Next week PricewaterhouseCoopers and the Urban Land Institute release the 2009 edition of Emerging Trends in Real Estate, which I author. For now, just let me say don't expect an upbeat outlook. But I'll have a lot to report about on ET in coming weeks.
In the Emerging Trends interview process over the summer I was amazed by the still large number of industry pros -- especially on the private equity investing side of the business -- who were still pointing to "fundamentals" as reason to hope that investment performance would not be hurt too dramatically by the credit crisis. They weren't sensing the economic downturn either. Leasing rates seemed to be holding up okay. It wouldn't be too bad.
Well, these Pollyannas should be focused today on the jobs outlook. Many economists forecast national unemployment reaching 9% next year up from 6% now -- financial companies are shedding jobs, the automakers and other manufacturers are tanking, governments are slashing their own payrolls and more importantly contracts to many companies. The construction industry is in a swoon and retailers are cratering. Even Pepsi is laying off folks. There are new headlines every day about corporate cutbacks. Every company I know has put into place what is effectively a hiring freeze. Even if the economy begins to recover by the middle of next year (and that may be too hopeful), typically jobs losses continue well into any turnaround.
The jobs picture immediately exacerbates the ongoing consumer capitulation. People are cancelling vacation plans while businesses clamp down on travel budgets (AIG aside--what were those execs thinking??? I know--they deserved a break from losing all that money!). Landlords will be scrambling to hold tenants and keep up property cashflows as companies give back space. After WAMU, Lehman, and Wachovia, everybody is wondering just what is a credit tenant today? Some law firms go out of business. And how about all those hedge funds who leased luxury digs at sky high rates a few years ago -- do we have any confidence in their staying power? Those long-term leases may not offer as much protection to office owners as advertised. Indeed in this environment, tenant rollovers assume an entirely different meaning.
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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.
