There’s light at the end of the tunnel

Believe it or not, the glass is still half full.It is now clear that the upturn in the “U” recovery will only begin sometime in 2010. The recovery will stretch out, but there will be a recovery. The instant media do not help our individual and collective psyches. If it bleeds, it reads!So with all of these thoughts rumbling around in my head, I was pleased that a Counselor of Real Estate meeting in Boston took a positive tone. Ray Torto, global chief economist for CBRE and principal of Torto/Wheaton, was our guest speaker.On the ride down to Federal Street I was reading Jeff Thredgold’s current TEA newsletter titled, “Wouldn’t it be nice…” Here are some highlights:Wouldn’t it be nice if:• President Obama and congressional leadership were more focused on providing incentives for wealth creation and less on wealth redistribution.• Wall Street “high rollers” had greater legal and financial accountability for the financial market abuses of recent years.• The administration and Congress would reach an intelligent, workable and cost-effective compromise on health care.• We actually got serious about U.S. energy independence with a program geared to 1) conservation, 2) alternative sources of energy, 3) access to much more gas and oil in Alaska and the continental shelves, and 4) developing massive deposits of oil shale in the West.• We weren’t running a federal budget deficit of $183 million every 60 minutes.• The $865 billion stimulus program contained more in the way of real economic stimulus and less social engineering.• The Congress would soon get serious about reining in the growth rate of entitlement programs.• We didn’t have a $12.7 trillion gross national debt and we weren’t spending over $1 billion daily just to pay the interest on that debt.So it was refreshing to hear Ray Torto start by saying he is optimistic about America’s and the globe’s future. In a medical analogy, he said he feels we went through the trauma, survived the emergency room and have been six months in intensive care. Now we are moving to the recovery room and will be there for some time, followed by rehab — perhaps up to two years total, or sometime in 2012.The last economic cycle lasted 66 months — peak to peak. Since after the fourth quarter of 2007, we have lost at least 8.4 million jobs. We will likely begin to see positive job growth soon (in 2010), but it will be a long haul to the next peak. It is the first time since World War II that a decade has not created new jobs. This will be a U-shaped recovery over the next four years — a “U” with a broad flat bottom, which is much different than the “V” recessions in 2000 and 2002 that only lasted about two quarters.It will take between 2011 and 2015 for commercial real estate markets to return to a natural state. Different sectors in different areas will recover faster. But it is all jobs-driven. While overall we are in better shape than we were a year ago, jobs equal occupancy and the lack of jobs equal vacancy.There are caveats, of course. The Fed needs to keep the inflation genie in check with a slow, controlled raising of interest rates. Also, energy prices need to remain relatively stable (no sudden spikes). No more (new) wars and, of course, currency exchange rates, no meltdowns in Greece, China etc.Our resiliency and entrepreneurial bent should get us through this economic cycle. Hopefully, the lessons of the excesses stick and we do not revert back to our debt-laden ways. Finally, to get to heaven, survive ‘til ’11!
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