News & Press
Tom Hoban's Column
Forecasting for 2010 real estate market a bit more perplexing for investors than other years
Published: Friday, January 1, 2010
Forecasting the real estate market might be more difficult this year than in any of the previous 10 that this column has been appearing in your Snohomish County Business Journal.
Forecasting the real estate market might be more difficult this year than in any of the previous 10 that this column has been appearing in your Snohomish County Business Journal.
Whether it's the anemic national economic news, reaction to Boeing's South Carolina announcement, fears of inflation ahead, the banking industries' ills, or other forces, Snohomish County has all of the symptoms of a region that may be mired in high unemployment for most of this year, causing investors to take a hard look at the assumptions we build into our forecast.
The real trouble is, it doesn't look temporary. Snohomish County and the North Puget Sound currently present a perplexing picture to investors inside and outside of the region who are trying to make sense out of who we are, what we are, and what we want to be in the longer run.
Real estate investment and development is usually a long term bet on the growth and health of a specific area. So the long term matters in the short term when it comes to attracting investment, business, and measuring the real estate needs they create.
The banks' problems are a game changer all by themselves and only add to the challenge of forecasting for 2010.
But investors looking at our region recognized other problems before the banking crisis and high unemployment landed upon us. It's worth re-visiting those problems now so we can get to the work of addressing them.
Major problems began over a year ago after the 2008 gubernatorial election when we rewarded a sitting governor with another four-year term after she picketed on the Machinist's side of what appeared to have been a poorly-timed strike.
Faced with a choice in that election, we simply present a picture that says we don't “get it”. After all, Boeing had moved its headquarters to Chicago years earlier and kept repeating to us that location is a choice for them now. Her opponent had no ties to labor or Boeing. When we needed a statesman to work the middle, the majority chose otherwise.
Local investors began to distrust this post-election environment, so many of them just picked up the phone or got onto airplanes and went to South Carolina to see what was really going on. What they saw was a property twice the size of what the operations there demanded. They stopped listening to local spin here. Something didn't match up.
But we kept sending more bad signs. Too many of us stood by when Boeing ultimately completed the purchase of the South Carolina plant. That event caused investors to wonder why there was so much silence from those in positions of authority locally who surely must have known at least as much as they did.
The last minute save attempts by government and union leadership looked like too little, too late in the minds of investors who were at that point way ahead of that game.
Discussion about divesting out of our region became more common. By mid-2009, inviting new investment became very challenging. Sprinkle in the acrimonious conversation in letters to the local newspaper editors, blogs, and coffee shops after the South Carolina announcement and we sent a strong message that we are not nice to employers who don't do what we want.
At a time when other parts of the country were beginning to dig out of their own economic malaise, in comparison we looked arrogant, angry, and confused as we closed out 2009.
The implications of our current circumstances are many. Outside of a now obvious need for different behavior from the institutions we rely on for leadership, today's economy and the very real possibility of a sustained high unemployment environment here has potential impacts on public safety and retail spending patterns, among others. It creates real questions about our ability to deliver on big projects such as Everett's Riverfront and Port Gardner Wharf.
The simultaneous loss of wealth from real estate value declines and bank stock values is substantial and problematic. Snohomish County possesses a now thinned pool of actionable investment wealth locally to tap into to stimulate recovery from within.
There is a road map out, of course. The shortest route requires much more attention to the wants and needs of the investment community, business interests, and the private sector generally.
Not because they are right and labor, our elected officials, or we are wrong, but because without them, we have nothing. They are key elements of any community that we have proven we take for granted while we bath in the warm water they heat for us. We've fallen into believing ourselves and ignoring the obvious signs of trouble even as the water gets cold.
This road, though, has no room for cynics, those who take cheap shots, those who repeat problems without offering solutions, those who are angry, selfish, or myopic about how great we are. We need to get healthy. And we need to get healthy fast lest we find ourselves maintaining the status quo situation that let it happen. All of this while 10 percent of us struggle for want of a job and more businesses owners and investors holding up the other 90 percent may give up the game altogether or look elsewhere out of necessity.
The new game we are in requires that we play up and play well enough to not just keep that which we have. But, we must also attract outside business and investment to our area. That, friends, is a fierce competition that others have been playing a long time. And they have proven they are pretty darned good at it.
Tom Hoban is co-owner of the Everett-based Coast group of commercial real estate companies, specializing in commercial real estate management, sales, leasing and investment. He can be reached at tomhoban@coastmgt.com, 425-339-3638 or www.coastsvn.com.