The local commercial real estate industry braved harsh winter weather elements January 16th and showed up in force to hear economic predictions for the coming year. With the capacity crowd assembled at Dearborn Inns’ banquet center, 2014 CORENET MICHIGAN President Kyle Hauberg welcomed attendees and thanked all of the sponsors for their support of the event, including: CBRE, Stout, Risius & Ross, DMS Moving Systems, Turner, Bodman & Title Source. Other organizations lending their support included: BOMA, CBOR, CCIM, CREW, ICSC, IFMA, IREM, USGBC and SMPS.
Following years of “doom and gloom” forecasts, there’s reason to believe Michigan’s financial fortunes are changing and brighter days lay ahead. Stating “I’m an Economist and I am here to cheer you up”, Robert Dye, Ph.D, Chief Economist for Comerica Bank, spoke about the “Great Recession of 2008-2009” and how it continues to be a drag on the economy. Before speaking about his predictions for the year, Mr. Dye laid out some fundamental truths and cycles of our US economy.
The audience received an Economics 101 review in that there’s a virtuous cycle in our economy which includes housing, manufacturing (autos), labor and financial markets. Outside forces around the world certainly affect what’s happening in our US economy, including financial markets and monetary policies in other countries, their manufacturing trends, trade policies and technological advances. All of these forces pushing and pulling lead to uncertainty with the direction of our own economy which may result in either progress or stagnation.
While national unemployment is below 7% for the first time in over 5 years, many believe it’s a result of people giving up on locating employment. Furthermore, it’s no secret the rolling out of Obama health care has been problematic and nobody understands the long term implications this national policy will have on our economy. Although threats of continuous government shutdowns are behind us, problems remain with long term entitlement programs (Medicaid, Medicare and Social Security) and finding common ground on solving the national debt ceiling issue. Interest rate spikes could also spook the markets. With continued uncertainty and without more sustained job growth, Mr. Dye spoke about a mere 2% GDP increase in 2014. Unknown world events could also drag down the US economy.
While the US is less dependent on oil imports, they continue to play an important role in our US economy. Should a world event lead to spikes in domestic gas prices, such an event would certainly play havoc with our overall economic recovery. Other various world “wild card” events need to be watched, including: recovery of the European economy, terrorist events, Syria, Iran’s nuclear program, etc.
Comerica’s Chief Economist listed a good number of signs in our overall economy to illustrate sustainable growth pointing to a “real recovery”. Land values are growing with income, unemployment is down, home sales and new construction are all headed in the right direction, consumer confidence appears to be on the rise, post-recession job gains are trending up, labor market data shows improving conditions, pent up demand for cars and other big ticket items are substantive and interest rates are at a historically low point in our history. Mr. Dye also noted the brightest part of our economy is the emerging energy and manufacturing renaissance our country is experiencing. The huge energy manufacturing revolution is bringing back more manufacturing jobs and helping with the overall trade balance of our economy.
While there’s more reason to feel positive about the direction of the economy, the lingering effects of our most recent “Great Recession” continue to give us pause heading into 2014. Only time will tell if the continued growth of commercial real estate is sustainable and follows the general recovery of the US economy. Stay tuned for what will certainly be an interesting year for those in commercial real estate and affiliated industries.
ROBERT E. MATTLER, Associate Broker, Attorney and LEED AP BD+C, is Director of Green Brokerage at Armada Real Estate Services in West Bloomfield, Michigan. He speaks and writes about emerging green real estate issues in Michigan and elsewhere. Bob is also the senior news correspondent for www.GreeningDetroit.com For more information, contact Bob at Armada Real Estate (248) 855-1221; or by e-mail: Mattler@GreeningDetroit.com