Tuesday, May 15, 2012

Commercial Real Estate Is Our Economy's Foundation

There are concerns at the national level that in the zeal to raise revenue, the first place certain factions in Washington always look is to increase taxes or eliminate tax deductions. "Loopholes," as the uninformed will often call them.

But right now, as capital continues to only dribble in for availability for commercial real estate acquisitions, increasingly there are calls for Congress to "do something." Frankly, when that happens, that is one damn scary proposition. Because, often, in that same zeal to be "seen" as "doing something," real damage is done, with scads of unforseen unintended consequences.

IMHO, banks are -- largely -- being unfairly blamed for the slow trickle of capital available for CRE acquisition. The same reasons that businesses aren't hiring (do NOT believe the stats coming out of the Department of Labor; they are revised downward every month after an initial splash) is because regulations coming out of Washington DC are a moving target.

No business can efficiently create a business plan for a 24 month cycle because of the byzantine number -- and nature -- of new regs that continue to be piled on. Its no wonder private enterprise is stagnant. Corporate officers -- who have a legal, fiduciary duty to their shareholders (many of which are unions, pension funds, public employee retirement funds, mutual funds, individual investors, etc.) -- are unwilling to take risk to grow or expand their businesses because they may be penalized next month, or next year, for that same growth. For making acceptable business decisions today that might be viewed by overzealous bureaucrats, who frequently don't understand capitalism let alone know how to spell it, as "unfair."

But in our commercial real estate world, there need to be concerted efforts to significantly increase the flow of capital. Why? Commercial Real Estate is the foundation upon which much, if not all, of our economy rests. How, you ask? Consider the following:
- Without land development, there are no new housing developments to employ construction workers, architects and drywallers.
- Without land development, there are no new retail, office or industrial buildings being built -- all of which employee people in new construction, but later, in product distribution, business, and consumer retail opportunities.
- Without office, industrial, multifamily and retail development, it is more difficult for businesses and individuals to locate in areas convenient for their work or family needs.
- Without commercial real estate investors and business entities having access to the capital to fund acquisitions, it is more difficult for businesses to grow and expand.....

Shall I go on?
A part of me says Washington needs to do something. And yet, I shudder at the thought of those very words. What Washington really needs to do -- and this is what separates statesmen from politicians -- is to GET OUT OF THE WAY. Knock off the senseless nanny-state reg passage.

Only then will we see a loosening of capital, and natural, market-driven stimulus.

My two cents ....

No comments: