Spring brings steady but slow growth



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The first quarter over and spring is here. Everything is on the up and up. Right? If we ignore the huge government deficits and the stopgap funding measures for the federal government and the threats that the real fights will be over the 2012 budget in the fall, then things may be looking better. Oh yes, unemployment is down to 8.8 percent (does anyone really believe that?). Oh, and the damaged nuclear power plant in Japan is nothing to worry about. And the United States' intervention in Libya will be all over in a few days... Does anyone else hesitate to turn on the news or read the paper? Most folks figure we will get through all this, so things will get better.As economist Jeff Thredgold, reports "left largely alone, the U.S. economy could easily continue to build on current momentum and sustain solid job gains over the balance of the year and into 2012."I was at the Concord Chamber of Commerce's Business Showcase, which took place last month. Generally, folks are glad this long winter is over and everyone is hoping that spring will come in and buoy business activity.In the commercial real estate market, there is a slightly higher level of activity. There continues to be a large gap between buyers' and sellers' ideas on pricing. We have a flex-tech building for sale. It is listed at just under $50 per square foot, which we see as aggressive pricing. We have had a lot of interest. The property will sell to a user. Investors are on the sidelines. Lenders like users because they often qualify for SBA guaranteed financing and they are committed to the property for the long term.Economic cyclesSome investors are selling then looking to redeploy the proceeds in a tax-deferred exchange, also known as 1031 exchanges. This is a powerful motivation to defer capital gains taxes.Brokers like 1031 exchanges because there is a clock ticking - 45 days to identify and nominate properties and another 135 days to close (180 days total). In the current soft real estate environment, 180 days is almost warp speed. For good businesses with a strong future, it is a good time for owners to buy a property that will support and enhance their business. Property prices are down, and in some cases for distressed properties, way down, and lenders are lending. So, for the right buyers, there are opportunities.Tenants are looking for deals. Most do not want to go long, but they want concessions and they want options to extend into the future.If it is the future that most concerns business lenders, it is generally agreed that 2011 into 2012 will be OK, perhaps better than 2010, but not earth-shattering. What happens beyond that is less certain.Students of classic economics look at economic cycles and say after the Great Recession, there has to be a sustained up cycle in our future, while students of globalization say the worldwide economy is just too complex and impossible to forecast.With Japan struggling at home following the tsunami and the nuclear plant shutdowns not yet under control, with China fighting inflation, with the U.S. struggling to control deficit spending and even approve a budget, and with Europe still worried about Ireland, Greece, Spain andPortugal, no one can confidently say there is another sustained up cycle in our future.One of the results of the recession is that we at Norton Asset Management have elected to travel out of New England. The best part about business travel is seeing different markets and talking with folks outside of our region.So what do we see? We see lots of vacancy, especially in the office sector. We see reluctance to lease more space or pay more rent.What does this mean? In our view, 2011 and 2012 will bring a slow, steady, mild improvement. Will things take off from there? We are not sure. The 2012 presidential elections could re-establish a positive outlook and get the business sector charged up.Only time will tell.Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA) with the Building Owners and Managers Association. He can be reached atwbn@nortonnewengland.com. Edit ModuleShow Tags