By: Denise M. Champagne//January 16, 2012
By: Denise M. Champagne//January 16, 2012//
A bright economic outlook for 2012 is being painted by a local banker who says “We have arrived.”
Gregory MacKay, senior vice president and chief economist at Canandaigua National Bank & Trust, Thursday presented a preview of what the economic impact will be on the commercial real estate market this year. He was speaking to members of the Upstate NY Chapter of the National Association of Industrial and Office Properties at the Country Club of Rochester.
MacKay began with a recap of 2011, citing weather problems in Japan, political and financial problems in Europe and the “shenanigans going on in Congress,” ending the year with a gross domestic product growth of about 2 percent.
He said GDP is advancing, but at a slow pace; industrial production “is fixed, in good shape, doing fine” and most of the items in the corporate indexes are positive, with the exception of housing, which isn’t expected to pick up anytime soon.
MacKay said the economy is not exactly in a recovery, but what he would call an expansion which he expects to continue. He also said there will be no double-dip recession, contrary to predictions, up until about six months ago, from the purchasing managers’ index.
On the business end, MacKay said corporate profits have never been higher. “We’re making money hand over fist and banking it,” he said. “Everything that’s going on at the corporate level is generating something that was unheard of in the past.”
MacKay said capital good shipments are nearing an all-time high, private non-residential construction is back and consumer spending is “back with a vengeance.”
He said retail holiday sales were strong, not record levels, and that people are buying cars as fast as they’re coming off the assembly line.
“The consumer is feeling much much better about themselves than they have in years,” MacKay said, noting it is not like it was in the mid 2000s.
He said employment is not growing as fast as people entering the market place, but the filing of initial claims are down, but he doesn’t expect the national unemployment level to drop below 8 percent in 2012.
It was at 8.5 percent in December (6.9 percent in the Rochester area, as of November) which MacKay said is not good in any growth situation and needs to be worked on, but that the country is in better shape than in was in the last couple of years.
He said the only “clunker” in the immediate outlook is that housing starts are below normal. He attributed part of that to what he called a mid-1980s “baby bust” in which 1 million fewer babies were born, leaving that many fewer people starting families and shopping for houses now, although he said multi-family housing is taking off.
MacKay also said housing affordability has never been higher; that it is a lot better than people see it and that it just needs a spark to get the market moving.
Another concern is the number of imports exceeding exports, although MacKay said the deficit, which he attributed mostly to oil prices, has decreased from $700 billion to $400 billion.
“Somehow, we have to get back to exporting more than we import and no, it’s not going to be a windmill on top of your car,” he said.
The theme of his talk was “Are We There Yet?” He asked those in attendance if they remembered driving with their parents when they were young and asking that question, one his grandchildren now pose to him, noting he loves the enthusiasm and anticipation of children.
“Oh to be a kid again, but to have my knowledge and cash,” MacKay quipped. “Are we there yet? We’ve arrived.”
MacKay said the Federal Reserve System, businesses and consumers have done their job and that there is no domestic problem for continued growth, other than housing, “the one bad answer I have for you today.”
He said there is a little problem with the European Union which needs to be fixed and that hopefully, the member nations will see Band-Aids will not work. He believes their collective conscience will offset nationalism with 27 different treasuries all trying to take care of themselves first.
“New York state is back commercially,” MacKay said, noting the commercial real estate market is better than it was in 2005. “The country is back commercially. Banks in this area are dying for your business. They’re ready to lend.”
He said there is a tremendous and growing demand for loans and competition among banks is very strong.
MacKay concluded that there will be reasonable growth in 2012 with no inflation.
“I think it’s going to be a great year, plain and simple,” he said.
MacKay was welcomed by chapter President John D’Amanda, a commercial real estate attorney with the Rochester office of Nixon Peabody LLP.
NAIOP, according to the chapter’s website at www.naiopupstateny.com, is a commercial real estate development association.
Speakers for the Feb. 14 meeting will be Monroe County Executive Maggie Brooks and Rochester Mayor Thomas S. Richards.
— Photos by Vasiliy Baziuk