Jacksonville commercial real estate brokers, builders and bankers looking for economic encouragement Wednesday heard what University of North Florida economics professor Paul Mason considered the good news and the bad.
"It's not all bad news for growth, but there's room for improvement," Mason told 75 NAIOP Commercial Real Estate Development Association Northeast Florida Chapter members and guests at the Jacksonville Golf & Country Club. He provided a year-end wrap-up.
Mason listed what he called the "black swans" for economic growth, considered to be events that can significantly affect the economy's progress.
He listed the European debt crisis; "Obamacare," the Affordable Care Act championed by President Barack Obama; taxes; interest rates; the deficit and the federal debt; and the real estate markets.
Obama was re-elected last week for a second four-year term.
Speaking directly to their market, Mason made four points about commercial real estate:
• Commercial real estate occupancy rates were clobbered by the Great Recession and new construction of commercial properties has been almost non-existent.
• Occupancies will rise marginally in 2013 due to business improvements generating marginal increases in rents.
• The low interest rates have maintained property values in commercial real estate, but higher rates will eliminate this advantage.
• Locking in long-term rental rates will be a beneficial strategy before the economy eventually improves and landlords regain some competitive advantage.
Mason's comprehensive review also included some forecasts.
• Economic growth will remain at less than 3 percent for 2013-14 and the economy could fall into a recession if the so-called fiscal cliff policies under negotiation by Washington, D.C., lawmakers and the president fail.
• The unemployment rate will fall only if large private sector businesses begin to invest and need additional employees to staff their expanded operations and if small businesses are encouraged to open and expand, meaning there needs to be a conducive climate that Mason said does not exist now and is less likely under Obama's second term.
• Inflation will rise to 4 percent or more in 2013 despite slow or negative growth as corporate and bank assets that have been held in reserve are put to use.
• Taxes will rise next year, "and it will be lot."
On the positive side, he said residential real estate has been improving. "We are back to a moderate growth period like prior to the boom," he said in his presentation.
Mason is a professor of the UNF Coggin College of Business. He and students produce the LEIPLINE newsletter that reports and analyzes economic statistics, including for Northeast Florida. The newsletter also provides a quarterly economic assessment and forecast each February, May, August and November. It is available at unf.edu/coggin/leip.
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