Tuesday, October 17, 2017

Real Estate in Tokyo

It's always fun on a vacation to see what real estate is like in other places.  I recently vacationed in Japan, and got a chance to see various cities there.  The most interesting, from a real estate point of view, was to see how the 36 million people in Greater Tokyo live and work.  They have lots of very tall buildings, obviously, and they have a lot of diversity in their architecture. They even have one building that is designed to look like a beer stein, with a square lower part, and an upper part that juts out and is the color of foam!

 Another interesting point is that almost all of their hotels are at the tops of buildings, so that the lobbies are on upper floors, with offices beneath.  From a commercial real estate point of view, one would assume that the higher room rates for good views would have been outweighed by the higher rents that could be charged in leases to firms in the buildings.

The main takeaway from Tokyo is just how many people there are, yet how clean and orderly it is.  There are no public trashcans visible, and they have the highest number of vending machines in the world, per person (there are even machines on the tops of mountains and in the woods!), but there is no litter.  And the Ginza district looks like Times Square, but with bigger buildings and more upscale.

There is one intersection that has 2000 people cross every time the light changes; even so, it lacks the chaos and physical contact that crossing a NYC street entails.  People line up for everything, and wait politely for their turn. The main subway station covers at least one city block, but looks more like (and functions more like) a mall.  Departments stores have food halls and restaurants, some of which only serve one thing--and they are still crowded.

So now I am home, enjoying the peace and quiet of our little state, but happy to have seen the vastness of another vista.

Monday, October 2, 2017

Amazon and Connecticut--A Good Match?

Plenty of pundits have already weighed in on the issue, but I feel compelled to comment on the Amazon search for a second headquarters, because the question emphasizes both the benefits and deficits of Connecticut.  Everyplace in the country is competing, so we should strut our stuff as well.

They want a place with access to a skilled workforce.  We have that in abundance.  Our higher education system is good, and our proportion of highly educated workers is above most other locations.  We also have lots of people looking for good jobs, or leaving the state because they can't find them.

Amazon is a distribution company at heart.  Its real mission is to get you what you want, when you want it. That's different from manufacturing, or even from most retail businesses.  Rather than having a unique product, they have a unique delivery and distribution system, because they both store and consign items.  They ship from other places and other companies, even from other distributors, and they do so on a timeline that's very hard to beat.  Where is Connecticut located?  Right between the Northeastern hubs of NYC and Boston.  Our future is, as some have said, in distribution.  We are too high-cost to manufacture some things, and too small to have the population to use all the goods ourselves.  But we can ship in every direction.  And we have excess real estate at reasonable prices.

So why aren't we on the short list?  Probably we never made the long list, and that would be because we have a reputation for being a tough place to do business.  Not just expensive, since both Boston and NYC can beat us on that front, but unfriendly and anti-business.  We are almost alone in our own quadrant there, although Vermont is probably nearby. 

It certainly doesn't help that Hartford is poised to file for bankruptcy, we have no state budget, and we have union contracts that are far more generous that the states around us, or anywhere.  If you were outside the State, reading the papers, would you consider us?  I certainly hope so, for the reasons above.  And I hope even more that the Legislature and the Governor's cabinet do everything they can to address the issues in this paragraph. 

Thursday, September 14, 2017

We Need More Taxpayers-Not Higher Taxes

The following article is by Bill Derosa of CBIA, please click here to view CBIA articles online.

According to the latest employ­ment report from the state Department of Labor, Connecticut lost 600 jobs in July, underscoring the urgent need for policymakers to pass a new two- year state budget quickly­ and without tax increases. Prior to the July numbers, Connecticut had built some momentum on the jobs front, adding 5,600 jobs in May and 5,600 in June (revised down from the original June total of 7,ooo).

At press time, the state had regained 82% of the total 119,100 jobs lost during the recession and 101% of 1,680,600 private-sector jobs.

"We're still up 11,600 jobs year over year, which is better than we've seen in recent years," says CBIA economist Pete Gioia.

"It's important not to derail that momentum. The legislature must deliver a fiscally sound state budget that relies on long-term structure spending reforms and rejects broad-based tax increases.

"We believe the decision to hold the line on taxes last year helped create the conditions for this year's job growth, and now is no time to change course."

Although Gioia is encouraged by the recent improvement in job growth, he thinks Connecticut should be doing much better. "To do that, the state needs to work with the private sector to develop a comprehensive plan to fill good-paying, taxpaying jobs needed not only in manufacturing but also in financial services, trucking, and the building trades."

Concerns Over Concessions Deal
Legislators failed to pass a budget agreement before the gavel dropped on the 2017 General Assembly session and have since been locked in a stalemate. When the session ended, several budget proposals were being considered, including Gov. Malloy's plan and two Republican proposals, both calling for over $2 billion in state employee wage and benefit savings.

A major part of the governor's plan is a $1.57 billion concessions deal reached between the administration and the State Employee Bargaining Agent Coalition.

That agreement was narrowly approved in the House on July 24 and the Senate on July 31, where Lt. Gov. Nancy Wyman cast the decisive vote, breaking an 18-18 tie along party lines.

Three moderate Democratic senators threatened to vote down the concessions package but ultimately chose to approve it in return for a pledge by Senate Democratic leadership to support certain structural fiscal reforms-including eliminating state employee overtime wages from pension calculations. Those reforms could make their way into the final budget agreement, but there are no guarantees.

A Long Way to Go
The approval of the concessions package reduces the budget deficit from $5.1 billion to about $3.53 billion over two years. "Connecticut started with a $5.1 billion problem," says CBIA President and CEO Joe Brennan. "Even if the SEBAC deal saves the estimated $1.57 billion, there's still a long way to go."

The deal includes a three-y ear wage freeze (followed by two annual 3.5% wage increases) and three furlough days for most employees, an increase in pension contributions from 2% to 4%,1 increases in medical and prescription payments, changes to the retiree healthcare plan, and a hybrid pension/defined contribution plan for new workers.

However, the package also includes a four-year no­ layoff provision and extends current state employee pension and health benefits contracts another five years to 2027.

That has businesses and other taxpayers worried. Rising state employee retirement costs are one of the main factors driving the overall increase in the state's fixed costs and its persistent budget deficits.

"I've been hearing from a number of our members, large and small, who are concerned the contract extension could lock in unsustainable pension and healthcare costs," says Brennan.

A recent report by The Pew Charitable Trusts, a non­ partisan public policy research group, did in fact warn that the cost of Connecticut's employee retiree health­ care benefits would likely rise again after two years.

The report, provided at the request of state lawmakers, analyzed the concessions deal and recommended additional policy measures, including: Commissioning a 50-state comparative study of retirement benefits and policies to help ensure Connecticut is in line with peer states Requiring stress test analysis of all retirement plans as part of regular reporting to determine how plans would perform during a financial crisis Incentivizing state workers to save more in defined contribution retirement plans.

Tax Hikes Haven't Worked-and Won't Work Now Following the approval of the concessions package, Brennan called for state lawmakers to focus on ending the budget deadlock-and doing so without resorting to tax increases.

"Failure to adopt a new biennial spending plan only adds to the uncertainty that has plagued Connecticut's economy in recent years," he says.

"The legislature must now turn its attention to passing a bipartisan budget that rejects tax hikes, which will further damage our economy and kill the momentum we've seen on jobs this year.

"We need more taxpayers-not higher taxes."

Tax increases, however, are just what some are recommending, including state employee union leaders, who want $1 billion in tax hikes targeting the state's financial sector and investment earnings.

A proposal from House Democrats increases the state sales tax from 6.35% to 6.85% and adds surcharges to restaurant and hotel transactions, all of which would bring in approximately $1 billion in revenue over two years.

As consumers themselves, businesses historically have accounted for nearly half of Connecticut's sales tax receipts, so the proposed increase would place a sig­nificant additional burden on the state's job creators.

"History has proven that additional tax increases will only cause more harm to Connecticut," says Brennan. "That approach doesn't work; it only makes things worse."

He notes that after two huge tax increases in the last six years, Connecticut is still in serious trouble.

"What did we get? Declining tax revenues, growing deficits, wealthy and educated people leaving the state, and an economy that still lags much of the region and the country."

Seize the Opportunity
"If Connecticut is going to reach its full economic potential, we urgently need a budget without any broad-based tax increases," says Brennan. He urges legislators to consider recommendations in the Republican budget plans and the Pew report to find additional structural reforms and other ways to rein in state employee costs.

"Lawmakers must seize the opportunity to send a message that Connecticut is going to do business differently and instill more confidence in individuals and businesses."

Monday, August 28, 2017

Will Jobs Follow Apartments?

New Haven and its surrounding area have seen a great deal of apartment activity over the past few years.  While housing prices have remained steady, or even declined, rents have risen by 50% or more in the central city.  The administration is banking on the continued desire of young professionals and empty nesters to live in the city, wherever they may work.

The most recent announcement, of a new apartment high rise, behind the new apartment high rise that used to be the Union Trust building, is a good example.  That site was talked about for years, as the potential spot for a new parking garage, but the selling out of the Union Trust units has led to a plan for more units directly behind it.

Once all of these luxury buildings have gone up, and professionals are living here, why wouldn't they want to work here as well?  And didn't General Electric say, on its way out of Connecticut for Boston, that its biggest concern was the recruiting and retention of talent.  Aetna made much the same argument, as it prepares to pull up stakes in Hartford and relocate to New York City.

It stands to reason that university and other startups, professional firms, and other businesses that depend upon finding educated workers would look in New Haven, if there already exists a population of people living here and working in similar jobs remotely or elsewhere.  So, doesn't it also make sense that we will see a wave of employers opening branches or firms in our city, to take advantage of what people here call the GSCIA (Greatest Small City in America)?  Let's hope so.

Thursday, August 10, 2017

What Makes a Good Real Estate Agent Great?

I've spent several hours over the past few days talking to past Pearce clients about their real estate buying or selling experiences.  It was so useful, and so gratifying, that I've decided that I need to do it on a regular basis!  I asked each of them to tell me what qualities s/he found most important in the agent used in a particular transaction, and which services offered were most appreciated.  And here are the results:

1.  Overwhelmingly, the number one factor that made agents great was communication.  Clients were happiest when agents kept in touch regularly, yet this simple fact was not taken for granted, as many agents don't do that.  People I contacted told me over and over again that it was really important to their selling or buying process that they be kept informed, and that their agents were excellent at living up to this need.  It was mentioned so often that it should be the first thing buyers and sellers ask about in an interview.  However, the fact that you ask about it and someone says that they will communicate often, does not guarantee that s/he will.  Tip for clients:  Make your expectations clear upfront.  Tip for agents:  Don't prejudge what a client will want to hear.  Tell him/her everything.

2.  The second point that arose again and again was that great agents control the process.  They serve as backups for clients, who may be buying or selling from far away, who may never have bought or sold a property before, and who almost always have a lot going in, in addition to the transaction in question.  Many people mentioned that their agents kept track of dates and deadlines, always reminding them not to drop the ball or let an important clause lapse.  Great agents anticipate the next need, and regularly remind clients to stay ahead of the curve.

3.  Great agents are knowledgeable about local customs.  They can explain mill rates and closing practices.  They can talk about differences from town to town.  They serve as sources for questions and research help.

4.  It was surprising how many people mentioned that their agents went above and beyond.  We don't always know that clients recognize what is part of the job, and what qualifies as doing "extra".  I heard of an agent getting the mail, checking the property often, taking care of repairs that needed to be done before the closing, and other tasks big and small.  It was gratifying to know that clients do appreciate that such service is more than the basic representation.

5.  Flexibility was a key trait mentioned.  Buying and selling are activities often done outside of the regular working day, and clients were impressed that agents rolled with the punches.  Also, great agents accepted that needs ebb and flow, and that sometimes searches would get back burnered, while at other times people were ready to move quickly.

What did they not tell me?  I was a little surprised that they didn't mention help with pricing or offers, or advice on choosing among properties.  That doesn't necessarily mean that clients don't look to agents for actual real estate advice, but it does seem to indicate that all the points above are what made the difference.  That suggests that there could be less emphasis on how long an agent has been in business, and more on service.  One seller used a questionnaire to choose an agent, and got pushback from those who didn't want to answer questions formally.  From everything I heard, great agents have no reason not to make promises upfront, because they really deliver down the line!  In fact, I should close by quoting one client:  "She really became a friend".  That's right, everybody.  While you are buying or selling, you may talk to your agent more than anyone else in your life, for that period of time.  Choose someone you like!