The lack of inflationary pressure and the low interest rate environment might extend this recovery further then previously thought. Could the low rate environment be what’s keeping us in controlled growth? The Fed’s primary way of battling recessions is to reduce rates, so is it troubling to think that if a recession hits too early then it’s bad news for how the Fed plans to mitigate…or is it a testament for keeping rates low and elongating the recovery before a high rate environment causes a recession?
Now with wage growth occurring, that’s good news going into 2019 because we all expect interest rates to rise, but at least with wages rising workers will come off the sidelines and earn more.
Read the last 3 reports from The Conference Board and decide for yourself where growth is coming from and going:
Also, from a real estate perspective, here’s an interesting excerpt from a recent article –
“The fact remains that deliveries of new properties are way below historical averages, in all property types. Demand far outpaces supply. The Fed has already increased interest rates four times. Real estate has been largely unaffected. The industry is more impacted by labor and building materials’ costs. Those have ticked up but not necessarily because of inflation, and building continues.”
Bring that information locally. The demand curve has changed locally and new large businesses keep coming our way looking for space as they demand to be here.
That’s the trigger that requires new supply to come at a more frequent pace as well. When the demand line moves it not only requires a supply change but it also changes the supply line with an equal pace. Historically, we only saw a few large deals per year and even with the limited supply we had the deals would happen, but they’d take longer. Now that we’re seeing more deals, more frequently, we need to have more supply than we anticipated in prior years based on prior year trends. The trend line has shifted, and we can’t make future quantitative decisions based on historic demand trends.
We need to have ample supply for the opportunities that could continue to present themselves or else this market won’t grow with new impactful businesses that want to be here due to our strong demographics, diverse economic drives and consistent population growth.
Our International airport has grown significantly, there’s a plan for a privately funded Brightline ril system to connect to Orlando, our local Hillsborough citizens voted in a tax increase to help pay for transportation and education, and investors now have new opportunity zones to choose from. Please look at the progress our area is making and decide for yourself how you see this plays out, but I can’t see a noticeable headwind that would derail us (no pun intended). I also can’t see a significant tailwind that propels us faster though, so keep an open mind that we are peaking and we should be disciplined and cautious with certain financial decisions.
Just to play devil’s adcovate, here’s a random thought. Historical events always take a while to materialize when we look back on then in hindsight. They don’t just happen overnight and we always look back and notice when they started. It’s clear as day.
So I go out on a limb and say watch for the signs that we’re already slowly starting towards an economic softening or recession, and then make smart decisions to help yourself get through it one way or another. It’ll make it less painful and it’ll allow you to navigate the uncertainty and risk when it eventually gets here.
Call Fortress CRE, so we can talk expert advice on where your real estate strategy should be focused in West Central Florida. Fortress Commercial Real Estate (CRE) adds value to business owners looking to grow through their real estate, office and building needs.
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