The second quarter of 2022 produced mixed economic signals calling into question the factors that determine a recession. Inflation skyrocketed to over 9% driven primarily by gas and food prices. The Fed is targeting successive 75 basis point increases in the Fed Funds Rate in an attempt to tame the price increases. Additionally, GDP has declined over the past two quarters. While these signs all point to a recession, at the same time we are also seeing jobs, retail consumption, manufacturing and service sectors registering positive growth.
Locally, Nevada County’s industrial and retail vacancy rates have continued to fall to very low levels, reflecting the positive growth in manufacturing and service sectors mentioned above. Office vacancy has increased by about 1% over the first quarter rate, signifying continued volatility and disorder in this sector.
A positive note is that capital is migrating from larger metro areas into small and tertiary markets like Nevada County, which are now perceived to be best positioned to benefit from city outmigration and work-from-home trends produced by the pandemic.
While economic signals are quite disparate as of this writing, Nevada County commercial real estate does appear to be relatively well positioned to continue on the general upward trajectory that we see in rents and values since 2017.