The Central Valley’s story is in the process of being written, and we are in the very early chapters. Over the next 30 years, I believe the region will become The Story because of Central Valley growth and the fact that our economy is becoming more and more linked with the major economies that surround us.
There are 6.5 million people living in the Central Valley between Bakersfield and Redding. If the Central Valley were its own State we would be the 16th largest in the country. Over the last 20 years, the Central Valley has been the fastest growing region in California and among the fastest growing in the nation. By 2060, the California Department of Finance believes the Valley’s population will reach 8.4 million people. It also predicts that Kern and San Joaquin counties will be the fastest growing in the Central Valley because they are the gateways to the Valley.
The Central Valley is surrounded by several world leading economies: the San Francisco Bay Area, Southern California, and, increasingly, Reno/Sparks in Nevada. I believe that Southern California and Silicon Valley are the stories of the last 30 years. Those stories are world-famous and, to some extent, played out.
However, over the next three decades, I believe the Central Valley will be what people talk about in California as the population grows and our economy becomes better tied to the major industries that surround us.
Beyond the Valley’s long-term prospects, our firm has noticed a significant uptick in activity this year after many years of slower improvement. This is evidenced by significant decreases in vacancies across the San Joaquin Stanislaus counties’ markets:
- Office — The office vacancy rate in the Stockton/Modesto market area decreased to 12.9 percent at the end of the second quarter 2014.
- Industrial — The Industrial vacancy rate in the Stockton/Modesto market area decreased to 9.1 percent at the end of the second quarter 2014. The vacancy rate was 9.6 percent at the end of the first quarter 2014; 9.8 percent at the end of the fourth quarter 2013; and 10.6 percent at the end of the third quarter 2013.
- Retail — Stockton/Modesto’s retail vacancy rate decreased in the second quarter 2014, ending the quarter at 6.4 percent. Over the past four quarters, the market has seen an overall decrease in the vacancy rate, with the rate going from 7.0 percent in the third quarter 2013, to 6.8 percent at the end of the fourth quarter 2013, 6.7 percent at the end of the first quarter 2014, to 6.4 percent in the current quarter.
These factors make the Central Valley a good long term bet for commercial real estate investment.
As a region, let’s not get too down on ourselves. It is often said that contrarian investing is the smart move. While the world is focused on Apple,Facebook and the Bay Area they are missing out on the massive emerging market that is the Central Valley.
Very few people know the Valley’s story, but I am confident that our story will be told over time. My family and I will be here for decades to come. Over time, population, transportation, technology and the economy will hit critical mass and we’ll see a tipping point, and I believe the story of our Valley will ultimately be a positive one. I am betting my future on it.