In good times and in bad, Kent Williams and the San Diego office of Marcus & Millichap have more than managed to hold their own.
Williams, a M&M first vice president and San Diego regional manager, spent two years in M&M's Ontario office and left in 1994 to sell audio supplies in Indiana. He came back to Southern California as an M&M commercial property agent in the University Towne Centre area in 1997 and was approached to manage the office here a year later.
In January 1999 when Williams officially took the helm, the San Diego M&M office had 16 agents and 25 employees overall. Today the local division boasts about 55 agents and 110 employees overall.
"The sales volume that we did in a year then, we do in a month today," Williams said.
Williams, who also acts as Western U.S. director of M&M's National Retail Group, said while Palo Alto-based M&M is better known for its multifamily brokerage business, he hadn't worked that part of the ledger.
"I was one of the few guys who didn't do multifamily," Williams said. "The retail division was created seven or eight years ago. We went from obscurity to surpassing the competition."
The retail division was followed by the creation of M&M's Office/Industrial Group.
"Eventually we will probably split up our agents so they can focus on their specialties. They overlap today," Williams continued.
Unlike many brokerages, M&M doesn't handle leases.
"If we handled leases it could be viewed as a conflict of interest. A lot of clients come to us because we don't do leasing," he said. "It's a totally different mindset."
As recently as a couple of years ago, San Diego, by some surveys, was listed at the very top of office markets in the country. Now, Williams suggests that at least some of the bloom is off the rose. But even with roughly 3 million square feet of office construction under way in the county, Williams doesn't seem too worried; much of it is pre-leased already.
"There is some concern about overbuilding, but I don't necessarily agree. What's going up is good, leasable space," Williams said.
Williams said the office space demand was strong enough that the Hines La Jolla Commons project was asking as much as $4.50 per square foot before the 224-foot, 345,000-square-foot building was at least temporarily halted last spring due to concerns over the Miramar Marine Corps Air Station traffic pattern. At last check, Hines and the Marines were reportedly close to resolving the issue.
With limited opportunities, particularly in the central submarket of the county, industrial properties have generally, but not always, kept their vacancies in the single digits.
Large industrial spaces may be endangered in many parts of the county because they are too expensive to produce or reproduce on the land where they might otherwise go. Williams said smaller industrial spaces and industrial condominiums are still very much in vogue, however.
"This works really well with small incubator space," Williams said.
In another vein, Williams said this is a good time to purchase apartment complexes, particularly if they can be held for say, eight years.
"This is a good time to buy, particularly if you aren't leveraged," Williams said. "We're bullish on a long-term hold."
He emphasized that the apartment complex still has to make sense financially and fit with the rest of a given portfolio.
With average vacancy rates at 3 percent or less in the county, retail properties have tended to fair extraordinarily well in San Diego County. They aren't always bulletproof, however.
"The weird thing about this asset class is the economy really does affect the ability to pay the rent ..." Williams said. "That 3 percent vacancy can go up quickly in a bad economy."
Perception may also play a major role.
"Retailers are not only vulnerable to competition, but consumer confidence as well," he added.
And risk is not necessarily diminished when you have a big-name regional or national tenant, Williams said.
"A Subway operated by a franchisee could be just as vulnerable as a mom and pop. Just because you're national doesn't mean the corporation has signed its name to the lease," he continued.
Williams also warned there could be problems for centers anchored by older movie theaters as more new ones go to stadium seating.
As for apartments, Williams said as recently as a decade ago, investors often lived within sight of the complexes they owned. Today they are more often in another part of the country, or even another country altogether.
"Now they are chasing returns from a distant location," Williams said.