Good morning. Welcome to the second half of 2020. After a night of 4th of July festivities at the beach with plenty of food and wine, I find myself reflecting on a few of the events of this holiday week. There were plenty of fireworks for sure – actual and metaphorical. Politics, health, economy, race, and religion are all swirling issues in our deluge of data. Amidst all of this, sharing my thoughts about real estate investment in the Westside region of Los Angeles may seem incongruous. Not so!
Here are a few explosive reasons why, pun intended:
While the bombardment of political ads has launched, the focus has shifted away from the very troubling ballot initiatives affecting real estate investment. Propositions regarding property taxes (Proposition 15) and rent control (Proposition 21) in California are on the November 2020 ballot. Unfortunately, the official ballot titles are misleading – marketing that is meant to goad voters into believing that, if passed, they will serve the public good. What will actually happen is: increased taxes will be passed on to consumers, and further residential rent restrictions imposed upon property owners will diminish the supply of rental housing. In the short run, if passed into law, real estate values in California will be negatively impacted.
For the most part, re-opening hasn’t been going well. Shopping malls may be open, but many of the stores within malls are closed, some for good. It’s irrational to believe that the economy will recover rapidly (the V-shape I discussed in one of my prior letters) given a fair reading of the numbers. Far too many businesses are operating in low gear, unable to plan effectively or operate efficiently without right sizing their employee needs and their balance sheets.
There is a new executive branch policy in the works for dealing with COVID-19, likely to be presented to the public as “learn to live with it.” Now that’s a far cry from “don’t worry, a vaccine is on the way” and “the virus will just disappear.” The world has not only changed, it keeps changing in ways that are not anticipated or predictable.
Social Issues. Passion is running high, as evidenced by the many protests and demonstrations that we have been experiencing here in the United States and in other countries. Social media has provided an outlet for expression. Messages are being broadcast loud and clear, and there will be change.
As we take into account these burning issues and apply our street-smart clarity to real estate investments in the Westside region of Los Angeles, a world of opportunity opens up like a freshly blooming rose. Expect to see a) an increased demand for healthcare facilities that may be met by re-purposing existing properties, b) attractively priced investment properties as owners seek to escape potential or actual negative legislation, c) increased demand for owner occupied commercial buildings, and d) an influx of capital as those who seek opportunity flock to the U.S. I recognize that the challenge of compressing the broad scope of data and information into a cohesive and successful investment plan is daunting. It’s also fun and very rewarding! Details to follow next week.