Thanksgiving is behind us, Christmas is ahead and the comments of a Rate cuts remains divided. Whatever happens in the next two weeks on the rate cut may end up being a disappointment. The last rate cut did not see the equal drop in the 10 and 30 year bond. It saw a slight increase as inflation still remains a question.
The overall investment market appears divided. Whether it is the bond Market, the Stock Market or the Real Estate Market; one cannot get a majority consensus opinion.
In the San Francisco Peninsula the ultra luxury high end properties are seeing an exit of owners that are allowing large price cuts after 30 days on the market. San Francisco is not as badly hit as the Towns of Woodside, Atherton and Portola Valley, they just are not sheltered from the lack of optimistic buyers.
The layoffs of Silicon Valley have not be advertised much when it comes to packing bags and moving on to greener pastures. That may come later, a frustration that could indicate a point of purchase. Until then, keep one's powder dry appears to be the "Buyer's Attitude"
Across the nation the residential market is seeing price cuts which could be attributed to political agenda's of the media or actual fact. The buyer beware should be the model until some clear cut indications of our economy is clear. So far there is the same division of parties and supporter's of the opinions of where we will be December 31, 2026.
In the commercial venue there are some good and cautious attitudes. Rents on multifamily are slowly rising without too much objections from the renter. That is good news for the Multi Family owners. One can see that in the limited listings in the SF Peninsula with Cap Rates in the 5% or lower range is common in the San Francisco Market too.
Storage properties remain strong, a clear indication that many of the renters are putting belongings n storage waiting for a buying opportunity.
Car Washes are also quite strong and ironically during winter they will see an increase in income as the desire to "wash your own car in winter" gives way to the local car wash.
Retail is seeing continual weakness as the concern of a recession or slight weakness in the economy; along with a weak consumer confidence index. Banks, Drugs Stores are seeing the continuance of closings; as Amazon, Costco and Target hammer on prices competition; as well as, On-Line Banking and the use of curbside tellers. This leaves many owners worrying about the lease termination and how to address an empty property with a limited amount of time income but no occupant.
The bright star in the San Francisco area is San Francisco itself. A new mayor, a cleaning up of the streets of squatters and beggars along with a strong sense of safety has brought back many Corporate and Startup businesses. The City has a sense and feel as it did some 20 plus years ago. Now nothing like vested suits and high heals of the 80's, but a feel that makes a visitor, occupant and worker feel comfortable.
The year end comes down to Interest Rates, the Economy, and employment. the last final comment is Employment.
Silicon Valley is thinning middle management and programers (?). Artificial intelligence is a cheaper and more efficient replacement owing to the layoffs, but only time will tell if it is or will be efficient. So far from my use of AI, I feel it has done the work of several employees and legal council. Based on my reviews and my use, I say there will be a major change in the Employment numbers going forward. Then too, there is the migration out of the State of California as employment, the cost of living and the increasing cost of home ownership increases without abatement.
The last figure I saw was that California had a 5000,000 net loss of citizens. Well and good when one fails to consider the large estimated amount (+ 1,000,000) of legal/illegal immigrants who have offset the migration out of the state. One must consider weather loosing a mid level manager or a highly trained technician with substantially higher incomes is a good offset of tax dollars for the gain of a laborer? Is it a positive in the State Coffers when the taxes collected from high income migration out is worth the cost of care for the migration in until they become positive contributors to the Sate of California? Time will tell and ow many tax payers will have the fortitude to wait to see?
From and investment side it may be wise to invest when there is a secure cap rate and a secure lease before the Commercial Real Estate Investor make their next move, or just hold the cash in 4%+ government short term debt. Crisis and fear are always the best buying opportunities. whether it be stocks, bonds, commodities or real estate. Caveat Emptor.
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Gary McKae
Commercial Real Estate Advisor | Investor Advocate | Author
📍 McKae Properties, Inc.
📧 gary@pacwestcre.com
🌐 www.mckaeproperties.com
📞 (650) 743-7249
🏢 2044 Union Street, San Francisco, CA 94123
DRE# 01452438
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