I remember writing an economic report back in October of 2010 when we were all catching our breath, trying to digest what had gone wrong with the economy. Fast forward to today, many may say that the tone has remained cautious, but if we take a quick look at the numbers, the improvements tell a different story.
In October 2010 we were just starting to reinvest in the stock market. Oil prices were at $81.00 per barrel; gas was $2.65 per gallon and the savings rate was 5-6 percent. Gold prices were $1300 + and people were moving into hard assets. Office rents had decreased 35-40 percent, office vacancies were 16-17 percent and multi-family vacancies at 7-8 percent. I felt at the time that we were definitely headed for higher inflation in two years and that 2010 may be the greatest refinancing of world assets and reinvestments for hard assets.
Prior to 2010 I felt we could be headed the way of Japan with deflation and stagflation. I spoke with a number of CREs back then and the thought was that the U.S would not repeat the same fate of Japan but I was not certain. I do think that today commercial real estate investors have come roaring back and there is a tremendous thirst for commercial real estate.
During the fall of 2012, in an election year, we made positive and negative strides in many areas. Gold is higher than $1300 per ounce, gas is closer to $4.00 per gallon, oil prices have bounced around this year from over $100 to under $90 per barrel. We have avoided severe inflation and the Feds plan to keep interest rates low until at least 2014. Hard assets are still “in” and refinancing is better now than in 2010. It turns out 2010 was indeed a kick-off point to a stronger future.
However, throughout this first half of 2013, deleveraging is still here and there is not a great deal of “wild” spending. Uncertainty and high unemployment remains but the consumer confidence is a bit stronger. We are slowly making amends with our sins of the past.
With the Presidential elections behind us, this year will serve as the next chapter in our economy and our industry. Only time will tell.