A Recap on NAIOP South Florida Chapter’s 2017 Economic Outlook Program
By: Don Silver
Last week’s NAIOP South Florida Chapter’s 2017 Economic Outlook program did not disappoint. With the backdrop of President Donald Trump’s first week in office combined with a record-setting Dow Jones Industrial Average above 20,000 and solid economic and jobs numbers, a panel led by a former journalist, two economists and a former U.S. Senator made the price of admission well worth it.
Moderator Darcie Lunsford, senior vice president of Butters Realty & Management, led the panel, anchored by Mark Vitner, managing director and senior economist at Wells Fargo Securities, J. Antonio Villamil, founder and principal at the Washington Economics Group and former U.S. Senator George LeMieux, chairman of the Gunster law firm. The panel explored several economic and political issues of interest to commercial real estate professionals.
The consensus was that the economy, stock market, value of the U.S. dollar, commercial real estate market and future of the country are all in pretty good shape – with Florida doing even better.
“Tech is disrupting jobs; we’re going from 50 mph to 500 mph with solutions that displace workers,” said LeMieux. “But Florida is in a better position because we are more of a service economy.”
LeMieux went on to explain that Florida is gaining 300,000 new residents a year, with most fleeing from high-tax states like Connecticut, New York and New Jersey and others coming from Latin America.
“Trump is well suited for the job with his disruptive agenda,” said Vitner. “His tweets are his weapons of mass distraction.”
But Villamil weighed in, citing the impact Trump’s tweets have had on the Mexican Peso. “His tweets are bad for foreign policy.”
Speaking of relations with Mexico, Villamil said Florida does more than $3 billion in trade with the nation each year. So we have a lot to lose if the relationship goes south.
The discussion covered Trump’s cancelling of U.S. participation in the TPP, the risks of trying to undo NAFTA and the possibility of instituting border taxes, tariffs or even a VAT. “Mexico and Canada are two of our largest trading partners,” said Villamil. “How can we risk this with the talk of border taxes and tariffs?”
Next, the panelists discussed various tax proposals brought up during the campaign.
“There hasn’t been any significant tax reform in the U.S. since 1986,” said LeMieux.
“This is Trump’s time to do something bold,” exclaimed Vitner. “Let’s see if Congress can work at the speed of Trump.” (The crowd roared with laughter.)
Even though the U.S. is essentially at full employment, many are underemployed. “If we can reduce the tax burden on individuals, we may get them off the couch,” said Vitner.
Killing Obamacare was of concern to the panelists. Some believe the U.S. should only cover catastrophic illnesses and let consumers become better shoppers of healthcare services. “Healthcare needs to become more competitive,” said Villamil. What to do with the 20 million people already on Obamacare and what the few remaining insurance companies will do are major looming questions.
The discussion then moved to economic growth and interest rates. Most concurred that the Fed will be going up a full point (100 basis points) during the coming year. In regard to economic growth, the new administration’s goal is 4 percent. Most believed that maintaining growth of more than 2 percent – possibly 3 percent – would be very good considering where we are in the current business cycle.
The commercial real estate market was definitely of interest to this crowd. Some think there is a bubble forming in certain product types and geographic markets, especially the large “Gateway Cities.” Foreign investment in the commercial real estate sector has actually doubled over the past five years, with investors reaching for yield.
So where is the economy going in the next year?
LeMieux believes that 2017 will be a very good year. “Economies don’t die, they get murdered,” he said. LeMieux cited the strong dollar, low inflation, northeastern migration, boom in the I-4 corridor, an improving Brazil and coming deregulation as factors putting Florida in a great position.