The things we should be worried about are not the same as things we are worried about. That was the grand takeaway from keynote speaker Christopher Thornberg, Ph.D.’s presentation at the 11th annual Radius Real Estate & Economic Forecast, a gathering of over 400 business owners, investors, landlords, tenants and community leaders at the Hilton Santa Barbara Tuesday morning.
Both political parties were to blame as well as the media, the economist said, creating a climate of anxiety and panic that did not reflect the big picture especially when it came to numerous economic statistics. Close-ups of charts can make market drops look dramatic, while zooming out (which he did often in his PowerPoint presentation) shows regular fluctuations. Another example he used was the hit that soybean farmers took due to China’s retaliation against President Trump’s trade war—a loss, but not as dramatic once you factored in how small a role soybeans play in America’s agricultural trade.
The big question Dr. Thornberg tackled was when and if a new recession is right around the corner. He was one of the few economists to see the Great Recession coming in 2008 as early as 2006, but in short he doesn’t see a replay like that happening anytime soon.
While the trade war was not as bad as expected or reported, he chastised the Trump Administration and the GOP for its immigration policies at a time where the country is short of workers.
“Why are we demonizing people who want to work here when we need them?” he asked, joking it shouldn’t be the army at the border but a group of job recruiters.
We also need corporate tax reform in the style of Reagan and Kennedy, he added, not a tax cut as was passed last year, especially not when the economy was doing great.
The American public, he said, worry about things like the job rate, who pays for healthcare, tax levels, income inequality, business investment, and the cost of housing. But what we should be concerned about instead is the amount of workers (too low), what we pay for in healthcare (i.e. the quality), tax structure, wealth inequality, a lack of public investment (i.e. infrastructure), and the supply of housing (which needs to be at least double what it is now).
Before the keynote, Gene Deering, Brad Frohling and Steve Golis, all from Radius, presented their overview of the Santa Barbara real estate market with some examples within the greater tri-counties area. They celebrated the defeat of Proposition 10 but warned rent control advocates would be back in some form in the future. As for Santa Barbara, retail sales will remain sluggish, office sales are stable, and industrial sales are on the rise.
However, turnkey tech office space is in demand, while old “drop ceiling” office rents are out of fashion and rents will be lower. If anything the biggest boon is due to cannabis, whether that is in retail space, testing facilities, a $3.5 million sale on a building on Reddick street, or agricultural space. Other sales were mentioned re: State Street retail. The former Off Saks on the corner of State and Carrillo, just sold to a tech firm for $18.5 million. The building reportedly will become the new Santa Barbara home of a division of Amazon. By the last quarter of 2019, they hope to see a “new normal” regarding retail on State Street.
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