession level.

Retail: Continued pressure on asking rents and competitive concessions offered by landlords will support positive leasing activity in 2014 resulting in a moderate decrease in the countywide total vacancy rate from 4.5% in 2013 to 4.3% in 2014. The recovery is underway, albeit sluggish, and is much more evident in the prime coastal submarkets compared to the rest of the county. Retailers will continue to compete for the most visible locations, investors will continue upgrading existing properties, and new ground-up construction projects have begun.

Investment: The San Diego commercial real estate investment market transaction volume reached $5.1 billion in 2013, marking the 4 consecutive year-over-year gain in volume, a trend that is expected to continue in 2014. The Federal Reserve Committee’s reassurance of a highly accommodative stance of monetary policy, an increased availability of capital and easing lender standards will positively support the investment environment. Demand for top products in secondary markets including San Diego will remain strong, but will be met with a shortage of large scale offerings.

Multi-Family: Development activity has heated up, making the multi-family sector the first to fully recover and begin sustainable expansion. Fueled by pent up demand and historically low interest rate financing, investment activity in this sector is forecasted to remain fierce. With household formation and employment poised for moderate improvement, San Diego should expect to see vacancy dip to 2.5% and rental rates rise slightly by the end of 2014.

Overall, we expect 2014 to be a stable year for San Diego’s commercial real estate market. San Diego will increasingly be a relatively attractive market for investors to place their money in 2014. There will be attractive leasing opportunities for tenants/users that do not need to be in large Class A projects in the core markets. 


Posted by Jennifer L. Chandos on April 4th, 2014 2:15 AMLeave a Comment

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