Image via WikipediaGood news blared from the speakers of my clock radio, touting the importance of getting out on the street and selling your business, or in the words of John F. Herbst Jr., President of Wallingford\'s I2S, LLC, go to where the fish are. If customers or clients are no longer in your town, state or region, find them.

Herbst found his clients in China and with a little government help from the U.S. Commerce department (more good news, those groups do work for us), landed contracts for $23M in product manufactured in CT and exported to China where I2S will build two steel mills. Fifteen new jobs will be created in Connecticut. An interesting aside is that fifteen jobs represent 40,000 hours in manpower.

Portfolio.com from the BizJournals group published a story about a Kauffman Foundation for entrepreneurship study that stated \"Start-Ups\" are hiring fewer people in part due to technological advancements. Looking at the amount of man hours that go into a single job, one starts to understand how much work one needs to have in their log to create a job. With so many start-ups being technology companies, the good news for one Connecticut manufacturer starts to explain why making actual products is so important to the jobs picture in the U.S.

http://www.portfolio.com/business-news/2011/07/11/kauffman-foundation-study-shows-startups-less-healthy-hiring-fewer-workers

http://www.myrecordjournal.com/wallingford/article_6d3a1e2c-ac34-11e0-9090-001cc4c002e0.html

http://articles.courant.com/2011-07-11/business/hc-china-trade-tenova-20110711_1_trade-mission-mill-wallingford

Related articles
Wallingford Market Update for May 2011 (wallingfordwired.com)
U.S. trade deficit swells (theglobeandmail.com)
New Firms are Generating and Holding onto Substantially Fewer Jobs in the U.S.; Kauffman Foundation Study Finds that U.S. Jobs Problem Pre-dates Great Recession (kauffman.org)
Oil imports drove May trade deficit to $50.2B (seattletimes.nwsource.com)


July 12, 2011

Connecticut union members, all 45,000 of them, from university professors to the police force to social workers to snow plow drivers have a state savings agreement to ratify with Connecticut and Dan Malloy.

SEBAC (State Employees Bargaining Agent Coalition ) had posted a summary of the agreement on their website and reaction is strong. Wage increase freezes and no furlough days are some of the hot button topics.

But, the most astonishing piece of this agreement, to me anyway, is a step toward healthy preventative medicine. Employees must sign a commitment to have annual check-ups and take lifestyle and medical steps to improve their health. If they don’t there will be a fine, and not a small one: $100 a month for those who refuse the commitment. Whether a watchdog will be checking all the check-ups is another thing. A new job as overseer doesn\'t seem to fit the idea of cost-savings that the administration is touting. But, the idea behind preventative health is sound, even if all the implementation bugs haven\'t been thought through.

The Governor was looking for $2 Billion in savings. This agreement as it is summarized today offers $1.6 Billion in savings from union workers. The private sector can expect the Governor to come back at them to make up the $400 Million difference. Although additional cost cutting measures have been discussed, don\'t lose sight of the fact that Governor Malloy, is increasing government spending 2% over the next two years, not cutting it. While it may seem to private sector professionals that the union member\'s resistance to this agreement is a point of view most heralded down the rabbit hole, the governor who is asking us all to sacrifice, public and private isn\'t tightening the belt of state government too tightly.

For details of the agreement, union spokesman Larry Dorman\'s comments, the details of no layoffs for four years, and end to longevity payments and the rest, click the link to hit up SEBAC. http://tinyurl.com/65wwwgb


May 17, 2011

Last night the new budget was passed. The government tells us there are massive cuts in a budget that will increase by $40.1M over the next two years. I answer the standard government line with the standard citizen line. Show me one home in America that can cut its budget and increase spending every year. Arguing against the government’s shell games and Ponzi schemes is always a loser. Connecticut will lose even more this time because our children won’t come back to work in CT to pay the ever-increasing tax burden. Companies will shutter their doors or flee. The ranks of private sector employees will shrink again. Our anemic economy will buckle under this blow.

This tax hike, the largest in the state’s history will cut everyone. Across the board taxes that penalize us for purchasing essentials like food are regressive, hitting lower income individuals with a greater percentage of the burden.

The State of CT has consistently been ranked between 48th and 50th best state to do business in the country over the last four years. For the last TWENTY years, we have come in dead last, 50th, the state with the least ability in the nation to create new business and expansions. On the bright side, we do rank # 4 in taxed states. How many people in CT realize that not all U.S. citizens work until May 2nd to keep their first dollar of income. Never mind the dollar, their first dime, first penny. Residents of Connecticut work more than 1/3 of the year before we can keep any of our income. Somehow the fact that New York works its resident till May 26th actually makes us feel better.

It’s ironic that Connecticut’s nickname is the Constitution State. The idea of a Constitution was born of taxation. Taxation without representation: how many of us felt represented in this tax hike?

Not me as a person, nor as a small business owner. The increased gas tax, taxes on my business equipment, additional sales taxes on services, these might just put my 26-year-old, second generation, company out of business. Yet, Malloy claims that this regressive tax hike is going to create jobs. Where? The government? What happens two years from now when more local businesses, small retailers who for the first time ever tax a baby onesie, close? Where will those government jobs be then? When the companies have been driven out, how will anyone keep their jobs? If there is some other way that Malloy intended to create jobs through these hikes, I’d like to know.

Dannel Malloy drove the specter of Osama Bin Laden, Al Qaeda, and The World Trade Center Deaths off the front pages of CT’s papers quickly and decisively. The Connecticut State Legislature: Economic Terrorist. Do the Legislators realize that they have family businesses, entrepreneurs and all those companies who have been asking themselves, is it time to move our headquarters south or offshore in their cross hairs?

We hunted Osama for ten years because he destroyed thousands of American lives in the towers, yet we elected Malloy. We voted for Malloy to go to Hartford and destroy our livelihoods. The good news is that we can’t be lower than 50th so taxing the struggling economy of the 50th best state in the union to do business won’t be change our stats.

Some of my favorite new taxes, in no particular order are: 10% increase in the cost of a ticket for concerts and sporting events. Those sporting and concert venues that had been touted as economic drivers in their region, The Arena at Harbor Yard, The Mohegan Arena, and the rest, they’ll take multiple hits: First from a drop in ticket sales, then from a drop in acts who play the venue because the seats are always empty. Malloy saved us from a $.03/gallon gas tax increase, but Diesel fuel? That’s a different matter.

Hopefully Connecticut residents don’t know that an increase in the cost of diesel will translate into increased costs for products on shelves. Nor will it occur to them that those few companies left manufacturing in Connecticut will become less competitive as Diesel driven distributed goods exported to other states and Canada rise in price due to transportation. Look for Metro North fees to increase along with the Diesel Fuel Tax.

Now that Malloy has taken away that under $50 apparel and shoes tax exemption, maybe you can save a little money by making your own clothes. Nope. Fabric and yarn will be taxed now too.

Don’t forget our state’s health. Non-prescription medicine will also be taxed for the first time.

Don’t park in the cross walk, speed or renew your driver’s license cause all those fees rise too. Of course, if you don’t renew your license you’ll get one of those nice new high-priced tickets, so you might want to do that.

The guys on Capitol Hill are glowing with achievement right now. They are slapping each other on the back proud of their ability to make the sacrifice equal. Yet, three Democrats in the Senate voted against this budget. Be sure to remember them July 1st not only when you find yourself paying taxes on items that were never taxed before, but when you are paying that 6.35% sales tax.

Tax hikes are pedaled to people by saying they only even the playing field. The rich and big companies are the only ones who take the biggest hits and they barely feel it. With the exception of GE and a few others, Connecticut isn’t made up of big companies. We’re a state of entrepreneurs employing less than 50 people, less than 25 and by the end of the year; I expect we’ll have fewer of those companies because this tax increase could very well be a death knell for a hundred companies, including my own.

Of course, this whole budget does depend on unions making a $2B concession. If they don\'t and layoffs begin, does anyone expect that these tax hikes will go down?


May 4, 2011

I tried the CoStar Kool-Aid but it didn\'t do it for me. CoStar works well in primary trophy markets like D.C. where they are now based and Chicago. But in the backwaters of New Haven County Connecticut, much of their data is out of date.

LoopNet is less about research and more about marketing, so it was one of the better resources for my company to produce accurate information about market availability if not vacancy rates and absorption rates.

As it is planned now, LoopNet and CoStar will still function as they have traditionally when they were independent companies with CoStar providing information about leasing and sales and LoopNet providing marketing information to the masses. The combination of the two entities will reach 15% of the total Commercial Real Estate world of Broker Professionals, Landlords, Tenants, Lawyers, Property Managers and the rest of us who move the Commercial Real Estate market. The commercial real estate market is one of the largest asset classes in the United States with over $11 trillion in value.

CoStar has acquired ten other real estate information companies, but LoopNet is the feather in its cap. As a user, I don\'t expect big changes yet, just a lot more sales calls and ultimately, more fees.

The details, facts and figures of the transaction are detailed here on GlobeSt.com. http://www.globenewswire.com/newsroom/news.html?d=220019


April 29, 2011

The promised year was 2012. Investors, Brokers, anyone thinking about or involved in the commercial real estate market were told for the past two years that we should expect the market to remain in the doldrums through the first part of 2012. But, activity has beat the estimate. The Commercial Real Estate Market nationally is buzzing again.

Investment in Industrial real estate began on the west coast industrial hubs at the end of 2010. In the Northeast, Industrial real estate in the form of clear-span flex space remained desirable and hot throughout the second half of 2010. The trend continues in 2011 and beyond.

Connecticut’s private sector is largely made up of small companies that employ less than 250 people. For smaller companies based in a state where casual dress rules the day, non-traditional office space that is easily adaptable from a cube farm to a lab to a distribution area rules the day when tenants or buyers are looking for new space.

In the Boston area, Investor-Developers are picking up Retail Centers that hold promise for physical and construction expansion in future years. The office market remains in a holding pattern but Lab space is being absorbed more rapidly than expected last year.

In Connecticut and New Haven County in particular, leasing activity has picked up since our tough winter. Business activity throughout the state slowed, while roofs were shoveled and roads were cleared. New Construction for uses other than educational facilities and medical facilities is still far below the levels those that herald growth in the market, but Privately owned companies who hesitated to purchase properties for their operations last year have their eyes open again.

Last fall, Washington D.C. was the hot office market. The government expanded into vacancies and took space while other offices throughout the country gave up space. But, NYC rents are back on the rise and vacancy is dropping.

The Drake Hotel property, one of the most valuable pieces of city real estate, according to The Wall Street Journal, is on the brink of redevelopment. The owners can exploit a number of potential uses on the site. Hotel properties in Manhattan didn’t suffer the way those in Vegas, Miami, Los Angeles and other cities did in large part due to the devalued dollar and European tourists. The apartment market has bounced back nationally too. Real Estate headlines for the past two months have touted the strength of the apartment market.

So, the news is good almost across the board. The apartment market has come bounding back. The Industrial market, especially in cities with good port access and solid distribution access (rail and road infrastructure) keeps the 2010 roll going and investors are putting their money back into real estate across the country. Warehouses are moving product. D.C. grew 43,700 new jobs in the last 12 months filling empty apartments. Lab space outside Boston, especially in East Cambridge is filling. Over the last ten years a quarter million square feet a year, on average has been leased up.

But the news is not all sunshine and unicorns. Chicago’s industrial market continues to endure a dearth of transactions and a lot of empty space. And perhaps, more importantly, the larger economic indicators nationally remain in flux.

The banking industry remains under fire with some headlines claiming that smaller banks, mutual and community banks the sweethearts of the recession years are in danger of failing, whether those dire predictions are fulfilled remains to be seen, as is the future of Bank of America’s bottom line. The refinancing of commercial mortgages, had the pundits screaming at this time last year as the second falling shoe in the real estate market, seem to be all but forgotten, whether they stall the recovery that even USA Today is now touting also remains to be seen. Employment figures, the rising price of oil, and re-employment of Americans, especially in Connecticut along with rising tax burdens will play a role in the resurgence of the market.

Overall, this bolstering of the market and its positive trajectory may continue strong and healthy, but it’s more likely that there will be bumps in the road as the market finds its steady normal.

*****on another note, it seems that USA Today and I had the same idea today. Here\'s their take........ http://tiny.cc/e5aw0


April 22, 2011

Pink Magazine a business women's publication wrote in the May issue that investing in REITs (Real Estate Investment Trusts) is a great idea for women without the time to buy property and watch it themselves. Did the writer of that article read ANYTHING about REITs before writing that? Not to mention that a small commercial property is not time intensive. A trusted broker or manager will handle the leasing, trusted subcontractors, plumbers, construction, electricians will handle the repairs that are not the tenants' responsibility.

REITs can be a great investment but when a leading REIT like Prologis starts shedding assets, it's a different world. Part of the argument that Pink Magazine made for investing in a REIT is that it's a time saver, but it's still a stock, without an understanding of the REIT's holdings, the market trends for their property type and the economies and vacancy rates in the markets where the REITs have holdings, an investor is still flying blind. Now is not the time for a real estate novice to invest in a REIT, not without having solid knowledge of market trends and demand.

On the residential front, pundits believe that we are hovering near the bottom of the market. Fewer homes are on the market this spring selling season than there were last year. Less inventory is a traditional sign that the bottom is here. Nationally, homes have declined in value 14% and in some areas, such as Portland Oregon and New Orleans values have actually risen two to three percent.

In Connecticut, Gold Coast Towns like Greenwich, New Canaan and Darien as well as waterfront homes have seen larger declines in value than middle class suburban towns. Outside Hartford, Avon and Glastonbury have also seen declines in value around 15% compared to 11% in towns like Guilford, Madison and Branford.

Foreclosures remain the wild card in the housing market. Currently, banks own about 765,000 homes nationally. Some predict that the number will rise to more than a million over the next ten months. Bankers don't want to be in the real estate business so that number may cause another dip in home values but what will actually happen remains to be seen.

In the commercial markets throughout Connecticut, retail and office properties are still in the most volatile position while light industrial properties and leasing is brisk.


May 14, 2009

It only took Forty Years to reverse a Bad Decision that seemed Avant Garde in the late 60's. I think of the people who hold an Oak Street Neighborhood Reunion every year. Imagine seeing your neighborhood returned after being plowed under for a highway. "They paved paradise, put in a highway connector." -kristin

Plans for Route 34 demolition are revealed
Rustin Fakheri

Staff Reporter
Published Wednesday, April 22, 2009
After 40 years of contention, New Haven will demolish part of the Route 34 East Connector to build a boulevard and shops.

At a press conference Monday, Mayor John DeStefano Jr. unveiled a city project that would reconnect streets and develop businesses along the route in the Oak Street area of the city. The plans include demolishing part of the connector, replacing it with a boulevard, and using the freed 10 acres of land from the project to house businesses. But the project?s expected cost, and its extended time frame, threaten to further strain the city?s budget at a time when the Elm City is struggling for funds.

According to New Haven city records, the state of Connecticut acquired 26 acres of land in the late 1960s to connect downtown New Haven to its valley communities through an extension of Route 34. The project displaced 600 families in the process. At the time, the project was billed as creating jobs and improving the city by destroying the Oak Street area ? a ?slum neighborhood,? as contemporary advertisements for the project called it ? in favor of ?high-income apartments and department stores.?

By razing the Oak Street area, the state claimed it would better connect downtown New Haven and the Yale-New Haven Medical Center, which were on opposite sides of the neighborhood.

DeStefano said he hopes that this time the new project will better connect downtown New Haven to Union Station and the medical school campus while creating more than 5,500 construction jobs and 2,000 permanent jobs. The plan allows the Yale medical school campus ? which includes both Yale-New Haven Hospital and the Yale School of Medicine ? to expand into the area south of the highway.

Developer Carter Winstanley will, as part of the Downtown Crossing project, erect a new building between North and South Frontage Roads. The building, which will feature office and laboratory space, will mark the beginning of DeStefano?s 15-year Downtown Crossing project, meant to rebuild more than 18 acres of land in the area, the mayor has said. The city has yet to turn the land for the building over to Winstanley, though city officials said they expect the deed to change hands before the end of the year.

At the press conference, DeStefano said Downtown Crossing, at a projected cost of $45 million for solely the medical school campus portion, would generate $100 million in sales, income and property taxes. The cost of the entire project, City Hall spokeswoman Jessica Mayorga said, is difficult to pin down in light of the long-term nature of the construction.

But city officials maintain that the project will, in fact, decrease the tax burden on residents by broadening the city?s tax base.

?By reconnecting the street grid, developing space for new businesses, labs, housing, restaurants, cultural attractions, parks and so much more,? DeStefano said in a statement, ?we will be growing our tax base, reducing the tax burden on our residents and most importantly, creating thousands of new permanent jobs at all skill levels.?

Ward 6 Alderwoman Dolores Colon said the project will be the first attempt made by the city to bring a community back to the ward it fractured in the ?60s.

?I think that whole area needs life after dark,? she said of the Oak Street area. ?After the hospital and Med School employees leave, it?s like a grave site.?

The city expects the Route 34 project to take 15 years to complete


April 22, 2009

CNN is reporting the widely known fact that $700 Billion in commercial real estate loans that will mature in the next two years. Surprise! With rising vacancy, dropping rental rates and stricter underwriting standards, their pundit Don Peebles thinks that a lot of properties will go into foreclosure.

What a soothsayer.

Commercial real estate cycles have followed residential cycles since Lords kept serfs to work their land. Crops died off, tenant farmers couldn't meet the price of their rented land plots, the overlord took their land back and home, they couldn't work so stopped buying meat and fish, grocers went out of business, pubs couldn't pay their rent and every one clung by their fingernails or fell until a better crop came in and harvests improved.

Suddenly, the media seems to be catching on.

Those of us in the industry knew that commercial real estate would suffer, the only questions were and remain, how long will the market be slow and how far will values drop? As ever, the answer is yet to be seen. If layoffs continue, businesses will shrink requiring less physical space, more space will come on the market with fewer companies growing or starting up (government bailout money is still elusive for business, CBIA loans are difficult to secure, taking longer than ever, banks are skittish about lending...funny when those businesses might employ more members of the families whose homes are in jeopardy if they could expand their product and service lines and grow through the recession), and landlords will see more vacancy in their buildings, making it harder to meet existing mortgage payments, or refinancing terms.

Now, according to CNN's pundit, this isn't a big deal for the economy because someone else will pick up the property and people won't lose jobs like they did in the financial industry. It'll just be one investor or group of investors trading property to another group, so only a small pocket of people will be hurt. **Nice Spin if you can Get It.**

Conveniently, CNN's real estate report left out an entire sector of commercial real estate owners. The business owners who own their business property or those who own properties larger than they need so that they can live in their workspace for free. As their debt management issues impact them and their business, it'll be a sign that our economy and corporate health is still in jeopardy. He also neatly side stepped the issues that underlie vacancy in commercial and industrial properties. Empty spaces where companies once employed, once paid taxes to the towns and cities in which they are sited, dark buildings not being maintained. Don't let CNN fool you. In painting commercial real estate owners as an army of Donald Trumps that deserve a little humility, they neglect to look at the issues that create and are created for and by a commercial real estate bust.

When buildings go dark it won't simply be because people bought investments that were upside down at the top of the market; their debt exceeding their income. It will also be because companies failed, mortgages came due. It will mean that not only are more people losing work, but town city and county tax based services will suffer. Non-profits will suffer - fewer businesses, fewer sponsorships, fewer profits.

A commercial real estate money collapse will be felt in every pocket of America to some degree. It looks as though the crash will not be stopped with $250 Billion in commercial loans coming due this year. As with every bust, some areas will be hit harder than others and this time, Connecticut's barriers to business, though keeping us out of the hunt for desirable corporate headquarters and regional satellite business centers for the past ten years, will help us through the recession. Since we haven't grown like the rest of the country for the past twenty years, there isn't far for us to fall. Unless of course, our state government chooses to enforce more regressive corporate and sales taxes, in which case we'll only have our legislators to blame. Then again we're already 49th best state in the union to do business, how much farther can we fall?


April 20, 2009

Since the start of the Commercial Real Estate crash of 2009, Connecticut Commercial Real Estate owners have been living in the eye of the real estate storm. Landlords in CT read the news as REIT stocks tumbled on the heels of hedge fund implosions. They worried as the end of 2008 and the credit crisis hit retail property owners with rising vacancies and rent renegotiations. But, they did not feel the earth shift under their feet the way REITs world wide and commercial property owners in Florida, Texas, Vegas and the Inland Empire east of Los Angeles hit by the subprime crash, over building, and the crash of our retail economy did.

Now the storm is gaining speed and no one is safe in the eye. The market in Connecticut is shifting, assets and equity are for sale.

In Plainville, Connecticut Commons, 556,000 square feet of retail space is on the block. It is part of a 52 property portfolio being sold by Macquarie DDR Trust throughout 20 states. The property had been valued by the ownership for $91 million. But that counts Linens and Things on the balance sheet. An open air big box center, one wonders what the vacancy rate will be in six months or two years. How many people will buy fishing rods at Dick's Sporting Goods for opening day of trout season this year?

A year from now, the sale of the John Hancock Tower will be hailed as the shot heard round the commercial real estate world. The building sold at auction in 60 seconds for $660.6 million.

In 2006, its sale price was $1.3 billion.

In 2009, a roomful of investors stood with their arms at their sides while a single bidder raised his hand. The Tarantino twist in the story? This was not a sixty second sale.

Normandy Real Estate Partners bought enough of the debt through second and third mortgage leans on the tower to force its troubled owners into foreclosure on the first mortgage. More twists: the roomful of prospects were only there to see what would happen and how low the price would go.

The unknown subplot realized after multiple calculations? Not only was the sale price a fifty percent discount off the purchase price of two years ago, Normandy bought the building for an even lower price in real dollars. They bought the Boston landmark at a cost of money far below that which is available to buyers with today's underwriting and increasing vacancy. The real cost of the tower is closer to $400 million.

Investors watched. Fire sales won't sweep the market traditionally, savvy investors are going to look for similar over leveraged properties. In fact they already are, in Colorado and Southeastern states where money ran like water for the past seven years.

In Connecticut those properties will be harder to find, vacancy rates being an underwriting issue since the early 90's when the state last sunk. But 1031 money flowed freely from New York City for several years, so there will be distressed properties to cherry pick.

Though Prologis, Kimco Realty and Simon Property have successfully sold equity, REITs are over leveraged and stocks are falling. Mergers and acquisitions are on the horizon. Of the 130 public REITs, 30% are trading at below $5 a share. REITs have stakes in CT. Through mergers and acquisitions, properties will continue to be dropped from portfolios and will be opportunities for CT investors who have been waiting for prices to fall.

While there isn't much land left in our state, existing properties will be prime for redevelopment, green development, transit oriented development and available at lower prices than we've seen in ten years if they are sold off as under-performing REIT assets.

Toxic, the catch phrase of self help books for a decade is the commercial real estate catch phrase of the next several quarters. Keep an eye out for toxic assets and opportunity.


April 14, 2009

The TALF (Term Asset-Backed Securities Loan Facility) funds rollout began on March 5th, will it spur commercial real estate investment as promised?

Commercial property values are falling nation wide. Construction and Development are at a dead stop around the country because no one can get financing.

In ailing Detroit, 8 of 13 approved developments are on hold.

In California, the tax rolls of many counties are negative. The national economic downturn and falling commercial real estate values throughout the state are at the heart of tax revenue loss. While homeowners are getting relief through government programs, most commercial real estate owners are not. The mortgage crisis hit people where they live but the ramifications of a devalued commercial real estate market are rippling across the state. County programs are being slashed. The Inland Empire, boom-towns east of Los Angeles for the last decade, is crashing.

Should Connecticut see Commercial Real Estate values fall in a similar manner, a city like New Haven, which has already begun laying off city employees would be devastated by negative tax income. 124,000 residents: more than 160 non-profit organizations.

Around Chicago, luxury condominium developments have stopped mid-construction as have mixed-use developments.

Nationally, heirs of Howard Hughes may soon own a mall portfolio by default. Mall giant General Growth Properties, bought Rouse in 2004 and inherited its commitment to pay half the appraised value of property related to The Hughes family's master planned community outside Las Vegas, Summerlin. The only problem? General Growth Properties stock has dropped 98%. To make the payment, GGP would effectively give all their stock to the Hughes heirs.

The government used the "Domino Effect" to justify entry into the Vietnam War, but leaders couldn't see that building an economy on consumerism wasn't going to splinter when people stopped spending?

Talk about a real domino effect. Buying ceases. Stores are shuttered, clerks are laid off, logisitics workers are laid off, no new mall construction, trades people are laid off, call center workers for catalogue workers are laid off, truckers move less product. It?s a Domino Effect that looks like one of those Guinness Book attempts dominos falling one after the other in circles, up and down stairs, on ramps, off ramps and ends in an explosion of falling real estate values.

Meanwhile in Connecticut and New England as a whole commercial values hold steady. New England Manufacturers will outpace the rest of the country in revenues. In a contrarian move, they project revenue.

Our Commercial Real Estate Market is not imploding. We've been here before, 1989-1992. It was a blip on national radar but devastating to Connecticut and the rest of the colonies. We learned. Exponential growth has not been the norm over the past ten years.

Still, nerves are on edge and the question remains:

Will TALF funds, which are available for three years while most commercial mortgages packaged into bonds run seven to ten years, really spur investment and lending?

The disconnect in the years between fund monies and traditional commercial mortgage terms of ten years has not gone unnoticed.


March 8, 2009

Are we in the middle of the Recession or Just the Beginning?

Economists are all over the time space continuum when they speak about the economic downturn and project a recovery. In November, and economist from Tulane was projecting a start of recovery at the end of this quarter. At the other end of the spectrum, there are those who don't see the economy turning around till the first quarter of 2010. Retail closings, banks continuing to perform badly and job losses lead me to believe that we are somewhere in the middle of the recession but we have three or four more months of loss before we reach the bottom. As stimulus dollars are slowly released to the banks, people will hold tightly on to the money waiting to see which way the wind blows before potential lending opens up. This will delay recovery and drive us deeper into the downtown.

Now, however, around Connecticut, the recession has come home to roost. Circuit City is working to close its big box stores. Each closing will leave large chunks of retail vacancies on the block. There won?t be other big box retailers moving in so those spaces will be ripe for re-use. But the question is, what type of space is in demand in this new era of downsizing?

Stamford?s office market is showing signs of economic fatigue. In 2001, after the World Trade Center fell, financial firms flocked to Fairfield County. Greenwhich became the hedge fund capital of the country and Stamford filled office space with financial service firms. Rents were climbing and the value of office buildings followed, doubling in two years.

It?s a different picture today after the fall of the financial titans. Currently the office market is seeing about 18% vacancy, much of it sublease space. 22% vacancy equal to the red days of 1991-92 is predicted by 2010.

Rising vacancy translates to lost jobs and discretionary income. Ripples run through every level of the economy, from the barber to the Landlord. As shops, restaurants, salons and other retailers that provide services of ?choice? rather than the necessities of daily living see their customers dropping off, sidelined by job loss or wage caps, or fear that they may be the next to be laid off, the retail Landlord will continue to see vacancy rise.

Rising vacancy rates will continue to drive down the value of buildings. The first wave of real estate owners to feel the burn of the economy are those that have loans coming due or those with low occupancy in their properties who may need a loan to keep the properties operating. Larger banks are not lending and those that are, such as citibank are looking hard at the credit-worthiness of the borrower. Local banks like Quinnipiac Bank and Trust or the Bank of Southern Connecticut and a regional bank like Liberty Bank are still lending, however they are not making huge loans as the banks were just last year.

Around the state, as around country the recession has come home to roost. Even traditionally recession proof industries like universities and hospitals are feeling the burn. Yale lost half its endowment in the market crash. Harvard lost a third. It?s projected that enrollment will drop as people struggle to pay for college. Medical institutions are being hit with people putting off procedures due to fears of being out of work, or waiting until ?Things turn around?. Municipalities are cutting payroll too. Mayor Bloomberg laid off 20,000 workers last week.

Some are projecting ten percent national unemployment by the end of the year. That unemployment will cut across all industries as world economies adjust to meet demands of defaulting economic systems. It will be a hard adjustment for americans who have spent the last twenty years growing, spending and consuming products. Cutting edge manufacturers and new technology creators are going to be the ones to lead us out of the economic slump. Stimulating the economy so that every one starts buying multi-colored ceramic jack o lanterns, neon valentine hearts and mechanical easter bunnies to put n front of their newly refinanced homes is not the long term answer.

-kristin

February 1, 2009

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