| Yesterday?s RELA breakfast at the Boston College Club brought out the cautious optimists. CBRE's Ray Torto (left, with Kennedy & Associates? Doug Poutasse) says that if all goes well, CRE could recover well before the economy in a reversal of prior trends. He believes the US economy will recover fitfully in the next few years, but CRE is already turning the corner. Ray sees 2011 as a transition year with some pricing power perhaps appearing by next Christmas. Meanwhile in 2012, CRE will get back on track. But the overall economy will take another year or two because several sectors are operating at a scale that's too large: law, construction, autos ,and airlines to name a few. For CRE, the good news is that it isn't ?over scaled.? The bad news, Rays says, ?We took the debt others used and put it into pricing.? That's got to adjust. |
| Doug says the popular press (thanks for the shout-out) and political leaders are being too negative (...nevermind). The US has already seen more job growth than it did at his point after the two prior recessions. But businesses still aren't in a ?strong hiring? mode. They first want to see productivity and profits return to boom levels. High unemployment, he says, reflects demographics, among other things. Baby boomers, who aren't retiring, and their echo-boom offspring are all in the job market at the same time. Yet for the first time since the Great Depression, there are fewer jobs now than 10 years ago. In CRE, he sees some construction in retail, expects industrial development ?to come back,? and for offices pinpoints 2013 as the time when space and jobs will ?match up.? |
| Boston, says Ray, compared to the nation, is in ?fabulous shape.? It's No. 2 or 3 on investors? buy lists and No. 2 for economic strength. The Hub has growth industries in place and an intact CRE infrastructure, namely banks and major equity players that ?didn't blow up? during the recession. CBRE investors see Boston as a value play, a place where they invest for income not growth. Unemployment may be high at 8.4%, although declining, but there is growth in office using jobs. Also, demand for multifamily housing is strong. Doug told us that in a reversal from past cycles, young people are not fleeing the region and that could be a ?big competitive advantage.? |
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