“Why do you press harder on the remote control buttons when you know the batteries are dead?”…I wonder how many of you did this over the last few weeks of the Holiday break? More importantly, I wonder if that is not what the Fed is doing with their constant stimulus and stubborn economy and unemployment rate?
This time of year, we look forward to a year where real estate will once again be a positive force, not just for our respective wallets but for the consumer and the American economy. While the real estate market’s recovery may have been gradual in 2013, it was consistent, moving on a steady path forward and upward. Commercial real estate has historically been a delayed mirror of the economy. As we continue at very low rates of new construction, we are seeing existing vacant space being absorbed or redeveloped. However, there continues to be a dampening effect caused by the quantum shift in space demand caused by technology. You can now live smaller. When you downsize your computer to a laptop or tablet do you really need a desk? If you carry your books on a Kindle do you need a bookshelf? Is your iPad your TV? We used to need hundreds of square feet to hold our stuff, but the next generation can fit all their possessions in the back of a Zipcar. And who needs a parking space if you can share a car?
Although your remote control batteries may have been dead the store mannequins may have been semi-alive when you were shopping! Futuristic News reports that store mannequins now have Kinect cameras built into their eyes, other retail innovations tracking shoppers are heat tracking cameras over aisles, Bluetooth sensors picking up your phone. All tracking “shopper behavior.” We seem to be outraged that the NSA is culling our data or listening to our calls but your local Target store knows that you like Miley Cyrus, has pictures of you holding up her latest album, knows your ATM & Pin #, credit card # , your cell phone # and your IP address so they know when you are back!.
Speaking of phone numbers, expect to see area code “442” to start showing up on your caller ID more frequently. This is an “overlay” on the “760” area code and is being rolled out this year because of a shortage of “760” numbers.
In December, the Fed put its cards on the table and announced that tapering would begin. It is going to scale back $10 billion a month, starting this month. That’s about a 10% cut and the market seems OK…for now. Going forward, keep your eye on the 10-year Treasury not spiking above 3% and unemployment to stay steady or declining. In case you are looking for something else to worry about, here are the top 10 worries for the real estate industry in 2014 according to the ULI/PWC 2014 Emerging Trends Survey.
10. Refinancing
9. Global Economic Growth
8. Tax policies
7. Inflation
6. Land costs
5. Vacancy rates
4. Construction costs
3. Income and wage growth
2. Interest rates
1. Job growth
To view the full PWC/ULI report, you can download it here. As you can see, many of these items revolve around inflation – an issue I will discuss more of next month.
In the meantime, we have recharged our batteries and are up for a quick start to the new year, we are reviewing each property and each deal with plans to use our best market knowledge, technology, closing skills but never forgetting that in the end, this is a “people” business and it is the relationships we have and that we make that are the difference in the end. I hope you enjoy the story…
The Cleaning Lady
During my second month of college, our professor gave us a pop quiz. I was a conscientious student and had breezed through the questions until I read the last one:
“What is the first name of the woman who cleans the school?”
Surely this was some kind of joke. I had seen the cleaning woman several times. She was tall, dark-haired and in her 50’s, but how would I know her name?
I handed in my paper, leaving the last questions blank. Just before class ended, one student asked if the last question would count toward our quiz grade.
“Absolutely,” said the professor. “In your careers, you will meet many people. All are significant. They deserve your attention and care, even if all you do is smile and say “hello.”
I’ve never forgotten that lesson. I also learned her name was Dorothy.
