Boring. That’s how Ward S. Caswell describes the current recovery. And CB Richard Ellis’ director of information management sees no reason to believe that the upward trend will do anything else but continue on its boring, upward path. The following, exclusive interview is a milestone of sorts, timed as it is with the emergence of CBRE as’s newest MarketData provider, supplying the website with industrial and office statistics on a quarterly basis for all 21 US markets we cover. So why does Caswell yawn over the current state of the market? And what could rouse him from his ennui? Read on: What’s the biggest surprise for you in your latest statistics?

Caswell: The biggest surprise is the resiliency some of the markets are showing and their ability to bounce back quickly. For example, I’m glad to see Boston posting some fairly sizeable positive absorption, the magnitude of which surprises me. Boston tends to lag during recoveries, but it came in with a couple of million sf of positive absorption last quarter. What other geographic areas pop out?

Caswell: Certainly the Sunbelt seems to be doing fairly well. But overall, it’s a pretty boring time. We’re at a plateau in vacancies. Absorptions were positive last year, but not dramatically so. It depends on which measure you’re taking and which slice of the overall pie you’re looking at, but overall absorptions for the year were just shy of seven million sf, which is indeed, historically pretty small. Do you expect it to stay boring?

Caswell: There are a lot of contingencies, such as the election, oil prices and the threat of additional terrorist attacks. Those of course would all be strong negatives. Other than that, we’re seeing signs of a surging economy, and we should see vacancies come down nicely and absorption settling in. In addition, there is the fact that there was fairly limited construction toward the end of the last peak compared to previous cycles. A surging economy would mean jobs. Right?

Caswell: Certainly we’ve seen jobless recoveries before; it’s much the same as in the last recovery. Employers tend to hold off adding folks until they’re absolutely certain they need them and can keep them and maintain profitability. But we’re starting to see some positive signs, although it’ll be impossible to get highly accurate employment numbers until the post-election revisions. Do you think this will be the year when employers stop holding off?

Caswell: I read all the prognosticators. But I look at my people and the folks I work with and they’re all working flat out. You can only do that for so long before people start making some lifestyle choices. Multi-tasking has its limits.

Caswell: It does, and people start making errors and companies start having difficulties meeting their goals on those productivity initiatives. So I’m actually a little more positive on the employment front than what I’m seeing in the prognostications. I look at the activity that our offices are posting, and it’s quite strong. Now a lot of that activity is still on the sales side, of course, but leasing has been coming back nicely for us. How will interest rates impact those sales?

Caswell: The Fed is cognizant of the impact of raising rates too quickly. One interesting effect, of course, is that you raise the rates and the bond markets take a slide, and real estate is basically an annuity investment for many investors. So as bonds become even less attractive, that tends to keep the money in real estate. But once interest rates get to a certain point and stop moving and bonds bounce back, that will draw some capital from the real estate markets. And cap rates?

Caswell: I’d expect to see cap rates stabilize somewhat. There’s still a built-in expectancy of recovery. And do you see a softening in pricing?

Caswell: Rather than a softening, I’d see it as a moderation. Things will move slowly and predictably enough that, as the cost of capital goes up with rising interest rates, the actual incomes, which have been largely steady, should rise to capture the difference. It’s a nice little machine, a nice little balance. In terms of the office sector, where do you see growth coming from?

Caswell: While the Sunbelt markets tend to focus on light manufacturing and low- to medium-wage office workers, the Northeast and to a certain extent Atlanta and Southern California tend to focus more on high-wage office employment–and that’s where the innovation occurs. Such as?

Caswell: Well, I wouldn’t be surprised to see a resurgent tech movement. It’s become a highly cyclical industry. People look back one cycle but you have to look farther than that–to the ’30s and ’40s and ’50s. They really are quite cyclical. And where will the industrial growth be?

Caswell: I would look to the port markets. If we can make some progress on government debt, if we can stop the deflation of the currency and certainly if China revalues as has been hinted, it could have some interesting ramifications on our trade deficit. It would be interesting to see some product flows out of the US, but the focus for industrial growth is still going to be on warehouse and distribution for goods coming into the US. So, to recap, no major shock to the system–either upward or downward?

Caswell: Too much pressure on interest rates could of course have a negative impact on sales, but I really don’t expect it.

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