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Real Estate Trends Report 2021 San Diego Region Real Estate Trends Report SAN DIEGO REGION Real Estate Trends Report Photo by Scott Murphy 1 2021 San Diego Region Real Estate Trends Report Welcome to the San Diego-Tijuana 2021 Emerging Trends in Real Estate Report. Brian F. Mooney FAICP Principal, RICK Engineering Company District Chair 2020-2022, San Diego/Tijuana ULI The Urban Land Institute (ULI) is a leading voice in real estate The local version of Emerging Trends in Real Estate looks at regionally, in the US and throughout major global markets. the key market sectors for Office, Industrial, Hotel/Hospitality, Our “Emerging Trends in Real Estate” is a trend and forecast Retail, For-Sale Housing, Rental Housing and Affordable publication now in its 42 edition, and it is considered one of Housing. We have also included a Special Report on State the most highly regarded forecast reports in the real estate and Local Policy that will affect real estate trends. A review and land use industry. The year 2020, due to the worldwide of Tijuana and its regional markets is being produced as a pandemic for COVID-19, has reshaped the playing field separate report. for multiple industries, which in turn has had a significant Our team at the San Diego-Tijuana ULI has conducted impact on the real estate industry. On a national scale, the interviews with key leaders, developed a questionnaire to ULI Emerging Trends Report has focused on “Dealing with help build on the research and interviews and analyzed the Certain Uncertainties,” and to better understand these issues potential trends for 2021 and 2022. The result is a report and how they affect our local San Diego-Tijuana region, our that critically examines and draws conclusions on what to District Council decided to develop a focused study by local anticipate in these varying land use categories. I believe it professionals to delve into the market trends that relate to will help both public and private professionals, agencies and our real estate and land use issues. businesses make informed decisions relating to potential land use and investment opportunities. I look forward to learning your comments on this new and important endeavor, and to all the professionals, business leaders and government officials that have helped make this a reality, I thank you. Brian F. Mooney, FAICP San Diego-Tijuana ULI, District Chair 2020-2022 2021 San Diego Region Real Estate Trends Report ULI San Diego-Tijuana would like to thank and recognize the many people who contributed to this local Real Estate Trends Report. Committee, Authors, Editors & Contributors And to our local Sponsors Beth Callender CallenderWorks Allen Matkins Kimley-Horn Gary London London Moeder Associates Bank of America KTUA Brian Mooney Rick Engineering Company Brookfield Properties LISC San Diego Chris Clark Director, ULI San Diego-Tijuana Buchalter LOWE Eduardo Velasquez Research Director, San Diego Regional EDC C&S Companies McCullough Hasan Ikhrata Executive Director, SANDAG CallenderWorks Miller Hull Partnership Belinda Sward Strategic Solutions Alliance Cavignac & Associates National CORE Tony Pauker Former San Diego-Tijuana District Council Chair Civic SD Procopio Peter Dennehy Vice President Customer & Market Research, Newland Dudek Project Design Consultants Richard Gollis Principal & Co-Founder, The Concord Group Fairfield Residential Resmark Equity Partners Nicole Sadowsky Manager, The Concord Group Gensler RICK Engineering Company Michael Combs Associate Director, CBRE Greenhaus Silvergate Development Derek Hulse Managing Director, Cushman Wakefield Hensel Phelps SGPA Bret Morriss Managing Director, Stream Realty Group HomeFed Corp Tideline Partners Steve Williams Founder & Partner, SENTRE Hub & Spoke Communities University of San Diego Robert Rauch Hotel Entrepreneur, RAR Hospitality IDS Ware Malcomb Julie Coker President & CEO San Diego Tourism Authority Katz & Associates Daniel Reeves Juniper Strategic Advisory Jennifer Whitelaw Senior Consultant, TW2 Marketing Notice to Readers This report is a forecast publication produced by ULI San Diego-Tijuana with the support of industry members from throughout the region. It is inspired by the Urban Land Institute’s Emerging Trends in Real Estate report and based on the best available information at the time of writing. The San Diego-Tijuana Trends Report seeks to provide an informed outlook on real estate investment and development as understood by ULI San Diego-Tijuana and our contributing authors. The analysis, views and opinions expressed herein are those of the contributing authors and not necessarily their employers, the Urban Land Institute or the ULI San Diego-Tijuana chapter. The material that follows was developed from a number of sources: interviews, research by individual contributing authors, surveys and forecasting. Contributing authors to this report are identified at the beginning of each section and are responsible for the content of their chapters. While the information contained in this report represents informed analysis of the San Diego-Tijuana real estate market, it should not be used to make business decisions in lieu of professional consultation. 2021 San Diego Region Real Estate Trends Report SAN DIEGO REGION Real Estate Trends Report Contents 1 ....... Executive Summary From EVOLUTION TO 19 ..... Property Type Outlook RENTAL HOUSING Market REVOLUTION Gary H. London, Senior Principal, Overview Richard Gollis, Principal & Co-Founder, London Moeder Advisors The Concord Group 5 ....... San Diego Region ECONOMIC DEVELOPMENT 22 ..... Property Type Outlook RETAIL Market Overview PRIORITIES: 2021 & Beyond Eduardo Velasquez, Michael Combs, Associate Director, CBRE Research Director, San Diego Regional EDC 25 ����� Property Type Outlook OFFICE Market Overview 7 ....... How SANDAG’s Five Big Moves Could Reshape Our Derek Hulse, Managing Director, Cushman Wakefield Region. Q & A with HASAN IKHRATA 28 ..... Property Type Outlook INDUSTRIAL Trends & Executive Director, SANDAG Investment Prospects Bret Morriss, Managing 9 ....... Real Estate Outlook INSIGHTS from District Council Director, Stream Realty Partners Members Belinda Sward, Strategic Solutions Alliance 31 ..... Property Type Outlook HOTEL Hospitality Forecast 14 ..... Property Type Outlook HOUSING Introduction Robert Rauch, Hotel Entrepreneur, RAR Hospitality Tony Pauker, Former ULI District Council Chair & 33 ..... The Impact of COVID-19 on Hospitality & Tourism. Advisory Board Member Q & A with JULIE COKER President & CEO, 15 ..... Property Type Outlook FOR-SALE HOUSING Market San Diego Tourism Authority Overview Peter Dennehy, Vice President Customer & 34 ..... Special Report POLICY Round-up by Daniel Reeves, Market Research, Newland Juniper Strategic Advisory 2021 San Diego Region Real Estate Trends Report Executive Summary From EVOLUTION TO REVOLUTION by Gary H. London, Senior Principal, London Moeder Advisors Oh, what a year it was. Even though forecasting is, at best, Because real estate is a reflection of the physical places a business fraught with failure, the year 2020 started with which accommodate all of our activities, persons in the land economic forecasts, including those of ULI, blindingly use and real estate business have only to look to the pace of absent of any real sense of the economic calamity that vaccination to offer some prediction on the pace of recovery would play out as a response to global pandemic. Most of of the real estate market. those forecasts portrayed 2020 as a mirror image of 2019, To be sure, some aspects of real estate were more burdened with continued economic prosperity showing no real sign of than others. Those relative burdens are detailed in this Trends impending recession, and all systems more or less “go”. report and summarized here. But none of the real estate All systems were not “go” as the world, the U.S. and the San sectors have been left unscathed. There are both temporary Diego region experienced a full year of economic deep freeze, and permanent changes in their use, occupancy and pending vaccination as the likely solution to end the ravaging relevancy which will be reflected in their future performance. of the disease and reopen the economy. The nation has lost The more ”sticky” changes have been catalyzed by the nearly ten million jobs in the past year. Over that time, the pandemic. But they were going to happen anyway. What the unemployment rate surged from 3.5% in January 2020 to pandemic wrought was a sooner-than-expected alteration in 6.7% by the end of the year. The high point was 14.8% in April. use and occupancy. That suggests some permanence. In San Diego, there still is the sobering reality that the region Other changes are not so sticky and are likely to shake lost an estimated 70,000 to 105,000 jobs last year, particularly off the aftereffects of pandemic as it slips further into our in the lower wage and economically vulnerable sectors, and rear-view mirror. There are also silver linings for new types there is no letup in the region’s high cost of living. of real estate uses which are accelerating. The challenge The economic salvation of the San Diego region has always for land use professionals is to be able to sort out the sticky been the military, an employer which counts 150,000 persons from the temporary and make decisions on development, who always meet their payroll. There are 354,000 military COVID-19’s Impact on Key Trends connected jobs accounting for 22 percent of all jobs in the region. But there is also an increasingly diversified mix of Accelerated
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