Hey sports fans and most of us in real estate are into sports—have you noticed two of the biggest leagues are in lockout (the NFL and NBA) and aside from a few living off the past stars like Derek Jeter baseball player salaries are in decline. David Stern claims that 22 of 30 of the basketball franchises are losing money and blames player salaries. The NFL lives off multi-billion dollar a year TV contracts, but more fans resist the big ticket prices. At Yankee Stadium, the premium seat sections are never filled and many of the fans sitting in those seats buy them discounted off Stub Hub. Meanwhile, many cities and states think twice about subsidizing sports stadiums and arenas when roads are potholed and teachers get laid off.
The whole inflated sports salary phenomenon was emblematic of our over-spending, over-borrowing leading into the 2008 crash. Now sports team owners are figuring out that the average fan can’t afford to go to as many games or pay as much for gross ballpark food. Games still serve as a good distraction from life’s demands, but those demands (like earning enough to keep out of debt) take increasing priority. And the players like most everyone else will be making less too.
Certainly that’s happening in the real estate world—bankers and brokers try to stir up trades, but the volumes remain well off pre-crash peaks and show no evidence of increasing dramatically. Advisors still pound the pavement to raise money, but admit it may take awhile to put the dollars to work given the extremely lackluster economy. Markets may already be entering an extended pause mode—demand just isn’t perking up and recovery appears priced into most deals. The opportunity fund players start to realize that big promotes are not in the offing and developers don’t have much to do.
We still see the corporate CEO suites pulling down big bucks—their compensation packages spike again after a few down years. But this is another version of the 1870s Robber Barons which promises to run its course once the public realizes that laying off rank and filers, abrogating employee pension plans, and transferring jobs overseas doesn’t justify lining their own pockets with much of the savings. How can these honchos keep making all this money and stockpiling cash in company coffers without any substantial domestic hiring when the unemployment rate is at 9% and the nation’s economy is going sideways at best?
In the meantime, the CEOs deftly deflect criticism by claiming they would start hiring again if there were not all this “uncertainty” about government policy. Yes, uncertainty is the bugaboo constraining consumer demand and it’s all government’s fault. Uncertainty, of course, is code for the possibility of increased regulation and higher taxes on rich folks like them both of which are allegedly bad for business.
But federal income taxes haven’t been so low since the 1950s, myriad tax loopholes and tax subsidies have sliced effective corporate tax rates, and you could make good arguments that more onerous regulation would have prevented many of the abuses that led to our recent crash. If low taxes and hamstrung regulators are good for business and the economy why are we in such a fix today? The CEOs pump hundreds of millions of dollars into politicians’ campaigns to keep uncertainty very much alive in Washington DC. If you were earning as much as them at the expense of everyone else, you’d be putting up smokescreens too.
I think I’ll go distract myself by tuning in a ballgame as long as teams are still playing.
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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.
