Gas vaults over $4 towards $5, Lehman Brothers signals more financial market issues, and last week's jobs report suggests consumer spending will slacken quickly once tax rebate checks are cashed. Some on Wall Street may continue to look at technical numbers and see slow growth. But on Main Street the stress-o-meter registers extreme readings, sort of like temperatures in the Northeast this week. One guy I know just went on medication to calm nerves, another learned his severe toothache results from grinding at night. These aren't subprime mortgagees. They are millionaires on paper with lots of debt, stock market losses, and diminishing prospects for year-end bonuses.
The gloomy jobs report reinforces outlooks that predict more people will face debt crises soon. As noted repeatedly here, many Americans not only over leveraged on homes and second homes, they must also cover car loans, student loans, and credit card payments. Those tax rebate checks won't go very far in this debt morass and as long as people continue to lose jobs -- defaults and bankruptcies have nowhere to go but up, and housing prices will slide some more too.
Then layer on the rising fuel costs. People either cut back on trips to the mall and vacation resort or have less to spend when they get there. The one-two punch of feeding debt service and filling gas tanks saps the consumer, which has been our primary economic generator.
Retailers and hotel owners stand in the crosshairs unless they cater to foreign tourists continuing to feast off the cheap dollar. CFOs start to cut travel budgets as airlines try to raise rates and cut flights in the peak summer travel season. But suspended job growth also means trouble for office owners -- tenants start to retrench and look to gain an upper hand in any negotiations. Not even the Wall Street optimists talk up quick rebounds or much chance for sudden corporate expansions.
Many real estate owners still hope they can dodge all the economic fallout. Managers, I talk to, expect returns in the high single to low double digits for portfolios. It's still early.
Odds on, this mighty hot start to summer leads directly into a Christmas chill.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
