Exchange Is Here To Stay

Video Index:
0:00 1031 Exchange is here to stay
1:22 Site visit to New Haven Marketplace in Ontario
2:47 What will Amazon’s department stores be like?
4:29 COVID update in the State of California and LA County
5:55 Rising prices of everything this holiday season
Hello Investors!

I’m Mike Lin, and I’m a commercial real estate broker based in Southern California.  I help owners of retail properties determine the value of their real estate and help to sell them for top dollar.

Here’s this week’s newsletter.  Enjoy!

1031 Exchange is here to stay (for the near future)


Over the past year or so, there’s been a lot of concern recently in the real estate investment community about the potential repeal or significant modification of the 1031 Exchange. My managing broker Brad Umansky received an email this week from congresswoman Judy Chu, who represents the 27th District of California. In this email, Ms. Chu said that the 1031 exchange will stay. Her letter says “Although we made some substantial changes in other areas of the tax code, I am pleased to inform you that Section 1031 remains intact.”

And just because I’m paranoid about reporting false information, I called Congresswoman Chu’s office and confirmed that they did indeed send out this email.

Click here to see this letter in its entirety.

This is great news for commercial property owners everywhere. The 1031 exchange is an important part of the investment community and the overall economy so this is a win for all of us.

The (new) New Haven Marketplace – Ontario


A new grocery-anchored shopping center is open for business in Ontario called the New Haven Marketplace and it’s at the heart of the Ontario Ranch project, a 13 square mile master-planned community that is being built on former farmland. When completed, Ontario Ranch will add 150,000 residents to the current 170,000 who live in Ontario, almost doubling the city’s population.
In this week’s video, I share some footage from my visit to the shopping center.

A sneak peek at Amazon’s Department Stores

According to an analysis by Coresight Research, between 2016 and 2019, Amazon converted about 25 shopping malls to distribution centers. But how about the more recent news about Amazon trying to beat department stores at their own game?  A few months ago, Amazon announced its plans to open department stores in Ohio and California.

The Wall Street Journal reported last week some possible insights about how these new department stores will be different from what we’re used to seeing. Much like how the Dash Cart and Just Walk Out technology have brought some minor conveniences to grocery shopping, These new Amazon department stores appear to be trying to do the same. The stores are reported to feature QR codes, touch screens in changing rooms, and robots to help with the shopping experience.

Customers could scan QR codes on clothes throughout the store, and an assistant, either human or robotic, could arrange for those clothes to be put in the dressing room. Once inside the room, the customer could use a touch screen to request someone to bring a different size to them, or the screen could recommend other articles of clothing for that customer.

My thoughts:
None of this really sounds that appealing or exciting to me. It’s really not that hard to pull two sizes of shirts off the rack to bring to the dressing room. And based on the pretty bad customer service I get in most department stores, I can’t even imagine how long I’d have to wait for someone to bring another shirt to me in the dressing room. My time’s worth more than that. This does sound a bit like using technology for technology’s sake, but that’s also how I felt when I used the Dash Cart at the Amazon Fresh grocery store near my home. But Amazon’s got so much money, they can afford to take risks on these types of technological innovations and possibly change the way we shop in the future.

COVID update in the State of California and LA County

In an effort to continue to limit the spread of COVID, California has implemented new health measures. Last month we saw how California had enforced proof of immunity or a negative test result requirement for large indoor gatherings.
Last Friday, Gov. Newsom announced a plan that will make California the first state to require all eligible students 12 years and older to be vaccinated against COVID in order to attend physical classes once the vaccines are approved for use on students. So, the COVID vaccine would just be added to the list of required vaccines, joining other required vaccines like measles, mumps, and rubella.

Any student who is not vaccinated may enroll in independent study, but may not attend in-person classes. Parents are left with no choice with this vaccine mandate. Some say they should have the right to choose what’s best for their children and they should not be forced.

In an August poll by the Kaiser Family Foundation, 23% of parents of children ages 12-15, who are currently eligible for the vaccine, said they would “wait and see” before getting them vaccinated while 20% said they would “definitely not” get their children vaccinated.

In other COVID news, in Los Angeles, starting on November 4th, the city will require everyone to show proof of COVID-19 vaccination in order to enter bars and indoor restaurants, health clubs, shopping centers, theaters, and personal care businesses – pretty much any retail property.

The rising prices of everything this holiday season

Get ready for more inflation. It’s still early October, but this year maybe a little bit more stressful and expensive than usual. One large reason is the huge increase in shipping costs.
For example, shipping a 40-foot container from Shanghai to New York costs $2000 before COVID. It now costs $16,000, according to Bank of America.

In a conference call with analysts, Costco’s CFO announced that in addition to higher shipping costs, Costco is also dealing with higher labor costs, rising demand for transportation and products, plus shortages in computer chips, and higher commodity prices.  All of this translates to higher prices for the consumer, which Costco estimates to be 3.5-4.5% higher.
FedEx has also announced that it will increase shipping rates by 5.9% for domestic services and 7.9% for other services.
But studies show that consumers will be OK with this price increase, as household net worth has gone up by 4.3% in the second quarter of this year.

The Federal Reserve has conceded that inflation will be higher than they expected, and has announced that they will be pulling back on the stimulus they’ve been printing in an attempt to keep inflation under control.

For the next few months, we’ll just have to be prepared to pay higher prices for almost everything.

That’s all for this week. Thanks for reading!


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Mike Lin, CRE