Talk is cheap. Perhaps that explains why there is an abundant supply of it in the world. It’s so much safer to talk about what we are going to do than actually doing it and risk failure of it not happening. Lasting success comes from consistently showing up. Two weeks ago I was in a triathlon in the foothills of Lake Tahoe(I think it was all uphill – even the water!) What I did come to realize (besides the fact that I hate to swim but love to run) is that the world is run by those who show up. Showing up is about taking action despite circumstances. Moving forward despite not being secure. Not waiting for everything to be perfect before you make your move. Picking yourself up one more time. Lastly, a big cool drink of chocolate milk makes you feel like a kid again and aides in your recovery.
These days, we are inundated with news on the financial and economic woes of the United States, Europe and the rest of the developing world. However, according to a February 2012 Fannie Mae Survey, Americans’ concerns about key economic and housing issues are beginning to subside, demonstrating that downside risks have abated. For the most part, attitudes are holding steady. I now consider real estate to be in the early phase of a cyclical recovery. After a hiring slump in mid-2011, the job market seems to be showing strength again. Lest you think that I am being too rosy, I am joined by 38 of the nation’s leading real estate economists who were polled by the Urban Land Institute’s Center for Capital Markets. They foresee the following:
- The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent In 2014;
- Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise;
- Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments.
These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from an unexpected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.
The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation, as measured by the Consumer Price Index (CPI), is expected to be 2.4 percent, 2.8 percent, and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.
Just as my triathlon seemed to be filled with short downhills and long steep uphills, so too is the economic recovery. According to a National Association of Realtors Survey, a “major portion” of small commercial property deals have fallen through because of stricter lending standards. Two-thirds of agents surveyed had lost a deal due to lack of capital.
One of the observations I am having is that we are all doing more with less. Companies are running at 200% over budget on income with the same amount of employees. Companies are paying overtime will hire temporary workers and then full time. Companies also continue to put more people in less space. The average is now down to 200 SF of office per employee, down from 350 SF. One area that is doing less with less is the court system. With budget cuts and layoffs, the unlawful detainer process (kicking a tenant out) has slowed immensely. For an uncontested case, the average time for filing to lockout has grown from 25-30 days to 35-40 days.
Another area where the government has increased is in the enforcement of the Storm Water Runoff rules. This is a déjà vu of the ADA rules. Expect tenant improvements ( TI’s) to be delayed and the cost to be passed back to landlords if you aren’t in compliance. If you own property start reading and preparing. Roof water drains to landscaping and covered (structure) trash enclosures are the main things.
So as your team at CDC Commercial keeps showing up to lease and sell your property. Remember that giving up is the grave where dreams are buried. As I continue to trudge up and down those hills in search of my refreshing chocolate milk, I hope you enjoy this month’s story about milk.
Glass Of Milk
One day, a poor boy who was selling goods from door to door to pay his way through school, found he had only one thin dime left, and he was hungry.
He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door.
Instead of a meal he asked for a drink of water! She thought he looked hungry so brought him a large glass of milk. He drank it so slowly, and then asked, How much do I owe you?”
You don’t owe me anything,” she replied. “Mother has taught us never to accept pay for a kindness.”
He said … “Then I thank you from my heart.”
As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Many years later that same young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease.
Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes.
Immediately he rose and went down the hall of the hospital to her room.
Dressed in his doctor’s gown he went in to see her. He recognized her at once.
He went back to the consultation room determined to do his best to save her life. From that day he gave special attention to her case.
After a long struggle, the battle was won.
Dr. Kelly requested the business office to pass the final bill to him for approval. He looked at it, then wrote something on the edge, and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all. Finally, she looked, and something caught her attention on the side of the bill. She read these words …
“Paid in full with one glass of milk”
(Signed) Dr. Howard Kelly.
Tears of joy flooded her eyes as her happy heart prayed: “Thank You, God, that Your love has spread broad through human hearts and hands.”
