Recently I ran into an attorney friend at a sandwich shop and the second thing he asked me was, “are you busy”? Great question. We have noticed that transactions for office and industrial space are taking longer to conclude. Our clients are asking for more time or more information before committing. The deal pace has slowed, with no sense of urgency. This is a significant change from a few years ago. We suspect it points to a sense of uncertainty in our economy.
What is causing this? What are the unknowns? Interest rates – are they falling? When and how much? Inflation, is it really under control? Will the higher costs for everything recede or are they permanent?
Low unemployment but lower work force participation post Covid – will office workers return to the office, especially in our hollowed-out downtowns?
Consumer spending among the financially well-heeled is very strong. I have seen waiting lists for Rolex watches at $12,000 a pop. Recently I read of parents hiring interior designers to “decorate” their kid’s college dorm rooms. That’s money-to-burn stuff. Yet we have increasing homelessness in many, if not all, our bigger cities.
If we look back to the “Gilded Age” in America between the mid 1870’s to the late 1890’s there was a huge gap between those who had money and power and those who didn’t. According to recent reading we have that same gap today, only larger. Historians describe those times as having materialist excess and widespread political corruption. Today, we have that same materialism but instead of political corruption we have nonfunctioning dead-locked politics with extremists on both sides having the loudest voices. Does that make people confident to pull the trigger for more office or industrial space?
There is uncertainty on the international stage. Will the Ukrainians be given the weapons to win the war against Putin or will that conflict spread? Will Putin invade other neighbors? Israel has destroyed Gaza fighting Hamas and now attacks Hezbollah in Lebanon. Will war engulf the Middle East? Will our political office holders take us to war with China over Taiwan? Remember, Taiwan as a nation was the result of the Nationalist Chinese losing a civil war with Communist Chinese in 1949/1950. Will we insert ourselves in a 75-year-old civil war? Maybe. Our senior military leaders are preparing for a “peer to peer” war where both sides have the same level of weaponry. Our Armed Forces have fought counter insurgency wars in Iraq and Afghanistan. In those wars we fought ill-trained and poorly equipped militias or mountain tribesmen with homemade weapons. It was not against a modern military like China can field.
Another bad influence on our business’ self-confidence is the unrelenting constant barrage of bad news that our media expels. Supposedly many Americans are fatigued with the bad news and aren’t watching or reading the news anymore (ignorance can be bliss but being uninformed can be deadly). Our news seems to be dominated by the shrill voices of extremism on both sides. For many people, our media in all forms is no longer a neutral reporter of actual events but is deeply partisan which damages media credibility. So now who do you trust? Where is Walter Cronkite when we need people like him?
I have decades of experience in weathering economic downturns. They are never fun. In all times preceding the downturns the media talked up the possibly of a downturn. Eventually if we hear the talking heads tell us bad times are coming, we pull in our horns, delay expansions/ hiring and Bingo Bango we have a recession. In that event the media created their own “self-fulfilling prophecy” and can congratulate themselves on being very smart.
And never mind the upcoming national election in November. Who knows how that will turn out? Will the results be contested?
All this doesn’t make a business owner/leader confident of the future. Some polls (if any poll can be trusted anymore) report that 70% of Americans think the nation is heading in the wrong direction. That underlying attitude can’t motivate our business community to take risks, to expand, or to launch new products. This may explain why commercial real estate leases and sales are taking longer to conclude.
And why we ask each other: “Are you busy?”