IF YOU TAKE A LOOK AT CONDITIONS TODAY, things probably look pretty familiar. The "recovery" still doesn't feel like one; Congress is still bickering; the Eurozone is getting hammered; the unemployment rate has averaged almost 8.3% for the past six months and job growth is modest, at best; office absorption isn't improving by much; capital, unless you have a best-of-the-best deal, is still not easy to obtain; and the only transaction activity and price growth that's occurring is being fueled by interest rates, which remain at record lows.
Well, so far, 2012 hasn't been a savior year, but neither was there heaven in 2011, and the prior year also fell short of expectations. As one of the speakers at our recent Institutional Insurance Symposium in DC stated, it feels like Groundhog Day for the third year in a row. And yet, there are those who believe 2013 will be better.
Perhaps. The upcoming presidential election has a lot of decisions in limbo, so there's a chance that the bipartisan bickering may stop after November. Corporate profits are up, but until now, that hasn't translated into jobs. There will come a point—hopefully soon—when companies start hiring again. That, of course, would fuel office absorption and put money into consumer pockets.
And then there's the European debt crisis. There are countless descriptions of the situation and its impact on the US, but I'll share two of my favorites. One speaker at the CRE Finance Council's annual meeting earlier this month said that talking about the Eurozone distress is like "circling the toilet bowl of the apocalypse." Meanwhile, another industry pundit described the crisis' impact on the US as "a giant turd floating across the Atlantic."
But word from the recent G20 meeting in Mexico is that global leaders have come together, determined to address and resolve the crisis in the 17-nation region. Under pressure from global leaders to integrate their fiscal houses and capital structure, EU leaders have planned several meetings for June to come up with a plan to tackle the crisis. The plans will culminate at the full EU summit in Brussels at month's end, which will seek to come up with a growth strategy and drive down the region's rampant unemployment level.
The EU leaders' determination is a welcome sign after years of non-action. Hopefully they will come up with a plan to pull the Continent from the depths of its recession, even if that means the hardest-hit countries will be removed from the bloc (a likely scenario).
On our shores, the central bank's policy committee cut its outlook for the US economy, bringing growth expectations down from 2.4% to 1.9%. The Fed, meanwhile, extended the "Maturity Extension Program," or what the Street calls "Operation Twist" (originally set to conclude at year-end), and plans to sell $267 billion of short-term Treasury securities this year, using the proceeds to buy securities that mature in six years or later. The effect? Long-term interest rates will remain low, hopefully spurring consumer and business spending. If that's not effective, I'm sure Bernanke has more drastic tricks up his sleeve.
Here's hoping he won't have to resort to them.
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