Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
Leasing; Sales; Management; Buyer or Tenant Representation
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 5, 2009
Attached is our complete listing of all properties for sale in Colorado Springs, based on property type - office, industrial and condo. This is the most complete listing that we are aware of. It’s our goal to provide this information, updated weekly. We develop these lists by basic research and cross-checking data points from the PPCIE, local broker's individual web sites, The Turner Book and any other public information domain we can find.
You are receiving this information because, at some point, you asked or a friend referred your name to be included in our e-mail Insider’s List. If you no longer wish to receive this information, send an e-mail reply to me (tim@hoffleigh.com) and ask to be removed. Alternatively, if you know someone who could benefit from the receipt of this information, forward this e-mail to them, and suggest they contact us, so we can consider adding them to our exclusive list.
All Market Average Office Building Sale Price PSF = $112.11 (NO CHANGE from $112.11 last week.)
We are currently tracking 143 office buildings for sale.
This is 1,452,392 square feet, which represents a total market value of $162,882,448.
All Market Average Industrial Building Sale Price PSF = $83.41 (NO CHANGE from $83.41 last week.)
We are currently tracking 130 industrial buildings for sale.
This is 1,663,437 square feet, which represents a total market value of $138,743,956.
To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/7.1.09.pdf
Closed:
We did close the sale of the 2 buildings we crowed about last week; 1) a 30,000 square foot industrial building; and 2) a small office building in the Old North End. Their pricing fell right in line with our analysis. If you would like to know more, or if you would like us to evaluate your property for it’s “real” value, give me a buzz at 719-630-2277. And, we’re now offering to create an APOD for your property, free-of-charge to our subscribers. This is a $1,500 value. There’s no latent obligation. Just give us a call.
Tim’s Market Notes
Bubble: When the value of something goes way beyond what it’s worth.
Bursting Bubble: When the value of something burst & crashes.
Inflation: Stuff costs more nominal dollars to purchase.
Deflation: The value of stuff goes down.
Liquidity Trap: When the government’s monetary stimulus plan doesn’t work.
Ebb & Flo: 2 old married hillbilly’s from Kentucky.
Normally, the price of something won’t go-up forever. Real estate’s no exception. Real estate prices went up, up and away, created a bubble and burst and crashed. When they crashed, they created our current financial chaos which is reflected as unemployment, illiquidity in the banking system, & general uncertainty about the future.
Now the government’s faced with the choice of deflation, (which is really bad because nobody wants the value of their stuff to go down), or inflation, which is also bad, but less bad, because at least with inflation, you think your stuff’s worth more, but ultimately, it leads to deflation.
Since deflation’s really bad, the government’s goal after a deflation (aka recession/depression) is to re-inflate the system. They can do that in one of 2 ways; 1) they can print money out of thin air and inject it into the system (normally through banks) or, 2) they can lower interest rates, stimulating demand for money, which, when demanded is spent into the system by consumers. In either case, new found liquidity acts as a lubricant, greasing the transmission of our economic engine, which allows (if left unfettered) the piston’s of free enterprise to start firing.
It’s been my opinion that we should expect a strong dose of inflation in the coming months based on the increase in the money supply. (I still believe that – I just think it may take a bit longer to get there.) In normal times, when the Fed pumped money into the system, either by creating money out of thin air or by lowering interest rates, it would cause too many dollars to chase too few goods and thereby create inflation in the system. However, Brian Bethune, chief economist for IHS Global, http://www.globalinsight.com/, says we should be more concerned about deflation, rather than inflation. He says, “The issue of inflation is over; the issue of deflation is still on the table.” Remember you heard it here 1st, “Inflation good; deflation bad!”
This month’s “Monetary Trends”, the monthly report published by the St. Louis Fed says, “In response to the current economic crisis, the Federal Reserve has reduced its federal funds rate (FFR) target to zero. With the FFR at zero, the Fed’s now in uncharted territory when conducting monetary policy. “Other types of policies” are now the focus of attention.” http://en.wikipedia.org/wiki/Federal_funds_rate. “Other types of policies” is government-speak for “let’s spend money.” That means our elected officials want yours & my money because when the government spends, everybody pays – in lay-man’s language “we get screwed”.
When I look at the St Louis Fed’s money supply chart, I think, “Damn, where’s the love?” Why hasn’t the system already inflated itself out of its current malaise and why hasn’t the corresponding value of my depreciated real estate portfolio come-back to life? Looking at the chart, and considering what Dr. Kochtu used to tell me, “You crazy Bastards; when you add fuel to fire, it burn.”, (Note – grammatical inflection is sharp Korean accent!), we should be hot, hot, hot with inflation and as real estate investors, giddy with optimism. But we’re not.
Hoff & Leigh, Inc.
Leasing; Sales; Management; Buyer or Tenant Representation
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 5, 2009
Attached is our complete listing of all properties for sale in Colorado Springs, based on property type - office, industrial and condo. This is the most complete listing that we are aware of. It’s our goal to provide this information, updated weekly. We develop these lists by basic research and cross-checking data points from the PPCIE, local broker's individual web sites, The Turner Book and any other public information domain we can find.
You are receiving this information because, at some point, you asked or a friend referred your name to be included in our e-mail Insider’s List. If you no longer wish to receive this information, send an e-mail reply to me (tim@hoffleigh.com) and ask to be removed. Alternatively, if you know someone who could benefit from the receipt of this information, forward this e-mail to them, and suggest they contact us, so we can consider adding them to our exclusive list.
All Market Average Office Building Sale Price PSF = $112.11 (NO CHANGE from $112.11 last week.)
We are currently tracking 143 office buildings for sale.
This is 1,452,392 square feet, which represents a total market value of $162,882,448.
All Market Average Industrial Building Sale Price PSF = $83.41 (NO CHANGE from $83.41 last week.)
We are currently tracking 130 industrial buildings for sale.
This is 1,663,437 square feet, which represents a total market value of $138,743,956.
To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/7.1.09.pdf
Closed:
We did close the sale of the 2 buildings we crowed about last week; 1) a 30,000 square foot industrial building; and 2) a small office building in the Old North End. Their pricing fell right in line with our analysis. If you would like to know more, or if you would like us to evaluate your property for it’s “real” value, give me a buzz at 719-630-2277. And, we’re now offering to create an APOD for your property, free-of-charge to our subscribers. This is a $1,500 value. There’s no latent obligation. Just give us a call.
Tim’s Market Notes
Bubble: When the value of something goes way beyond what it’s worth.
Bursting Bubble: When the value of something burst & crashes.
Inflation: Stuff costs more nominal dollars to purchase.
Deflation: The value of stuff goes down.
Liquidity Trap: When the government’s monetary stimulus plan doesn’t work.
Ebb & Flo: 2 old married hillbilly’s from Kentucky.
Normally, the price of something won’t go-up forever. Real estate’s no exception. Real estate prices went up, up and away, created a bubble and burst and crashed. When they crashed, they created our current financial chaos which is reflected as unemployment, illiquidity in the banking system, & general uncertainty about the future.
Now the government’s faced with the choice of deflation, (which is really bad because nobody wants the value of their stuff to go down), or inflation, which is also bad, but less bad, because at least with inflation, you think your stuff’s worth more, but ultimately, it leads to deflation.
Since deflation’s really bad, the government’s goal after a deflation (aka recession/depression) is to re-inflate the system. They can do that in one of 2 ways; 1) they can print money out of thin air and inject it into the system (normally through banks) or, 2) they can lower interest rates, stimulating demand for money, which, when demanded is spent into the system by consumers. In either case, new found liquidity acts as a lubricant, greasing the transmission of our economic engine, which allows (if left unfettered) the piston’s of free enterprise to start firing.
It’s been my opinion that we should expect a strong dose of inflation in the coming months based on the increase in the money supply. (I still believe that – I just think it may take a bit longer to get there.) In normal times, when the Fed pumped money into the system, either by creating money out of thin air or by lowering interest rates, it would cause too many dollars to chase too few goods and thereby create inflation in the system. However, Brian Bethune, chief economist for IHS Global, http://www.globalinsight.com/, says we should be more concerned about deflation, rather than inflation. He says, “The issue of inflation is over; the issue of deflation is still on the table.” Remember you heard it here 1st, “Inflation good; deflation bad!”
This month’s “Monetary Trends”, the monthly report published by the St. Louis Fed says, “In response to the current economic crisis, the Federal Reserve has reduced its federal funds rate (FFR) target to zero. With the FFR at zero, the Fed’s now in uncharted territory when conducting monetary policy. “Other types of policies” are now the focus of attention.” http://en.wikipedia.org/wiki/Federal_funds_rate. “Other types of policies” is government-speak for “let’s spend money.” That means our elected officials want yours & my money because when the government spends, everybody pays – in lay-man’s language “we get screwed”.
When I look at the St Louis Fed’s money supply chart, I think, “Damn, where’s the love?” Why hasn’t the system already inflated itself out of its current malaise and why hasn’t the corresponding value of my depreciated real estate portfolio come-back to life? Looking at the chart, and considering what Dr. Kochtu used to tell me, “You crazy Bastards; when you add fuel to fire, it burn.”, (Note – grammatical inflection is sharp Korean accent!), we should be hot, hot, hot with inflation and as real estate investors, giddy with optimism. But we’re not.
I discovered the “liquidity trap”. That’s what economists call a situation where nominal interest rates have been lowered, (see above – “And, Ya’ cain’t get no lower than that, Bob!”), to nearly zero (or zero) to avoid a recession (deflation). Hmm; that sounds vaguely familiar. It’s where the continuous addition of new money into the market (created by low interest rates) doesn’t stimulate the economy. (Since, we’re now hovering at 9.5% unemployment with predictions by the OMB to 10% for 2010 I’d guess it’s not working.) June’s unemployment figures were the worst in the past 3 months. That’s called a slippery slope or in lay-man’s language – Oh, Shit.
If, in a liquidity trap, additional increases in the money supply don’t stimulate the financial system, “What’s a mother to do?”
From Bethune, “Most people don’t understand how the monetary & credit system works right now. Most people who think about these things are using an old model, which assumes there’s no constraint on banking-system-capital. That model’s useless.” He goes on to explain that that the money the Fed’s trying to pump into the system is basically going to the banks, and then in circular fashion, going straight back to the Fed. How does that make sense?
He says a good way to think about this is to think about 2 houses. Behind house Number 1 are 2 swimming pools; 1 pool’s full of (liquidity) money and 1 pool’s empty. That’s the Rich Neighbor’s (the Fed) house. The White Trash next-door-neighbor, (the banks), has a Cement Pond with no water in-it and he keeps whining, “I need water; I need water!”
Under the new monetary policy model, Bethune says the Fed pumps water (money-liquidity) from its full pool to it’s own empty pool. Their pumps don’t push water to the neighbor’s pool. Under the old model the Fed had only 1 pool, so by necessity, when it pumped, it went to the neighbor’s pool. Now, there’s a Big Stone Wall called regulation which says banks aren’t going to lend while their balance sheets are low. The Big Stone Wall deflects the water that the Fed’s trying to pump into the neighbor’s pool and instead of getting it over the wall, it merely splashes-back and fills its own empty pool. Essentially, all the Fed’s doing is sloshing water around in its own back yard.
Bethune reports that credit in the economy’s still declining. It’s clear that money’s not moving beyond the Big Stone Wall, and while the chart says there’s a lot of money being created, its equally clear that its not getting into the system, thus his worry about deflation. According to Bethune, “There’s no worry about inflation until banks resume normal credit operations” which they won’t do until their balance sheets come-into compliance with federal regulations (and the walls come-a-tumbling-down) and that won’t happen until deflation has depreciated asset prices to match market realities. That’s called mark-to-market.
Another way to think about this is, normally, the Fed pumps money into the system by loaning it to banks who in turn lend it to consumers. In a liquidity trap, banks don’t lend because they fear their borrowers will default, because they believe those loans would be based on over-valued collateral. In this case, the Fed’s newly created liquidity is “trapped behind unwilling lenders.” (The theory of liquidity traps applies to monetary policy in non-inflationary depressions - sound familiar?) In liquidity traps, most economists believe the way out is by government spending, normally on “shovel-ready” projects. Lincoln had them; canals & rail-roads; Roosevelt had them; TVA; Hoover Dam, etc.
Milton Friedman said the Fed could escape a liquidity trap by bypassing banks and giving money directly to consumers & businesses. And as I write & re-read that statement, I chuckle; “What the hell? Where’s my money? Where’s the love?” In bank parlance, this is referred to as a “money-gift” or “helicopter-money.” The term “helicopter-money” is meant to portray the image of a central banker dropping money on people from a helicopter. Of course this is nothing new. Bush did this twice. It’s what happens on a daily basis at my house. In fact, I’m thinking of a name change - Helicopter Tim; heck, just call me HT for short. (You Dads know what I’m talking about!)
Of course, after the storm comes sunshine. In our economy, sunshine is inflation, because, while technically, it’s the loss of purchasing power, it’s the canon ball that creates increasing equity for hard-asset holders and it’s really a boon for debtors who can repay with less valuable currency. And it’s a huge boon for government because they are the world’s largest debtor; so that it’s coming is predictable. The government will inflate the system. It has too. It’s the only plausible way for it to get itself away from the massive debt its accumulating.
Want examples of inflation? In 1950, an average house cost $14,000. Today, it cost $169,000. That’s 1,100% inflation. Gas cost 18 cents a gallon; now its nearly $3 bucks. That’s 1,300% inflation. The list goes on & on. You could add any staple to the list; insurance; stamps, etc., etc. Paul Volcker said, “There’s a lot more inflation than reflected in government figures.”
Since this column is about Colorado Springs commercial real estate, let me bring this home. Colorado Springs’ commercial real estate is overpriced. (Except in the case where building owners & banks have concluded they need to be ahead of continuing price-deflation.) Properly priced real estate should be purchase for long-term investment now. Buy on the dips! Naturally, if building prices are going to come-down, rents will correspondingly, spiral-down.
What are my predictions? I know, “It’s the guy behind the red curtain” seeing the future. In the near and mid-term (say 18 – 24 months), I expect inflation & interest rates to stay low, and I expect continued asset-price-depreciation. However, when everything’s settled-out, I expect with some conviction, we will see the Roaring Lion of inflation rear his head and growl like he hasn’t in a long time (think of Jimmie Carter!)
Ebb & Flo: the natural rhythm of the market. It has to go up and it has to come down. It sucks when it comes down, but if you’re patient, we’ll all look smart again, eventually. I think.
It’s summertime. I hope you have a fun and profitable week. And think of me on Wednesday morning. I’m having my knee repaired from my Old-man athletic injuries.
Tim Leigh
Sincerely,
TJL
Tim Leigh
719-337-9551
Tim@HoffLeigh.com
To view our Office Matrix List please click below
http://hoffleigh.com/OfficeInsider.aspx
To view our Industrial Matrix List please click below
http://hoffleigh.com/IndustrialInsider.aspx
