The numbers, bad and not-so-bad, tell the story
CIBOR, New Hampshire’s statewide Commercial Investment Board of Realtors,
recently held its quarterly meeting at SERESC in Bedford. The theme was “Looking Through the Crystal Ball,” and economist Brian Gottlob of PolEcon Research gave a detailed and interesting presentation on current population and demographics.
For instance, New England lost 1.8 million people between 2000 and 2006 (an average of 300,000 a year. Now, Massachusetts and Connecticut are taking the brunt of this with the large loss of industrial and manufacturing jobs. In northern New England there were about 45,000 natural births each year and about 25,000 international immigrants.
Yes, our young college grads are leaving for more affordable states, but they also try to come back when they are raising young families. The more education they have, the more likely they are to return.
In New Hampshire itself, there are 28 degree-granting institutions with 70,000 students, but only 40,000 are from New Hampshire. In fact, 80 percent of New Hampshire’s college and college-plus educated population are from outside the state. New Hampshire continues to outperform the other five New England states, but the margins are smaller. Sales and acquisitions of our large employers, such as Fischer Scientific by Thermo Electron, continue to grind at our technology, R&D and manufacturing workforces. We are currently holding our own, but just barely.
This is not doom and gloom, but it is reality. New Hampshire needs to seriously foster an entrepreneurial climate. Key elements of such a strategy include, but are not limited to:
• Better and more higher education
• A better-educated workforce, especially from our tech colleges
• Improved quality of life for all ages
• Affordable housing for our workforce
• Incentives for small business
• A favorable tax environment
• Promoting public health and safety
If we do not do these things, we will be eclipsed by those states and regions that do. We need a 20-to-30-year vision for our state. Is anyone listening in Concord?
One of New England’s challenges is our 70-year legacy of suburban sprawl. Columnist Neal Peirce tells us that in 2001 Americans logged over 330 billion miles going to and from the store. That’s shopping, not commuting to work! The estimate for 2006 is 365 billion miles. Building big boxes on the periphery of our residential areas exacerbates this trend. It is time to get serious and encourage mixed uses, more concentration and less parking.
Current suburban parking requirements enable the sprawling. Land use and transportation are inextricably linked. First, change our zoning to encourage walkability and local transit. At the same time, discourage the big box, sprawl-like development. Then develop the “pooling of vans” for ride-share and mini-transit trips that will allow us to wean ourselves from driving everywhere. Our suburban zoning, with isolated land uses, forces us to live away from our jobs, our stores and our recreation. We no longer have noxious industrial plants with pollution, noise, truck traffic, etc. Today our manufacturing is often light assembly.
There is a softening in the housing market — more so in new homes, but sales of existing homes are lagging too. It is a good time to think about the next wave — smaller, greener, more efficient housing, quality construction on smaller lots — not vinyl clad McMansions on two acres.
In the commercial real estate sector, we continue to see cap rate compression (investors and buyers willing to take lower return, some in the 5 percent to 6 percent range). If interest rates turn upward, return on highly leveraged real estate could turn negative. A rising tide floats all boats, but eventually the tide recedes as the market adjusts. However, unlike the tides whose coming and going is very predictable, economic cycles are far from predictable.
If regional employment holds steady, New England should weather a downturn fairly well. But boom towns like Las Vegas, Phoenix and Miami are overbuilt and will take some time to work through the excess inventories.
Many economic forecasters feel the second half of the year will be stronger than the first half, at least in terms of gross domestic product. I hope they are right as we need some stimulus to sell and lease the commercial buildings we have listed. Economist Jeff Thredgold suggests that the recent sluggishness is like slowing a car from 55 mph to 31 mph. This slowing should help minimize inflation pressure further in coming quarters. He expects those pressures to remain under control even as we see the economy picking up speed over the coming quarters.
Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE), a fellow of the Royal Institution of Chartered Surveyors (FRICS) and a member of the board of The Initiative for a 2020 Vision for Concord. He can be reached at wbn@nortonnewengland.com.
