The recession will be over in October, but it won’t be the end of hard times.
That’s what economist Mark Zandi told an audience of retail real estate gurus in Las Vegas on Monday.
Zandi’s comments were part of ReCon, the annual convention for the International Council of Shopping Centers.
“This is going to get worse before it gets better,” Zandi told a crowd at the Las Vegas Hilton that was much smaller than at past editions of ReCon. “Over the next 10 years the U.S. consumer is not going to lead the way. At best, they will do their part.”
ReCon is one of the most important retail real estate gatherings in the country.
Before the bygone real estate boom imploded, the convention attracted as many as 50,000 attendees from around the world.
On Monday morning, however, about 27,000 had signed in, 3,000 fewer than organizers had hoped would attend.
“Last year and the year before were our best years,” International Council of Shopping Centers spokeswoman Erin Hershkowitz said.
Still, those who attended this year had a chance to interact with investors looking to take advantage of low prices.
Rob Moore of Gatski Commercial Real Estate Services in Las Vegas said there is an unprecedented level of opportunity available for people willing and able to take advantage.
They’ll just need to have strong stomachs to ride out the rest of the recession before they reap proceeds of any deal made this year, he said.
“It is not for the faint of heart,” Moore said of deals available today. “It is all cash with a quick close.”
If Las Vegas is any indication, the upside may be worth the wait.
For example, Moore said Gatski has a vacant big box store in the Green Valley area of Henderson, one of 49 such vacancies in the valley, available for free to a credible tenant.
The company, which manages about 7 million square feet of commercial space on behalf of owners, is prowling ReCon for potential retail tenants.
Moore says his company can put a tenant in the big box with no rent for two years, then hope to sign a long-term lease.
Even with 25 years in commercial real estate, two years of free rent is a first for Moore.
“We are trying to attract a large retail user who would be new to the market,” Moore said. “From where we sit, it is going to be very, very difficult to occupy that space the next two years.”
As far as the national economy goes, it should be out of the recession well before 2011, when the free rent would run out.
Zandi said a combination of the $787 billion stimulus package, tax cuts, pent-up demand for goods and services, low interest rates and low-cost investment opportunities will help the recession end by October.
The tax cuts, cash infusions to state and local governments and infrastructure spending should start showing up in the economy during the summer, and contribute to a rise in consumer confidence, Zandi said.
“This is really a moment of truth for stimulus,” he said. “Hopefully you will see it in your cash registers this summer. If you don’t, then the stimulus is ineffective and policymakers will have to go to plan B.”
Zandi says the stimulus package, while packed with controversial provisions, was a swift and decisive action that likely made the recession less destructive than if the government had done nothing.
“We all have a bit of trouble with any individual aspect, but when you take the totality of the response it was really quite impressive,” he said. “The reason why we suffered a Great Depression in the 1930s is because there was no policy response.”
Zandi foresees home values, an important wealth indicator that can influence decisions on spending for things such as Las Vegas vacations, to continue to decline until about this time next year. And unemployment will continue to increase well into 2010, albeit at an ever-slowing pace.
And even when the economy stabilizes and starts to improve, Americans still have a huge financial hole to dig out of.
One Zandi forecast that looked ahead to 2020 said no longer will Americans spend at a rate greater than the country’s gross domestic product.
For years, people had been borrowing to spend more than the economy produced.
Between fears of joblessness, more stringent loan requirements and the general stinginess that people acquire in tough times, the trend of spending outpacing earnings appears to be over.
“We are all a lot less wealthy and will be a lot less wealthy for a long time to come,” Zandi said.
Contact reporter Benjamin Spillman at firstname.lastname@example.org or 477-3861.