12:35am | I keep hearing, and parroting, phrases like: “We’ve reached bottom,” and “Things are beginning to improve,” and “Zen in 2010.” The last one was a phrase from a previous column for which I asked readers to give me their thoughts on what this year holds for the economy and the real estate market. Actually, the idea of using catchphrases to simplify economic outlooks came from a column I wrote while working for a commercial real estate-focused news outlet known as GlobeSt.com.
The CRE market is as a place where there are no shortage of reports and analysis on the market, as well as the economy, and where brokers and financiers alike poise themselves as experts on all things financial—and many of them are experts on the economy, and their forecasts are usually among the best that can be found in the business world. It was at the website where I first heard the catchphrase, “Things will be hell until 2012.” Now it seems there’s a bit of analysis to back that up.
A dose of bad news, or good news depending on how you read it, was reported by GlobeSt.com Tuesday in a story that states, “Commercial real estate should experience a robust return in 18 months to two years, according to industry leaders Sam Zell, chairman, Equity Group Investments LLC, and Michael Fascitelli, president and CEO of Vornado Realty Trust.” The two men, who spoke at the DLA Piper Real Estate Summit 2010 in Chicago on Tuesday, gave their opinions on investment opportunities and the future of CRE, the story states.
“Occupancy across the board in all markets will get much higher, and the single-family housing market, notwithstanding areas like Las Vegas and Miami, should get better,” Zell was quoted by the website as saying. “That should give the US back its mobility, historically one of our country’s strengths, that if you need to move to a job you must have liquidity in your home to be able to sell.” Fascitelli is quoted as saying: “I think you’re going to see a good market for real estate in two-to-five years.”
I’m assuming the Fascitelli timeframe takes into account the office market and how tightly it’s tied to jobs creation—or the lack of it, despite the government’s so-called stimulus package that seems to have helped out rich bankers and so far has continued to leave needy job seekers out in the cold—continues to be weak at best.
In fact the office market in places like downtown Long Beach and neighboring Orange County’s office market continues to look dismal, and they will continue to be in the dumper so long as the jobs that were lost in the last few years are not replaced. Downtown Long Beach has the advantage of having an abundance of affordable Class B and Class C space, so bargain hunters looking to house their firms may continue to turn their eyes toward the area. Orange County, on the other had, has a great deal of costly Class A space, and a hefty portion of those new and pricey office spaces were tied to the now-obliterated mortgage market in that area.
All that being said, 2012 seems like a safe bet for all of us forecasters, professional and armature alike, to sound the “all clear” signal. So I’ll parrot it again, “Things will be hell until 2012.” And if you don’t agree with the “hell” analogy, or if you think Fascitelli’s two-to-five year estimate isn’t all that far away, try living off an unemployment check like the 12.4% of us in Los Angeles County are doing right now. It’s worse in Long Beach, according to data for March released two weeks ago by the Employment Development Department. The rate in Long Beach was at 13.5%.
The money problems, of course, aren’t confined to those who are jobless. The government is out of money, too. And it’s the government’s job, more so nowadays it seems, to take money out of people’s pockets. It looks like the state of California is going to be taking a little more dough out of Long Beach’s sorely ragged pockets.
A Sacramento Superior Court Judge this week upheld a state budget bill requiring redevelopment agencies statewide to transfer $2.05 billion in local redevelopment funds to state purposes over the next two years. The decision by Judge Lloyd Connelly is expected to cost Long Beach’s Redevelopment Agency around $6 million, City Manager Pat West told me when I interviewed him about the monetary take last year.
However, following the decision the California Redevelopment Association Board of Directors voted unanimously to appeal the decision. “We strongly disagree with Judge Connelly’s ruling which effectively says the Legislature has unlimited discretion to redirect local redevelopment funds to any purpose it wishes,” CRA Executive Director John Shirey, a former Long Beach deputy city manager, said in a statement issued on Tuesday. “Under that logic any state program could be called redevelopment. The Legislature needs to deal with its budget problems by making hard decisions using its own limited resources—not by taking away local government funds. Despite this ruling we continue to believe taking local redevelopment funds and using them to fund State obligations is unconstitutional, and we plan to pursue and appeal immediately.”
Shirey added: “Redevelopment stimulates billions of dollars in economic activity and supports thousands of jobs, which is exactly what we need right now to boost California’s sagging economy.”
Yes, John, yes. More jobs. That’s the answer to many of our problems. And by “our,” I mean pretty much the whole world.
I’m reminded of an old banker joke: A banker fell overboard from a friend’s boat, and his friend grabbed a life preserver, and held it up, asking before throwing it, “Can you float alone?” “Obviously,” the banker replied, “but this is a heck of a time to talk business.”
What the economy needs are more life preservers for jobless—and by “life preservers,” in case any federal government big wigs, or business executives who continue to “hold off hiring until things look better” are listening, I mean JOBS.