Oh, what a year it was. Even though forecasting is, at best, a business fraught with failure, the year 2020 started with economic forecasts, including those of ULI, blindingly absent of any real sense of the economic calamity that would play out as a response to global pandemic. Most of those forecasts portrayed 2020 as a mirror image of 2019, with continued economic prosperity showing no real sign of impending recession, and all systems more or less “go”.
All systems were not “go” as the world, the U.S. and the San Diego region experienced a full year of economic deep freeze, pending vaccination as the likely solution to end the ravaging of the disease and reopen the economy. The nation has lost nearly ten million jobs in the past year. Over that time, the unemployment rate surged from 3.5% in January 2020 to 6.7% by the end of the year. The high point was 14.8% in April. In San Diego, there still is the sobering reality that the region lost an estimated 70,000 to 105,000 jobs last year, particularly in the lower wage and economically vulnerable sectors, and there is no letup in the region’s high cost of living.
The economic salvation of the San Diego region has always been the military, an employer which counts 150,000 persons who always meet their payroll. There are 354,000 military connected jobs accounting for 22 percent of all jobs in the region. But there is also an increasingly diversified mix of tourism, technology, life science, healthcare, manufacturing, and general business (most of which are small). Implication? A deficiency in one sector (tourism, for instance, this past year) does not take down the whole economy.
Because real estate is a reflection of the physical places which accommodate all of our activities, persons in the land use and real estate business have only to look to the pace of vaccination to offer some prediction on the pace of recovery of the real estate market.
To be sure, some aspects of real estate were more burdened than others. Those relative burdens are detailed in this Trends report and summarized here. But none of the real estate sectors have been left unscathed. There are both temporary and permanent changes in their use, occupancy and relevancy which will be reflected in their future performance. The more ”sticky” changes have been catalyzed by the pandemic. But they were going to happen anyway. What the pandemic wrought was a sooner-than-expected alteration in use and occupancy. That suggests some permanence.