Bagels now cost a dollar a piece in New York -- one dollar for a bagel! And we all know about gasoline prices. Well everyone knows apparently, but the President. That $4 a gallon barrier is just made for breaking. It took a while, but those high energy prices impact everything we buy -- since our country imports more and more, and in any case ships stuff we purchase a long way -- using more energy.
In short, consumers are getting hit hard and that's why the economy is sinking since we are all about consumption. It's been pounded in to us that it is better to spend and support the economy than save. And 70% of our economy has been consumer based, since we do not produce as much as we once did, and have become a net importer country. Until the housing slide, rising home prices and the refinancing wave fueled massive spending. But as we know -- that's over. And now inflation has kicked into gear, hammering all of us on the basics -- bagels (food). And how's your heating bill been this winter?
Wallet tightening is underway and next the jobs picture will start to deteriorate. Businesses are backing off on hiring and have started to tighten spending. Every day the newspapers report about corporate losses and layoffs. And a jobs downturn will not help the desperate housing market or the outlook for credit market loosening.
My pals who manage real estate funds tell me their returns are holding up. They see cap rates rising, but rents have increased in some places. Commercial real estate markets typically are last to feel the pain in recessions -- when stores go out of business and office leases don't get renewed. That won't happen immediately. Let's watch the hotel front where pain registers sooner.
Get ready! Here it comes.
© Miller Ryan LLC 2008
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
