Let’s Keep Our Perspective

By John E. Pound

As we read the headlines and listen to the news reports of the economic slowdown, it is important to keep these reports in perspective.  This is especially true in the politically charged environment prior to a national election.  While there is no question the economy has slowed down and as President Bush says, is going through a “rough patch,” I believe the St. Louis area is very fortunate in many respects.  The sky is not falling and our “cup” is more than half full.  Of course, this does not bring any comfort to someone who has lost his job or may be faced with foreclosure on his home.

It is often said St. Louis doesn’t experience the economic boom times some other areas do, but neither do we suffer the “busts” during slower times.  This has certainly proved to be the case during the past several months.  The St. Louis economy is very diverse, much more so than it was during the recession of the early 1990s or after the tech bubble burst and terrorist attacks 10 years later.  Our economy is not dominated by any single industry or even several large companies.  At one time not long ago, St. Louis was the single largest automobile assembly point other than Detroit.  That is certainly not the case today and while that is unfortunate in some respects, overall we are probably better off not being tied so closely to that industry today.  The same applies to the aircraft industry where McDonnell Douglas once employed over 30,000 people.

The overall level of employment in St. Louis is quite high and is above the national average for the country as a whole.  Many of our fine local companies are expanding, not contracting, with Edward Jones, Brown Shoe, and Express Scripts as shining examples.  The homebuilding industry has slowed down, but fortunately, we did not have much sub-prime lending and are not experiencing many home foreclosures.

The commercial real estate industry remains quite healthy overall.  Occupancy levels of both office and industrial properties are relatively high.  The area did not experience significant overbuilding of either speculative office or industrial buildings during the past few years, so demand and supply of available space has maintained reasonable equilibrium.

Commercial real estate is driven by growth in jobs and inventory.  While we have experienced a slowing in both areas, it has not been significant.  Most economists predict economic growth will continue to be fairly slow during most of 2008, but then increase late in the year and become stronger in 2009.  Since the development cycle of most larger commercial buildings is one-two years from inception to completion, developers are planning new projects and will probably proceed with construction unless the economy takes a downward turn.  This is good, as having a certain supply of both office and industrial space available to accommodate growth needs and new businesses is important.

At this point, the St. Louis economy seems to be well positioned to weather slower times for the rest of 2008 and then take advantage of improved conditions going into 2009.  World events can certainly change rapidly however, so “cautious optimism” is probably the best approach for business during the rest of this year.  Coincidentally, that seems to be the same approach most Cardinal fans have for the 2008 season as well.  Could it happen that the Cardinals will be playing in the playoffs just as our economy is turning around?

John E. Pound, SIOR, is principal of Commercial Realty Associates, and serves as the 2008 president for SIOR St. Louis. Headquartered in Washington, D.C., the Society of Industrial and Office Realtors is a global professional organization that certifies commercial real estate service providers with the exclusive SIOR designation. Individuals who earn the SIOR designation adhere to the highest levels of accountability and ethical standards. Only the industry’s top professionals qualify for the SIOR. Today, there are 3,100 SIOR members in 480 markets in 20 countries. With 60 designated members, the St. Louis chapter is one of the largest and most active SIOR chapters in the country. For more information, visit http://www.siorstlouis.com.

Columns