At Closing - From Chaos to Recovery
By: Lawrence A. Pobuda, partner, Stewart Lawrence Group
It was fitting that we held Development ’10 in Florida the last week in October. Only one week later, voters in that state would soundly defeat Amendment 4, a resolution that, if passed, would have significantly altered the power of local governments to act on comprehensive land use changes. Special thanks to NAIOP of Florida, the cooperative legislative body that includes all six NAIOP Florida chapters for their leadership in educating and directing our unified effort.
It’s been quite a year! When I reflect back, the year is comprised of four, fairly distinct quarters that represent our economic transition, from chaos to signs of recovery. I thought I would share my experiences and perspectives from each of these unique periods.
Quarter 1 – Winter 2010: When we convened in Chicago for the annual meeting in October 2009, we were still in free fall – finding our way to the bottom. I remember a lot of blank stares and the "new reality" hadn’t yet been established. While visiting our Northern Virginia chapter, I was impressed with the robust business activity and the building cranes that were still dotting the skyline in and around the Beltway. After speaking to the chapter on the eve of a Washington, D.C., snowstorm, a NAIOP member encouraged me to "hurry back to Minneapolis….and keep sending us those tax dollars!" The comment perfectly captured the gloomy weather and the "government fueled economic expansion" the region was experiencing.
Quarter 2 – Spring 2010: The spring was marked by a nice run up in the equity markets and strong corporate profits. This performance was mostly the result of aggressive cost cutting measures that were accruing to the bottom line, and our industry didn’t yet share in any of the "good news" of this period. Later in the spring, I, along with others, had the privilege of meeting with 24 members of the U.S. Senate Democratic Caucus and updating them on the state of commercial real estate markets. This Capitol Hill visit left me with mixed signals and paled in comparison to the feeling I had in Denver at the University Challenge. Kudos to our Colorado chapter for investing in this next generation of commercial real estate talent!
Quarter 3 – Summer 2010: The positive economic news of the second quarter was soon overshadowed by the political uncertainty that was enveloping Washington and the rest of our country. The magnitude and pace of legislative change were putting the brakes on any economic recovery, and our tenants seemed to "put on hold" any expansion plans. The "picture" of our new economic reality was etched in my mind during a visit to our Southern Nevada chapter, and a driving tour of Interstate 215. The sight of abandoned commercial developments – in various stages of completion – was a sobering reminder of the challenges we all face in the months and years ahead.
Quarter 4 – Fall 2010: As the election picture began to materialize, the economic optimism of the second quarter was again taking hold without the political uncertainty that bogged down the third quarter. Our NAIOP Credit and Capital Advisory Board issued a report on September 13 declaring a "largely optimistic outlook with little concern for a double dip." As we met in Orlando, I sensed the same confidence – a new optimism that we had a better understanding of the challenges and opportunities that lie ahead. Tenants were beginning to renew beyond the short-term renewals that marked the earlier days of the cycle. While investor interest is still focused only on the Class A trophy properties, I believe we will begin to see this change in 2011, as economic and political stability generates a modest appetite for real estate risk.
It has been a fascinating year to be NAIOP Chairman – a year marked by transition from the gloomy days of 2009, to a sense of optimism and a light at the end of the tunnel. Thanks to all of you for the hospitality you have shown me during my travels. It has been an honor and privilege to serve as your 2010 Chairman. I wish you the best for 2011.