2011: more of the same?
The November elections have come and gone. Now the economy is rocking and rolling – well, not so fast. Gridlock in Washington has resulted in no federal budget and no decisions on other key bills, so investors are leery because they do not know what the rules are or will be.Economist Jeff Thredgold tells us that while the U.S. economy has grown for five consecutive quarters, and is currently at 2.1 percent, it is meager but still positive.Officially, the Great Recession lasted 18 months, from December 2007 through June 2009. Here we are 18 months later, but it has not been a robust recovery.I am asked nearly every day “Are we recovering yet?”, “Are things getting better?”, “Do you see an up-tick?”. I try to be positive and optimistic, but this is turning out to be a hockey stick recovery – a sharp drop in gross domestic product which is the blade of a hockey stick, and a long flat to slightly rising “handle”.Like most of us, I think of my two twenty-something kids and their future. I know rising deficits might crush them. But as a businessman I know we have to continue to prop up this anemic economy until it gets some sustained lift of its own.As someone who just turned 60, I think about my future retirement, which will be much more modest than I anticipated.As an avid reader, I think about the nations of Europe, flying high a few short years ago and now needing massive financial bail-outs with interest payments that will choke their national budgets – all this when interest rates are historically low.Slow growthThe commercial real estate sector is not thriving.Some tenants are renewing, albeit for short periods of time. Some are “trading up” to better space, but usually with less square footage.We were looking at the current leasing listings we have at Norton Asset Management and it struck me that some of the properties have not had activity in more than two years. It makes me wonder how some of my commercial brokerage brethren are paying their bills.Because we have not bounced back from this “great recession”, in terms of GDP, and especially jobs, we are now forced to evaluate where we think things will be in two, five and 10 years. Everyone is anxious and timid. Landlords with huge vacancies are feeling the squeeze and tenants are cautious as well.Commercial real estate is a lagging indicator. It takes jobs, expanding consumer sales and population growth to push real estate.So with gridlock in Washington, budget deficits in Concord, Augusta, Montpelier and Boston, as well as tepid growth in the general economy, 2011 promises to be underwhelming for commercial real estate practitioners.When I recently sat down with an issue of Forbes magazine, I was struck by Paul Johnson’s Current Events column “Wanted – Someone to Trust”. Johnson, a historian and prolific author, cites the early leaders of America, admitting freely that it was a simpler time, with much less globalism and interconnectedness. He asks “Where are leaders like these?”The premise is that a strong national leader could begin to resolve the impasses and make the course corrections necessary to right the ship and get America back to work again.Thredgold recently wrote in his newsletter “Tea Leaf,” “Greater clarity from Washington, D.C., in regard to income tax rates, combined with progress toward more affordable government spending, would go a long way toward boosting business sector confidence. In a nutshell, rising confidence levels would enhance employment creation.”Amen.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 firstname.lastname@example.org.