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alstry (35.28)

Are We Shutting Down????

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July 18, 2008 – Comments (6)

Voit Commercial Brokerage reports that construction of O.C. office buildings plunged 90.8% in the second quarter to 325,276 square feet. Last year in the second quarter, 3.5 million square feet was under construction.
...
All the added space pushed the second quarter office vacancy rate to 14.46%. A year [ago], vacancies were at 8.95%. ... “You have two negatives — a lot of new product without tenants and you have got an economic slowdown,” says [Jerry J. Holdner Jr., Voit vice president of market research].

http://lansner.freedomblogging.com/2008/07/17/oc-office-construction-plummets-91/

A 90% plunge.  The commercial slowdown is not just limited to Orange County.  New commercial development is grinding to a halt all over America.  CRE was a major area for banks to lend.  Now few are building and existing projects and loans are defaulting at increasing rates.

Who are banks going to lend to now?  LBOs?  Private Equity?  CRE?  Land Developers?  Residential Construction?

It is pretty amazing how everyone is burying the heads in the sand.  The following upgrade was a first for me..........

NEW YORK (MarketWatch) -- The parent company of United Airlines, UAL Corp., may be on the road to bankruptcy, but not at the accelerated pace suggested in its recent stock price, said J.P. Morgan analyst Jamie Baker on Friday. In a note to investors, Baker raised his rating on UAL to overweight from underweight. "United shares have fallen too fast and furiously, implying a higher risk of near-term bankruptcy than justified," Baker wrote. "While not for the meek, we strongly recommend purchase of shares in advance of next week's conference call, which may be accompanied by significant capital announcements." UAL doesn't appear to be at risk from Chapter 11 until 2009, and only if management ignores capital opportunities at its disposal, Baker added.

The analyst is recommending purchasing shares even though he admits the airline is on the road to bankruptcy.

At this point, there are a number of companies on the road to bankruptcy.  Autos, airlines, banks, builders, and commercial real estate just to name a few.  Restaurants and retailers have already started falling off.

Quite frankly, we are existing in a live for today who cares about tomorrow attitude.  Very little is being done to set a foundation for the future as our businesses and economy continue down a very dangerous path.

The slowdown is now impacting practically everything including revenues for Google and almost every other media outlet.  Our local governments are strapped for cash and expect large cut backs in upcoming weeks.  Our government leaders have never seen this kind of decline in revenues.   The problem is that a HUGE infastructure was created to support growth that has now evaporated.  There is no way for our states and cities to support the current infastructure without shutting down a big part of it.

As the layoffs increase, expect even further slowing.  It is now a mess and getting messier. 

I know, only 5.5% umemployment....but inflation is under 3% as well.

Now the only question is hyperinflation or depression?  Either path is destructive.

6 Comments – Post Your Own

#1) On July 18, 2008 at 9:11 AM, alstry (35.28) wrote:

NEW YORK (MarketWatch) -- Citigroup said Friday it reduced headcount by about 6,000 in the second quarter and about 11,000 in the first half of 2008.

That's potentially a lot of commercial space now vacant for just one business.

The BIG issue is how are we going to support all of this newly created infastructure and jobs for an economy that is shrinking?

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#2) On July 18, 2008 at 9:30 AM, alstry (35.28) wrote:

9:27 a.m.   [SNE] Sony Ericsson plans to cut work force by 2,000

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#3) On July 18, 2008 at 10:27 AM, Varchild2008 (85.30) wrote:

Michigan is a great example of real estate, office buildings, stores, etc. that are vacant.  We have nearly vacant shopping malls....

However, the market corrects itself and buisnesses come in and scoop up these vacant buildings, offices, firms, stores, banks, etc. Cheaper to move in to an existing complex than to build one from scratch.

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#4) On July 18, 2008 at 10:42 AM, dwot (61.86) wrote:

I did not realise it, but here in Vancouver, Surrey actually, there is a office building that has been empty since it was built in the last boom, over 10 years ago.  I found that very interesting.  I suppose it has been locked up in legal battles.  But who knows, maybe there were massive layoffs and looking after it never got transferred to a new worker... 

I heard an interesting story up north where people weren't charged rent for a couple years and there was no follow-up because of no one taking care of the job.  And I have verified the story is true...

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#5) On July 18, 2008 at 10:45 AM, Varchild2008 (85.30) wrote:

Michigan is a great example of real estate, office buildings, stores, etc. that are vacant.  We have nearly vacant shopping malls....

However, the market corrects itself and buisnesses come in and scoop up these vacant buildings, offices, firms, stores, banks, etc. Cheaper to move in to an existing complex than to build one from scratch.

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#6) On July 18, 2008 at 12:41 PM, carcassgrinder (35.26) wrote:

Doesn't bother me a bit to see a lot of these builders like C.P. Morgan and commercial real estate firms suffering.  These were the sluts of the industry 2 years ago.  They threw up shitty housing additions and strip malls as fast as the banks could churn out bad loans to people buying outside of their means.  Now those people live in half vacant communities in houses they can't make payments on or sell because their losing value so rapidly....or should I say that they are realizing their true value very rapidly. These "vinyl-villages" are the trailer parks of tommorow.

Remember....pigs get fat... HOGS GET SLAUGHTERED!! 

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