Jim Pederson, August, 2013
The longest economic expansion in modern Arizona history occurred from the early 1990’s until 2007. Great fortunes were made in the real estate profession; however, as with most economic expansions, many participants in our industry became careless. Whether it was loan underwriting or compromising on the product that we delivered to the public, the end result of this carelessness produced a sudden slamming of the door that resulted in the essential shutdown of our industry. This resulted in business failures and many abandoning real estate and even Arizona to make a living in another pursuit.
To construct a business plan for the next several years we can take lessons from the recent downturn, as well as the recession that was experienced in the late 80’s and
early 90’s. At that time, our economists were predicting that recovery was years away and writing business plans should involve a very conservative approach. Contrary to these predictions, Arizona’s economy rebounded quickly and outpaced the rate of growth in almost all states including California. The Resolution Trust Corporation was pushing non-producing product out into the market which quickly cleaned the slate by ratcheting down values to reflect market.
The real estate professionals who were assertive during the start of the early 90’s recovery were the ones that profited most from the turnaround. Those individuals spent their time during the slow times to hone their skills and increase their knowledge of the trade area in which they worked. They were positioned well to take advantage of the upturn and quickly distanced themselves from the competition. If we look at any economic cycle it compares to a bell curve; the most profitable undertakings occur during the first 25% of that curve. Once at the top, everyone jumps back in and the inevitable downturn in the curve occurs.
The common thread of success, no matter what stage of the cycle, is serving the needs of our ultimate client. Our company develops shopping centers. Therefore, our ultimate client is the retail tenant. The needs of our retailing clients change quickly and our responsibility is to provide the product and complete knowledge of our trade area to serve that client well.
There will be many opportunities presented during the next two to three years in the greater Phoenix area. Those of us prepared with the right skills and the right attitude will emerge the winners when we arrive at the top of the cycle. Join me and several other experts on August 23rd at the Arizona School of Real Estate & Business from 9:00 am – 1:00 pm discussing trends, possibilities and opportunities in commercial real estate.