If real estate investors are counting on a private sector revival to stoke demand for space and bail them out of cash flow shortfalls they better think again. After a government stimulus prompted spurt, U.S. economic growth is now expected to ebb. The stock market is slumping again and European governments are going into austerity mode, and Congress resists further pump priming.
Companies realize the obvious-- this is no time to rev up hiring engines and institutionalize various strategies to buffer bottom lines using fewer high cost U.S employees—stepping up offshoring, outsourcing to more freelancers (who don’t get paid benefits or take up office space), and relying more on technological efficiencies than manpower. That’s why private hiring looks so anemic. As the government pulls back its stimulus and state governments retrench, the unemployment rate will stay high, consumer confidence will remain low, and business profits will continue to depend on productivity advances not sales gains. It looks like a vicious cycle, tamping down employment growth which the economy desperately needs.
Of course, the deficit cutters are right about the need to reduce the country’s massive debt, which results in taxpayers forking over hundreds of billions of dollars in interest annually to foreign T-bill holders before paying a dime for domestic priorities. But to think we can reduce deficits without raising taxes is ludicrous. And to think we can reduce deficits without raising the Social Security age and cutting public pension plans is equally ridiculous. We also will need to rethink our defense spending and how eagerly we engage in exceptionally costly foreign conflicts. But when we raise taxes, lower senior benefits, and cut payouts to defense industries—we’re cutting into people’s spending power and dampening employment growth (defense contractors hire a lot of people).
Some economists, meanwhile, talk about an eventual revival of U.S. manufacturing. And that may happen in coming decades. But in order to compete with low cost overseas manufacturing centers, our compensation rates will be well below what union labor has been used to making. And these jobs will be concentrated in Southern right to work states not the hobbled Midwest Rustland. But any manufacturing revival will be years away, and little help in the near term.
The BP horror in Louisiana highlights the U.S. jobs dilemma. Here the state’s long-coddled major industry (oil) has wiped out the state’s other important business (fishing), and politicians and locals, including fisherman, are begging the federal government not to curtail the business that precipitated the nation’s worst environmental catastrophe for fear of all the additional jobs that could be lost. Their pleas won’t help what’s left of the debilitated New Orleans office market—Big Oil moved most of their “clean” office jobs out of state to Houston years before Katrina.
Happy Fourth of July…
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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.
