Santa Barbara Executive Roundtable (SABER) hosted their annual economic forecast meeting today, Nov. 9, 2017. The talk was titled “Anticipating and Bracing for the Next Recession – Expert Panel”. That sounds ominous, doesn’t it?
Panel members were:
Keith Berry of Coldwell Banker under the moniker of Keith Berry Real Estate. Keith has had a very long career in local real estate office management and sales. He specializes in high-end residential properties.
None of the speakers spoke on any assessments or forecasts on their various segments of the local economy much past 2018 although Mr. Anderson did say that a recession of some sort was to be expected “sometime this decade”.
Mr. Johnson spoke on the entire commercial sector on all asset classes (and in about 10 minutes!). The overall assessment was that the market was not poised to experience any vast correction in 2018. Multifamily rent growth is not expected to feature the torrid increases seen over the past few years of 3% to 5%. He stated that it may be as little as 1% in 2018. Commercial and industrial vacancies will remain less than 5% in the overall market.
The sector most in the news is retail with numerous State Street vacancies coupled with the closing of Macys in the Paseo Nuevo center and the upcoming closing of Saks in the 1000 block of State St. Brokers and retailers complain of city neglect, the homeless, etc., but the more obvious culprit is the huge success of online shopping.
He talked about the current rounds of “re-imagining” downtown retail that is occurring in the community involving governmental and businesses interests. Having office uses of first floor retail space like financial institutions is an ideal solution as these uses are shuttered at night and don’t promote an active, people-oriented draw. Utilization of the upper stories in State Street buildings as residential is high on the radar. This is not a new concept. In my experience, a trip to Buenos Aires would provide an example of proper urban planning with multi-story downtown buildings featuring first floor retail, office uses on the next couple of floors and the balance being apartments and condos. Parks at least a block in size are present about every 11 blocks for use by the people living downtown. A very efficient, inexpensive rail system transports around 2,000,000 commuters from suburbs to downtown and back every work day.
Mr. Anderson spoke of the current economic environment as being “around the seventh inning.” He advised that retirees begin to pull back from riskier investments and to avoid irrational optimism concerning stock valuations. “It’s no time to be on autopilot!” he advised. Better choices may be found in European and some other international emerging markets. These markets are not as far along in their recoveries as the U.S. and therefore farther away from a peak.
He was the most circumspect of the group of speakers concerning an upcoming recessionary environment. However, he did expect the U.S. markets to have another great year in 2018.
Keith Berry read his assessment of 2017 from this economic roundtable meeting last year. Every one of his forecasts proved to be accurate. He said that this market will be a repeat of last year. All residential sectors are well within expected norms for volume and activity.
Mark Schneipp was the featured speaker and had a lot to say. The net of it was that he forecasts that there will be no recession in 2018 for the following reasons:
- The U.S. is at “full employment”.
- Inflation remains low at around 2.2%.
- Interest rates remain low.
- Lots of infrastructure packages are in play.
- The likelihood of an unexpected negative international event is low.
Dr. Schneipp’ s assessment of anything like Kim Jong Un launching nuclear missiles at the U.S. is “entertaining”, but so unlikely as to be dismissed in a forecast for 2018.
He flatly stated that elements of the current proposed Trump tax plan revision will have a negative effect on real estate values in areas in the U.S. featuring high real estate values / taxes and high state tax rates. That, of course, would include California.
Overall, he stated that “2018 will be stronger than ever!” So, why the ominous headline for the meeting? Negative news is what sells and what fills meetings. We all felt greatly relieved at the promising news.