Private cash more attractive than ever
Securing US funding just got a bit tougher
Pulling in Federal money to fund infrastructure projects got a little bit harder, as the US credit rating was downgraded.
If the US Treasury, and other government agencies issuing debt, ever do come out the other side, political fighting will force everyone looking for Federal money to scream louder - about all manner of spending.
Is it undignified? Yes, but so is mud-wrestling. And this year, the political process has become unrecognisable from such low-brow sporting pursuits (though the politicos are better dressed).
Going forward, with the new paradigm of a Deficit Reduction Committee, composed of 12 wise men, there will be more scrutiny, across all types of Government expenses. The reduced pool of spending will come at a time that State and Local revenues are also drying up. The message: don’t count on the government - at any levels.
From a real estate perspective, the port sector is doing relatively well; indeed some pundits maintain that we are not coasting down the secondary slope of a double dip recession, pointing at continued flows of cargo as the big importers bring cargo in.
Another important indicator is an index of the real estate markets around the nation’s big ports. Industrial real estate behemoth Jones Lang LaSalle (JLL), in compiling data for rents around the 12 US ports, found vacancy rates of 8.5% - less than a national average across broader industrial real estate asset classes of close to 10%.
In the bigger context, JLL had noted that the port sector tends to be a leading indicator of growth throughout the broader industrial real estate business, but that recoveries occur over multi-year time horizons. Clearly, a close inspection of the next batch of statistics is required after the new round of economic uncertainties that emerged during August. For the increasingly mechanised logistics chains, it may be worth listening closely to what Obama says about jobs, in a September speech.
Institutional investors are not uncomfortable with lengthy holding periods; the good news after the deficit mud wrestling is that the Federal Reserve is committed to keeping interest rates low for several years, which will benefit borrowers.
The very common sensical locus of all of these shifting currents is that renewed efforts to attract private sector investments into the port industry are more imperative than they ever were.
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