The country has been hit hard by the pandemic, and San Diego isno exception. Ray Major, chiefeconomist and chief data and analytics officer withSANDAG, spoke about the San Diego economy,unemployment and the recovery during the most recent digitalCREW San Diego event last week. According to hispresentation, San Diego is forecasted to see a 7.1% drop in GDPthis year, wiping out the gains from the last two years andoutpacing national GDP loss.

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"San Diego may experience a 7.1% loss in 2020 and a rebound of4.7% in 2021," Major said during the event. "That forecast is basedon that there will be some type of a vaccine and we will be toreturn to normal. But, again, any gains that we have had in theeconomy over the last two years will be wiped out by this event."By contrast, the nation is forecasted to contract 6.9% in 2020,also wiping out gains for the last two years and even into 2017,according to Major.

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The impact of the contraction will have a significant impactthroughout the local economy, starting with sale tax revenue, whichis expected to fall 35%. "This is a phenomenal decrease in salestax revenue," said Major. 'We would be expecting decreases of 5% to10% during a recession. We are looking at decreases of 35%. This isgoing on for three months, and it is going to significantly impactthe region's ability to provide services. What will end uphappening is 2021 is extremely lean."

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Unemployment is another major effect of the economiccontraction. San Diego unemployment hit a peak in May at 25% beforefalling in last June to 14.3%. "These are rates that haven't beenseen since the great recession," said Major. However, unemploymentis falling, and during the brief reopening of the local economy,there was a surge in activity. "This tells me that the economywants to open up again and people want to go back to work; however,with the more recent shut down orders, I expect unemployment ratesto go back up again," added Major. Retail transportation and foodand beverage have all seen declines in activity, while constructionsupply sales have increased during the pandemic, likelyattributable to home improvement projects.

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In terms of the recovery, Major looked at 50 different forecastsas well as his own data, and determined that the recovery will be adeep V-shape or a long U-shape. A standard V-shape has already beenruled out because we are too deep into the recession already."There is not going to be any type of recovery until there is avaccine," said Major. "In my opinion, there is going to be a long Vor a long U-shaped recovery. That means that we are going to bepushing out the recovery until 2023 or 2026, depending on howbusinesses can get back to full capacity. The long-termramifications are going to be felt for the next several years."

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So far, commercial real estate has weathered the storm, but theindustry will be affected. "This will eventually impact the realestate industry significantly. In terms of commercial, I thinkthere are going to be ramifications," added Major. "There are a lotof businesses that are going to realize that they don't need asmuch office space as the previously had. That is going to impactleasing. I do see that this is going to be a long-termdisruption."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.