The answer to the question “How did the US get into the present housing crisis” goes back to a real estate class examination question I missed in 1964.  While I was a student at the University of Florida studying real estate, I could not answer an exam question, which I remember to this day.  The question was, discuss the meaning of the phrase, ” Housing is the handmaiden of the GDP”.  At the time I knew “GDP” stood for the gross domestic  product or the amount of goods and services produced in a country over a given time period.  I had no idea what was meant by the term “handmaiden”.  The answer is that housing activity can bring the economy or GDP up and housing can bring the economy down.  Because housing is labor intensive, it consumes domestic products and can be rapidly built, it will quickly move the economy.

Now let’s go back to the year 2000, the tech bubble is bursting and you are Alan Greenspan in charge of the economy.  If he paid attention in my real estate class he would remember that “Housing is the handmaiden of the GDP” and to stimulate the economy he would pour money into housing by making mortgage money available on very liberal terms.  Looking back this is exactly what happened.

Fast forward to 2008, the housing bubble that this created is about to burst like the tech bubble did in 2000.  But now there is a problem, the old formula of using housing to stimulate the economy will not work.  We already have an excess supply of housing, which is too expensive for most buyers.

One way to stimulate the economy is to increase manufacturing and with the decline in the value of the dollar, more products are being exported.  But with higher productivity, fewer workers are needed to produce more goods.  What to do, what to do?

I believe that in order to stimulate the economy the government will create a “Works” program to build and rebuild our roads, bridges, transportation systems and yes even stimulate alternative energy development.  Everyone uses these public facilities, the money is being spent locally and we cannot continue down the path of continued oil use.

In the meantime, prepare for a period of declining employment, declining sales and difficulty in borrowing money, and inflationary pressure brought on by government spending on public works projects.  Hopefully, there will not be created the “stagflation” of President Carter’s administration when the economy was stagnant, but inflationary pressure ran wild.  If the administration is successful this will be just another economic cycle of ups and downs which seems to occur every ten years and should be over by 2010.

With the beginning of the New Year it is time to look back at what has happened in the real estate market and to project what to expect for the coming year. The “Industrial Association of Dade County” (IADC) has become the “Commercial Industrial Association of South Florida” (CIASF) with an emphasis on all aspects of commercial real estate including office buildings, shopping centers and industrial/warehouses. This year’s Industrial Market Report contains the same emphasis as prior years. For reporting purposes, Miami-Dade The following is a summary of the information in that report. County is divided into seven areas based on typical properties in each area.

Supply of Industrial Space: For the year 2006 industrial space increased by 2,174,000 SF as compared to the prior year of 1,783,000 SF. This represents a moderate increase in the annual supply of new industrial space.The area of Northwest/Medley had the greatest growth 599,000 SF.

Industrial Employment: 2007 industrial employment in manufacturing, trucking/warehousing and wholesale trading increased to 185,100 from 182,500 in 2006. This increase was primarily in wholesale trading.

Total Freight: Cargo movement through the Port of Miami decreased to 7,835,131 tons down from 8,654,000 while cargo at the Airport increased to 2,038,000 up from 1,662,000 tons.

Demand/Supply for Industrial Space: Based on industrial properties available for lease vacancies rates ranged from a low of 2% to a high of 10% in the seven regions described in our report. This variation is the result of additional supply and changes in demand. The highest vacancy rate was 10% in Hialeah.

Rental Rates/Sales Prices: With over 419 properties having a total of 11,316,000 SF for lease, rental rates ranged from $8.50/SF to $11.25/SF. This variation results from the variety of product type from large older, street level warehouses to 100% AC flex space with office and warehouse areas.

Sales for the year of 2007 through November for buildings over 10,000 SF totaled 144 with a total of 5,711,900 SF. Sales prices ranged from $72/SF to $106/SF; again, the wide variation results from the different property types.

Summary: As in years past our industrial market report provides a snapshot of conditions and influences for 2008:  Tenants are “right-sizing”, this is a trend to examine realistic needs and consolidate their operations into smaller spaces. Although the number of businesses in the area remains constant, they are consuming less square footage.  One effect of Miami’s increase in traffic congestion is the need for distribution companies to have distribution hubs in Miami. State government has not been able to reduce real estate taxes or insurance. These continue to discourage companies to relocate to South Florida. As a result of the downturn in local and national economies, rental rates for properties have stabilized and are trending downward. With stable rental rates, property values in the coming year will be based more on rental income rather than resale value at a future date.

If you’d like more information about the “Commercial Industrial Association of South Florida” send an e-mail to [email protected] or you can view the entire Market Report on our website