Notes from South Florida NAIOP Economic Outlook Summit

What’s in the Cards for 2012

Jan 25th, 2012 – Sheraton Suites, Cypress Creek Ft Lauderdale

Moderator:  The energetic Darcie Lunsford (formerly of South Florida Business Journal fame and now promoting Butters Construction).  Panelists:

  • Dr Dean Snaith, Director, Institute for Economic Competitiveness – University of Central Florida.
  • George LeMieux, Chairman, Gunster , Yoakley & Stewart, PA (Former US Senator replacing Mel Martinez)
  • Mark Vitner, Managing Director and Senior economist for Wells Fargo.

Summary

If you came to the meeting to learn about the South Florida Office and Industrial Market then you would have been disappointed.  The panelists dealt with global and governmental factors that affect our economy.  All three were in agreement that the current administration was responsible for exacerbating our current economic woes.  The consensus was that the current administration added to uncertainty in the market, have over legislated with Health Care Reform and Dodd-Frank, and Europe is a ticking time bomb.

Dr Snaith

Three things to watch for in 2012

Crisis in Europe

The crisis in Europe is like a wound and needs to be treated with antibiotics and not left to fester.  He believes that the Central Bank needs to come up with a fiscal policy and the individual countries in Europe should balance their budgets and work together like a symphony not a cacophony.

Dr Snaith likes his Metaphors.

Uncertainty in the Market Place

He was concerned about Dodd-Frank and was not sure what over 1,000 pages of legislation means.  (Here is a link summarizing what it means  http://cohenonrealestate.com/?attachment_id=178).  He was also concerned about Health Care Reform (Click here for summary http://www.kff.org/healthreform/upload/8061.pdf) and whether or not the Bush Tax Cuts will stay.  All this uncertainty makes it hard for analysts to complete their “spreadsheets” with so many empty cells.

Lost Wealth

Many home owners have lost Net Worth and it will be many years for them to recover. 

Senator LeMieux

Sen. LeMieux began with a Litany of what was wrong in Florida – 9.9% Unemployment, 20% of all foreclosures in US, Values down 50%, Foreclosures 800 days compared to national average of 260 days, 50% of home owners underwater.

Why?  Obama Administration  (Obama care, Dodd-Frank, Appointment of Cordray as Consumer Finance Director).

 Next, Sen LeMeiux told us why Florida had a bright future (with him as our Senator);

Mark Vitner

Always entertaining.  Generally agreed with other Speakers.

Unlike Europe, we have the luxury of not doing anything about the deficit for a while.

He recently agreed with George Soros and it made him feel sick.

Greeks have a history of default but has a small economy and not much of a concern.  However, Italy has the third largest economy in Europe and could bring down the European Banking system.  Already -ve GDP in UK and Germany.

He was generally upbeat about US Economy since Europe accounts for only 20% of US exports and exports are only 15% of US economy.

Prediction:  No double dip recession and GDP up 3.4% in 2012.

4th QTR sales were good but mostly comprised Iphone and Ipad.

Jobs numbers were up 200,000 but were low wage jobs.  42,000 of which were seasonal UPS and Fedex.

Credit card use down to 10 year low.

Savings rate down.

There are 1 million lost jobs from housing slowdown.  There were only 600,000 in 2011 when there are usually 1.6 Million.

Vitners Summation

1. Need agreement on foreclosures – MERS.

2. Worst recession since 73/75.  This time twice as deep.  12 years to recover.

3.  Net Migration of home buyers looking for value.  2nd only to Texas.

Q & A

How long to an agreement is reached between Government and Servicers?

Not sure.  5 large servicers (B of A, Wells, Chase, Citigroup, GMAC) are in talks.

Vitner believes that foreclosures will accelerate in 2012.  There will be a legitimate recovery in 2013 with 2014/2015 being a stronger recovery.  Port St Lucie will take until the end of the decade.

Another Question on Foreclosure

Vitner – Amazed that homeowners who are underwater are still paying their mortgage.  He likes the idea of creating a second mortgage that could be portable and attached to a new home purchase in another part of the country.  This would enable people to relocate for a better job.

Sen LeMieux – He believes that giving homeowners relief is a good idea.  If it is a second home or the home is abandoned then he would support a Judicial Foreclosure.  The market needs to be reset.

Relief good idea.

Gaming Destination Resorts

Vitner – Not a big fan in using Gaming to jump-start economy.

Sen LeMieux – Won’t pass this year, Orlando doesn’t want it, Right doesn’t want it, Tribe doesn’t like it.

He doesn’t want to double down on  Gaming.  Prefers Bio Science, High end medical Care. 

And now for the Commercial Real Estate Report

“A” locations doing well.

Apartments – Tailwind.  Demand for renting from people who lost their homes.

Warehousing – Robust.

Office – Trading Up.

Retail – Big Box users looking to cut costs.  Electronic stores looking to hire fewer people.

Malls – Doing better job of competing – just as cheap as online!

Here is the SFBJ article http://www.bizjournals.com/southflorida/news/2012/01/25/clouds-on-economic-horizon-outlined.html?page=all

Market Reports

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