Norm Miller is CoStar Group’s vice president who hopes to start up a five-star and 100-point scale system by the end of the year which can be used for building comparisons in each market. With it, investors will then be able to find out whether one office building is as great as another building.
Right now, Miller is trying to quantify the various factors that could be affecting real estate rent values, testing them and discarding those that do not have any effects whatsoever. Here are some real estate observations that Miller has seen in San Diego.
Based on the bigger picture, San Diego seems to be a very supply-constrained market, which means that the price and rent increases and decreases here are quicker. This is why San Diego’s market is so volatile. Since it is supply-constrained, there is not a lot of oversupply within the sectors of commercial real estate as compared to bigger markets nationwide.
Plus, San Diego is in California, a business location that isn’t very competitive and looks as if it will get worse because of troubles in budget deficits. Because of this, people will have incredibly high tax burdens, possibly forcing them to move to other states that have lower taxes.
The best solution for mixed-use development and cheap housing would be to allow much more density when it comes to development. Unfortunately, this is difficult if people do not like living close to other people. Because of this, a lot of people from San Diego have already moved to purchase cheaper homes in Riverside County.
Another way to solve cheaper housing would be through lower impact fees. Unfortunately, San Diego charges big fees and subsidizes units of affordable housing, making prices skyrocket to insane levels. This is why people have become so dependent on San Diego’s system. Strangely enough, this fee system is based on the thought that growth needs to pay for itself. This was meant to be a smart thing, most of all since other cities cannot seem to keep up with their growth, but San Diego still could have done much better.
Retooling San Diego neighborhoods is still possible, but it will take a lot of time. For now, we simply have to deal with it.