Hello Everyone,

As we transition into Fall 2022, headlines are overwhelmingly becoming negative.  Rising interest rates, rapid inflation, and geopolitical turmoil are dominating news coverage.  While those headlines are real and should merit legitimate caution, it is NOT all bad news out there.  At Coastal Commercial our favorite economic forecast for commercial real estate, comes from Dr. Peter D. Linneman.  The latest Linneman Letter points out the following to consider:

  • Real GDP growth is expected to be 2% per year for 2022, and 3.5% in 2023Since year-end 2019, inflation-adjusted household checking deposits and currency, is up 259% (people are flush with cash!)

• There is about $4 Trillion in excess cash on the sidelines looking for opportunities

• Over the past 8 months of 2022, the U.S. added 3.5 million jobs

In 2022 so far, industrial output rose by 2.7%

• Unemployment is hovering around 3.5%

• Latest retail sales are now 13.7% above the Pre-Covid peak

In 2022, e-commerce accounted for $256B (14.5%) of retail sales.  The remaining (85.5%) came from brick and mortar retailers

Travel and tourism activity have rose above Pre-Pandemic levels

• According to CBRE, Orange County retail rents are forecasted to increase 13.6% over the next 2 years and the current vacancy rate is only 4.5%
“Two basic economic truths that are largely forgotten are: that for everyone paying a higher price due to inflation, someone else is receiving a higher price; and for every additional dollar paid by borrowers as interest rates rise, a lender is receiving an additional dollar in debt service.” -Dr. Peter D. Linneman

While it isn’t all sunshine and rainbows out there, consider the strong fundamentals and resilience of the U.S. economy.  Our clients are lucky to live and invest in the southern California coastal markets, where demand exceeds the national average and Net Operating Income growth outperforms the rest of the country.  We encourage you to engage in the current market and invest in long-term assets.  We like that fear is dominating the headlines, because the market greed always comes back with a vengeance.