IF THE ECONOMY IS IMPROVING, WHY DOES IT FEEL LIKE IT IS STUCK IN THE DITCH?

The news is full of happy talk about economic recovery and growth.  The press keeps reporting about how the economy is growing.  For example, payroll processor ADP recently reported that private sector employment numbers were up by 209,000 in March.  That’s good news!  Fed Chairman Bernanke has recently said that he thinks the U.S. economy will return to its long-term growth of around 3 percent a year despite the weaknesses it still faces.  However, despite all that optimism, the tide hasn’t raised all the commercial real estate boats yet.  At least not where I am based, in Southern California.  Why not?

There are still a lot of negatives affecting the economy that have a disproportionate effect on commercial real estate – or at least on some parts of the CRE markets.  Since consumer spending fuels about 70% of the economy, the businesses that sell goods and services to consumers suffer – and don’t buy or lease more commercial real estate – when consumers aren’t buying.  (And, of course, the other businesses, which sell to consumer-facing businesses, also slow down, as does their demand for real estate.)  Here are  the major factors and trends that appear to be limiting consumer spending out here in the real world beyond the Beltway: