NAIOP Chapter Leadership and Legislative Retreat
Washington DC February 7-10, 2012
By John Conicella
As the current President of NAIOP Vancouver, I thought it would be interesting to share with our members some of the impressions and messages that I took from this month's NAIOP Chapter Leadership and Legislative Retreat in Washington, DC. I also find that with the passing years, getting a true sense of the economic reality in Metro Vancouver becomes more challenging. I feel it is like we are living in a hyperbaric chamber, yet we still say we breathe the same air as everyone else.
So I came to Washington this year with the hope of having 3 big questions answered;
- Where is the US economy at today and where is it likely to be trending in the future?
- What is the psyche of the American real estate industry?
- What issues are going to shape this election year and who will be the next President?
If you are one of those people who won't read past this paragraph and want the answers now and without the rationale, here goes;
Recession over/No idea when recovery takes hold/Personal savings up/Debt,Debt,Debt/ Tax Policy disconnect/Pockets of success/Capital gains/Destructive Capitalism/Iran?/High hedges/47%/8%/Obama.
If that makes sense great... if not, let's continue.
One of the unique benefits of being a part of NAIOP that no other local real estate industry group provides is the direct exposure and relationship we have to the USA, the largest economy in the world. There is no better barometer of the American real estate market, economy and political climate than spending a few days and sharing stories with people across the entire continent in an American election year in Washington, DC. And make no mistake about it; politics trumps everything in the US almost all the time and it's on steroids right now in an election year.
When I attended the conference last year, the best way to describe the overall psyche of the Americans in one word was "devastated". This year, the sessions Opening Remarks reconfirmed my personal impression by describing the previous two years as "horrific", and stating that the "economic storm" has completed its third year. The good news? A claim that the "recession" was over, but still not sure when the "recovery" will get traction. So why the uncertainty? It starts with a 2011 year end debt of $15.3 Trillion that will be $16.7 Trillion by the end of this year.
But there are some good signs! Americans are paying down their personal debt for the first time in 50 years. Corporate profits are at all-time highs. Retail sales are up. Internet sales are up 15%. The Dow Jones was up 5.5% year over year.
Chatting with our US chapter representatives, commercial real estate markets today vary across the US. The Washington, DC market itself is one of the best performing markets in the entire country. Even scanning through the local DC residential real estate papers shows surprisingly high sales dollar values that we are used to seeing in Vancouver. The California and Arizona markets are still in a challenged situation. Upper State New York seems to be pretty steady. But the general consensus across the board is that the worst appears to be over. For the industrial sector along the south eastern and eastern port cities there is hope for a strong recovery by 2014 with the opening of the improved Suez Canal, which will see a significant shift of goods movement to the east coast from the west coast.
We had the privilege of listening to two excellent lunch keynote speakers; Major Garrett, who is a respected Congressional correspondent and columnist for the National Journal, and Republican Congressman Tim Scott from North Carolina. I will do my best to weave their big ideas together.
Major Garrett essentially paints a picture that will likely see President Obama return with only one real caveat... that Iran causes a major conflict that forces the US to get involved. He points to historical numbers and says that if Obama has the magic number of minimum 47% approval rating then he wins. Since August his approval rating has moved from the 37% to 42% range to this week where he is 47% to 50% depending on the poll. Garrett also points out an interesting thought...he says for the first time in its history the Republican party is debating within its own party what "Capitalism" means.
Congressman Scott believes Romney will be the Republican representative for three main reasons; he has primary experience, he has the best structure supporting him and he has the largest financial backing. Major Garrett referred to a very interesting informal questionnaire that attempts to paint a picture on how to best describe a leader. When it was done for George W. Bush back in 2008 the words selected were "BBQ and beer". For Romney this year, it is "high hedges".
Interestingly, although Scott thinks that the Republicans will carry the House and the Senate he was frank and said it will be tough for them to oust Obama. He says it is believed Obama has a $1 billion armor chest of funds for this election. He believes that the new standard for winning incumbent Presidents is an 8% unemployment rate (it used to be 7%). He thinks Obama is primarily focused on jobs now and that he will likely get to 8% by October. He went on to say that he believes there is common ground with Obama on corporate tax rates and that Obama will ultimately compromise on a mid-20's percentage rate (instead of 35% in discussion) if the Republicans agree on closing some loop holes. That Tax Policy is not connected to the budget, Scott says, and this has been the big challenge that has caused most of the problems over the last 2 years. Amazingly, the Congress has not had an approved budget since 2009.
In just 3 days I feel I got a real good primer on the psyche, real estate market and political sentiment for our friends to the south. I believe 2012 is going to be a pivotal year that determines the next pathway for both the US and global economy. Based on the type of rhetoric, the energy and the money (estimated at $3 billion) that is going into this year's US election, I would say that the US is ready to finally reawaken from its very long and deep slumber.... and that should, in time, be good news for us as well.
Where do you think the US is headed? Did you make it down to Washington for the CLLR? Share your thoughts in the comments below.