As I sit to write this column, the April numbers are coming in. Unemployment continues to grow. The first quarter earnings results are dismal. In retrospect, the economic neutron bomb went off in December, but it had definitely been ticking for many months before that. Again, with hindsight, most businesses were deer in the headlights in the first quarter. We only closed on one commercial sale and a handful of leases. But now people realize they have to get back to work. We are reviewing several lease renewals "as is" and short-term, perhaps one, two or three years. Until the economy clears, no one wants to commit to more than that.
So as we look out to the horizon, what do we see? 2009 will continue to yield negative performance. 2010 should be flat, but 2011 will show measurable GDP growth. There is reason to believe this will be a jobless recovery. With current unemployment heading toward 10%, this is a bleak prospect for those who are out of work. But we also must consider the underemployed, likely 20 million plus who are not working 40 hours a week, no longer get overtime, no longer have employer contributions to their 401-K accounts, or covering their healthcare costs.
I recently returned from a trip to the southeastern states (Jacksonville, Fl., Greenville and Spartanburg, SC and Charlotte, Mooresville, Raleigh, Chapel Hill and Durham, NC). I visited with an old army buddy living in Hickey, NC. He is now working three days one week and four days the next. He is a quality control supervisor with 20+ year's tenure. Everyone with 10 or less year's employment was let go last month. Ouch!
But the Carolinas are poised to achieve renewed growth. They have had economic incentives, a good and affordable quality of life, lots of reasonable housing, and an open affordable and focused post secondary education system. We visited the new BMW plant in Greer, SC. Wow—over 1 million s/f and largely automated. As impressive as BMW was, it is all of the ancillary businesses that make the recruitment of BMW such a coup. There are millions of s/f and thousands of jobs. In NC, the state has established four new industrial parks in the counties surrounding the Research Triangle Park (RTP) located between Raleigh, Durham and Chapel Hill. RTP is expensive, so the state has provided lower cost options for smaller companies that cannot afford or do not need to be in RTP. The state has $10 million for recruitment of new businesses. Land is available, relatively cheap and easily permitted. New firms are welcomed and encouraged. Jobs are a good thing, and the infrastructure investments are impressive (roads, highways, water and sewer, airports, power capacity and distribution and telco/high speed fiber optics). The contrast to New England is hard to miss. Our aging infrastructures scream for investment and upgrades. We shun the sprawling landscapes that resonate throughout the south, but we do not have well established polices to level the playing fields between Greenfield and Brownfield. What land we have left to develop is hilly, wet, conserved or otherwise challenged. Our focus over the next two decades will be tearing down outdated buildings and rebuilding on these Brownfield sites.
We get excited about trains and transit but it is extremely difficult to make sense out of the numbers. While we picture ourselves as part of the dense megalopolis, in fact, we quickly become suburban and ex-urban.
A commuter train from Manchester to Boston seems to be an exciting idea, but not many of the 109,000 residents of Manchester commute to downtown Boston. Many of the Boston commuters live throughout the region. So we need to collect them at the train stops which usually means single occupant vehicles pouring into larger commuter parking lots to get on the train. The emergence of transportation oriented development with much higher mixed use densities around the train station is an exciting planning concept and one we ought to A) allow and B) incentivize.
In January, I drove my recently graduated daughter down to Alexandria, Va. to start her new career in D.C. On the fourth day, I had driven over to stay with my sister who lives in Baltimore. I had agreed to meet Emily in D.C. to attend a reception for senator-elect Jeanne Shaheen who was being sworn in that morning. I decided to drive to the Greenbelt Metro Station and take the Metro to Union Station and walk to the Capitol. I drove in just fine, walked to the train and was whisked into D.C. Four hours later, I took the train back, walked out to my car, jumped in and drove off to find an exit. Well, long story short, I drove round and round this humongous parking lot looking for an exit but all the exits called for a prepaid transit parking pass, which I didn't have! Somehow I got into the lot when the gate was left open. I had to re-park, go into the station, buy a $10 parking pass for a $4.10 parking fee and eventually extricated myself from this parking hell! There had to be more than 6,000 cars in those lots. Dozens of acres of asphalt to accommodate commuters. These are common place in the metro D.C. area but hard to imagine in central NH.
Our transit future needs to start with rubber tired links such as Van Pools, Rider Share and similar "gathering" components which will allow us to reach critical mass for successful transit without the humungous parking lots and garages which cost a fortune and eat up valuable land.
As the government prints stimulus money by the bushel, we need to seriously think about how and where we want to use it. It should not be used to repave existing roads which is simply maintenance. With the sudden but short lived largess from Washington, we need to invest these dollars in key infrastructures including water, sewer and transit to name a few, that will pay off over generations, not five years before the road needs to be paved again! We are encumbering our kids and their kids with large deficits. They should be the beneficiaries of wise investments in infrastructures that will improve their built environment for decades to come.
Bill Norton, CRE, FRICS is president of Norton Asset Management, Manchester, NH.