Weekly News & Capital Markets Perspective

This weeks perspective is provided by  Mike Sullivan:

I had the opportunity to spend time last evening with some good friends of mine – two brothers who own a locally-based development company and an attorney who happens to represent one of my best clients.  A wide range of topics were discussed but the one I found to be particularly relevant to this weekly blog centered on the activity of the developer.  Focusing for years on ground-up retail development for large, national clients, this company found it necessary to become a more nimble organization and to consider opportunities in many different areas as their main clients significantly decreased their expansion plans over the past three years or so.  What I found particularly interesting was their ability to land redevelopment opportunities within our city’s core.

Already well-known in the high-end retail tenant finish sector, they have leveraged relationships with key civic and private entities to secure opportunities within our downtown retail market.  And for those unaware, Downtown Cincinnati is experiencing activity, both new construction and redevelopment, not witnessed in decades.  To a large degree this local developer has reinvented itself and is actively contributing to the re-birth of Downtown.  I can’t help but think that in some ways, the Federal Reserve is hoping to help make its own contribution to the re-birth of our formerly robust economy.

Last week when they implemented QE3, the Fed replicated their tactics of 2009 and 2010.  With QE1 and QE2, they were able to temporarily inject life into the economy that actually filtered into the commercial real estate market, although some would argue that the slight increase in activity then was due more to the actions of investors who had been experiencing pent up demand from sitting on the sidelines since the fall of 2008.  Regardless, QE1 and QE2 were at least partially effective.  The problem, in the opinion of some, was that impact was short-lived due to the finite period of time for each.  With the open-ended and more flexible QE3, many investors are hoping that the effects will be more sustained.  While very few believe this is the cure-all for our continuing sluggish economy, most do believe it should have some positive impact.  The speculation is that some of the riskier product in the market will benefit.  From our vantage point, we are seeing appetite increasing for value-add product.  While it is obviously too early to tell, the hope is that QE3 will have some positive impact and much like the local developer I mentioned above, the economy will find some new and creative ways in which to recover.

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