Written By: Bruce A. Kellogg, MAI, FRICS
The Atlanta Chapter of NAIOP, the Commercial Real Estate Development Association, hosted a breakfast meeting that brought members and guests out to not only fill up on good food, but also on good economic input from Emory University’s prominent international business and finance professor who has been quoted and appeared on numerous news programs: Dr. Jeffrey Rosensweig, director of the Global Perspectives Program, Goizueta Business School.
Dr. Rosensweig primarily focused on where we are in the process of the recessionary environment we’ve been living with for over a year. Among his comments, he felt we had a 30% chance of being in a “W”-shaped recovery pattern versus the “V”-shaped pattern we experienced during the 1974-75 period. Another large part of his focus was that the economy is not growing fast enough to create more jobs, coupled with the fact that people today are not considering retirement at the age of 65 as in the past.
A positive point, however, is that the U.S. has grown at a rate of 2.7M people per year, with Echo Boomers leading the way in this unique form of mass production! Between this and the aging of Baby Boomers, it bodes well for the healthcare industry and education, especially for the former.
Some of the concerns presented by Dr. Rosensweig include that the unemployment rate is actually higher than the 10% being quoted, as approximately 6% of the labor force is not counted due to part time employment and other reasons. In addition, the expansion of products, as well as imports, has dropped, the trade deficit is growing, and consumers generally feel tapped out, resulting in fewer purchases. Alternatively, exports have grown for over six months, which leads to the creation of new jobs. Another plus may be that the dollar is cheap now, making real estate attractive to global investors, such as Japan and German, with many entering the Florida resort market.
As we were located in Atlanta, it was mentioned that tourism is expected to generate much activity in the future. Regarding inflation, we were advised that it will return within the next 18 months, although it is low right now. This should prompt us to create inflation hedges now to minimize its impact.
Globally, recession has not negatively impacted China and India as much as most other nations. Brazil has experienced a small decline, but Mexico and Russia have been more negatively impacted than many others. The good news is that all nations appear to be bouncing back. The final words by Dr. Rosensweig encouraged the audience to “keep the faith!” While there are still negative signs in the economy today, we are beginning to see some sunlight at the end of the tunnel. We were encouraged to abandon negativity. It makes sense to follow his advice, which will likely bring about positive change more quickly. Stay tuned!
