Asking the Barber If You Need A Haircut

The saying is used in different ways for different industries. Every surgeon sees a scalpel and every contractors’ hammer is looking for a nail.

How does this apply to commercial real estate you might rightly ask? Well in at least two ways. Let’s talk about jobs first. Here are some recent headlines;

“Millions Face Unemployment and Uncertainty” – CBS News

“April Unemployment Rate Rose to 14.7%” – WSJ

“Great Depression of 2020? US Jobless is at Least 20% or Worse” – MarketWatch

But here’s the thing; this unemployment problem and the parallel economic carnage were NOT caused by financial or credit issues like the Great Depression or the Great Recession. The economy was easing before the stay at home orders were issued in March. But the real purchase point of the downturn was caused by a VIRUS that we will defeat.

So those scary headlines talking about record unemployment should be rather obvious and a little less scary with perspective. And yes, I saw the remarks by Fed Chairman Powell yesterday. His call to action is a data point and one I hope our Congress will pay attention to.

If you ask a barber, I mean, an economist, what is going to happen when we shut the whole country for months, you will get a scenario much like the one we see before us now. But listen to what two term Federal Reserve Bank Chair Ben Bernanke said in the Wall Street Journal on May 11th: “Many people are suffering, but if we’re able to get..control of the virus, the economy will substantially recover and this downturn should be much shorter that the Great Depression.”

So, look past the headlines and ask the deeper question and frankly the harder question to answer; what happens when we get back to living life in a normal posture again?

There is no doubt that hospitality, retail, travel and associated industries are going to be impacted for some years to come. I can see a big dip in those industries and then a resurgence like the phoenix arising from the ashes. The desire to travel is not satiated once the need for safety is met.

On the subject of retail and restaurants, Cushman & Wakefield’s top retail economist Garrick Brown told me we were, “The most over retailed nation in the world and soon we will be under retailed.” That sounds like an opportunity for new and different retail concepts to me. Entrepreneurs will spring into action when the coast is clear.

The large blue-collar job losses will soon be followed by an echo with more job losses in white collar industries. But once again, many metrics of consumption are way, way down. For example, Tim Fletcher, a Vice President with GenRE says miles driven are down up to 40% since the crisis began. The US Bureau of Economic Analysis says consumer spending was down 7.5% in March and I’m sure we will see the number plummet further in April. So, CFOs are doing their jobs and protecting EBITDA by cutting cost as revenues are down.

But what do you think will happen when our world of consumers starts to consume again? Yes, the jobs will come back. I realize this will take time and many individuals and families will suffer. But the economy will fix itself once the nasty virus is conquered. Oh, and the government has applied record fiscal stimulus in record time, and zero interest rates to battle the crisis.

What was your second point, you might ask?

As Cushman & Wakefield executive John O’Neill likes to say, “Those of us in commercial real estate are more relevant than we have ever been in our careers.” Real estate issues are one of the foremost issues in corporate America just now. The pause in transactions will abate and those who are working hard to build relationships will reap the rewards.

Have you heard the saying “Dig your ditches to prepare for rain?” The saying emanates from the Jewish and Christian scriptures (2 Kings 3:16) and I think it is a helpful metaphor for our situation. The armies of Israel were stuck in the hot desert and were on the verge of dying of thirst. As the story unfolds, God gave the soldiers a very strange order to dig ditches. When the rain came, it all made sense…the army needed a vessel to hold the rain. Many lives were saved because action was taken in what looked like a hopeless situation.

Friends, we can look out on the hot desert all around us think about our thirst. Or we can do whatever your equivalent is of digging ditches. I bet helping those in need and reaching out to your entire business network is the “shovel” you should use right now.

I like to say your success blesses others. When you use your professional skills to solve problems you help executives and their entire workforces. When you receive the well-deserved compensation from delivering excellent service, then your company, your family and many of those hard-up retailers benefit as well. Everyone wins when YOU win.

Let’s get to digging right. Now.