Norton On Real Estate: Taking the long view will strengthen region’s economy
With 2008 well under way, lots of concerns about the regional and national economy are surfacing. My prognostications are that the best scenario for 2008 is that it will equal 2007. However, this may be optimistic. As of this writing, I think 2008 will not be as strong as 2007. I attribute this to three overall trends.
First, the region is soft and continues to soften. We are not creating jobs, and we are not growing in terms of population. New England has had a good ride, generally positive since the real estate and banking debacle ended in 1994. We even bounced back from the Tech Wreck of April 2000 — not 100 percent, but more than some regions. Our regional energy costs are high and the lack of a new tax base means existing businesses have to pay for rising costs of government and services. Our infrastructure is old, tired and in need of serious investment.
Those are the challenges, but there is no wave or economic boom rolling up from Boston this time. Electronics is now global, our regional firms do R&D and prototype development, but not large-scale production. The computer industry has left to a large degree. Last year laptops outsold PCs, so manufacturing is half a world away. Telecoms are global as well, not much going on here in the Northeast. Defense development and production has migrated. That is a global concern. There is no new wave coming to raise all boats outside of Boston. So we are on our own.
We need to promote smaller businesses. We need to train and educate workers to be top-flight talent for small entrepreneurial firms fighting to compete in a very competitive global economy.
Second, New Hampshire prides itself on receiving many accolades, such as the fastest-growing/strongest/leading state in New England. This story is old news. New Hampshire still leads New England, but the lead is tightening, and New England’s numbers are not impressive.
California’s economy benefits from 400,000 new citizens each year (the legal kind) while New England is losing 200,000 to 300,000 each year. The subprime housing mess will aggravate this trend. No, New England is not going to be as badly scarred as some regions, but the facts are that there was excess in this critical sector of the market and it will take time to correct. Banks, like most large U.S. firms, have been making record profits in recent years. The good news is they have been paying record taxes. The bad news is the profits were partially derived from lack of R&D, reinvestment and capital spending. It may soon be time to pay the piper.
Third, the U.S. economy is shaky. Excess government spending, with large deficits and acknowledgement that Social Security, Medicare and our national infrastructure are all under-funded at the same time millions of baby boomers want to retire suggest there are huge bills to be paid, probably by significantly higher taxes. But in a new global economy that rewards low taxes, innovation and adaptability, higher taxes is a no-no. Think of Europe where large social programs have been heavy millstones around their necks for two generations.
We also have to figure out the oil situation. Can you read this without being concerned with $90- to $100-per-barrel oil? The oil issue has been looming for over 50 years, now we are expected to do something about it.
We have enjoyed an incredible expansion of our economy and our net worth in the 25 years since 1982. There is no guarantee that this largesse will continue. We need to understand the global playing field for the next 25 years and identify both our roles and our value-added component, if we are to continue our standard of living and quality of life.
But green initiatives, non-oil-based energy and systems, applied technologies to squeeze more efficiency out of existing equipment and infrastructure all represent opportunities. In order to realize them, we need to stop managing quarter to quarter and take a longer view. So don’t worry about 2008 so much as where we will be in 2012 or 2012. nhbr
Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at firstname.lastname@example.org.