Monday, September 14, 2009

For Rent....Bring offers :)



This Washington Post story highlights the challenges facing the commercial real estate market. When properties sit empty it impacts the banks that financed them and the cities/counties that expect these buildings to add to the tax base.

"Constitution Center in Southwest Washington seems the ideal place for a federal agency or security-minded company to locate. So says an online sales pitch.

But property managers for the 1.4 million-square-foot building, which is scheduled to be completed in November, have yet to land any tenants."

"A lack of tenants in the late stages of a project was rare during boom times but is becoming more typical now, commercial real estate experts say, as businesses retrench operations and reduce their need for additional office space. In June, according to Delta's analysis, the amount of vacant space in the region soared nearly 24 percent, to 47 million square feet from 38 million during the same month a year earlier.

"We have 14 million square feet [of office space] vacant," said Jerry Gordon, president and chief executive of the Fairfax County Economic Development Authority. Gordon said that numerous agencies have cut their budgets because the county is losing tax revenue as housing values decline. "We need more revenue from the commercial side of real estate" to make up for shortfalls on the residential side, he said. "That revenue comes from new construction, which won't happen until we fill the old space."

I think you can relate stories like this to your own region - in 2005-2007 did you see an excessive build up of hotels, strip malls, and office space? I thought so.

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Are the banks in worse shape today than they were pre-Lehman? Wow, how could that be? That is the contention of Nobel Laureate economist Joe Stiglitz who says...

“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview yesterday in Paris. “The problems are worse than they were in 2007 before the crisis.”

I think his contention is not that the banks are in worse financial shape than they were in 2007, but rather that our problem with banks being too large to fail has grown. I think this is probably an accurate representation of the situation, unfortunately.

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Unemployment runs out for 33,000 in a high cost state....

"An estimated 33,000 New Jerseyans will receive their final unemployment check Friday, and the state estimates that benefits will dry up for about another 3,500 to 4,000 each week through the end of the year as residents exhaust the unemployment insurance benefits available to them.

Help for the unemployed now rests on Congress, where legislation is pending that would extend benefits, likely for another 13 weeks.

In New Jersey, and many other states, out of work residents can collect unemployment for 79 weeks.

But nationwide, 500.000 people are expected to reach the maximum threshold this month and 1.5 million people by the end of the year, according to the National Employment Law Project (NELP)."

That is particularly striking - after 79 weeks of unemployment (a year and a half) 33,000 people have been unable to find work. Maybe this isn't just a jobless recovery, but maybe a jobsLost recovery.

Cheers!

1 comment:

Anonymous said...

What makes you say that the banks are not worse off than pre Lehman? Using the "before criteria" banks are surely less better off. There has been no rebound in any asset class (except short term stock prices) that would cause one to believe that banks are more stable or liquid. Borrowed money from the Fed, or reduced requirements for Mark-to-market is not the same as being "in better shape" .