What’s New Hampshire’s economic strategy?
NH’s approach to economic development has to start with a vision
So much of commercial real estate tracks the economy –local, regional, national, even global. The economy influences the cost of utilities, labor, supplies and materials, which impact the cost of renovations and fit-ups. The value of any given property is impacted by interest rates. If I can borrow at 4 percent, I can charge less rent than if I am paying 8 percent or 9 percent. In a good economy, carpet becomes expensive, and in a bad economy it becomes cheaper. The mills spit out about the same quantities in good times and bad. You do not fire up a carpet mill to make only 1,000 yards of carpet!
The economy moves in cycles – very high inflation in the late ’70s and early ‘80s, good times in the mid-‘80s, then a slowdown in the late ‘80s, and here in New England, the FDIC came in and took over several state banks in the early ‘90s.
It took several years to work our way out of that real estate and housing crunch. The dot.com bubble came, then the tech wreck of 2000, then the financialization of housing and home mortgages – up, up, up until 2009. We looked into the “deep abyss” and crawled back from the edge with huge government intervention and stimulus, creating artificially low interest rates.
The past three years have been tenuous. The Fed wants to raise interest rates, but every time it speculates about doing so, or starts to, the economy sputters. So real wages are stagnant. More employees take home less, as they are forced to pay for more of their health care costs. We occasionally hear about under-employment, people not working full-time or stitching together two or three part-time jobs without benefits, or working well below their potential and skill/education levels.
We hear the figures every month, but few believe them or take them seriously. There is little or no inflation, but inflation does not include food, gas or energy costs! I cannot eat for the same amount I did a year, or even six months, ago.
Then there are the demographic shifts. Baby Boomers aging and retiring – but not all, since many cannot afford to retire. Gen Xers and Millennials are not fully employed. Many have large student debts, which affect their credit scores, so they cannot buy homes. Others do not want to. They feel the need to remain flexible because their employment is tenuous. So for most, it is an unsettling time. This is some of the reason that Bernie Sanders and Donald Trump are getting traction v. traditional senators and governors (and former secretaries of state).
Back home, communities have a feeling they have to double down their efforts to promote economic development.
Here in New Hampshire, without a sales or income tax, economic development needs to create more tax base – new or renovated taxable property. But given that we live in a service and consumer-driven society/economy, where 70 percent of the dollars in the economy comes from buying and services and not making things, jobs and employment (and even underemployment) are needed to keep things rolling.
So far, local economic development is about jobs, keeping those we have and expanding existing firms, as well as recruiting new firms. The latter is important, because expanding and new firms need new space, which increases values (and assessments on properties).
But to design and implement an effective economic development strategy, it should start with the communities (and state’s) future vision, also called a strategic plan. The vision should include and identify what types of jobs are desired. Are the employees trained and educated here locally? Are they recruited from away?
To get and keep those workers, communities need to have an above-average quality of life. So this is not simple math, not even algebra, it quickly evolves to calculus.
Bill Norton, president of Norton Asset Management and principal of Harrington & Reeves, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA). He can be reached at email@example.com.