News/Blog
Good News Friday: Reflections on a Year of Good News
It has been just about one year since Grubb & Ellis began to publish “Good News Friday.” The first edition talked about the $792 billion American Recovery and Reinvestment Act (the much-maligned stimulus package) and the jobs and growth it would bring or, more accurately, how many fewer jobs would be lost than if no action were taken. In conjunction with the massive increase in liquidity engineered by the Federal Reserve, the federal government threw all of its weight against a cascading, terrifying financial calamity that threatened to plunge the global economy into Great Depression 2.0. It was an epic struggle against a beast that we thought had become extinct or forgotten ever existed, a relic of our grandparents’ or great-grandparents’ generation. No one knew how the struggle would turn out. Maybe it’s an exaggeration to say that Western civilization hung in the balance… but maybe not.
It worked. The white hats won. By last summer and fall, “Good News Friday” was pointing to leading economic indicators that had stabilized and were turning higher. And now we are beginning to see some inkling of good news in commercial real estate – vacancy rates beginning to flatten out for certain specialty property types and prices stabilizing for high quality assets in primary markets. The Vanguard REIT index has more than doubled in the last year – more than doubled!
Are we out of the woods? No. Some sectors of the economy remain troubled such as the housing industry and state and local government. An estimated one-quarter of the 8.4 million jobs eliminated during the recession will not return. The commercial real estate industry must be recapitalized as it was in the early 1990s. Have leasing market fundamentals hit bottom? For most property types, the answer is no. But they are getting close. It will be a slow recovery for commercial real estate, but recover it will.
A year ago, I worried that going out on a limb with my good news flag every Friday would look pretty dumb if the credit markets disintegrated or the economic freefall kept accelerating. (Actually, looking dumb would have been the least of my worries or those of anyone else.) But, as we said in the first edition, “It’s human nature to believe that, when times are good, they will keep rolling indefinitely, and vice versa.” So it wasn’t such a crazy bet. It would have been crazier to bet against the resilience and vitality of the American economy.
Thanks for following us over the past year. We look forward to bringing you more good news in our second year.
—Bob Bach, Grubb & Ellis Senior Vice President, Chief Economist
