This Issue -- Thursday, February 1, 2007 |
Commercial Real Estate Deal - Entrepreneurship is Part of the Puzzle |
by Andy and David Farbman |
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Today, as Metro Detroit's economy continues in slow-growth mode, there is renewed interest in supporting entrepreneurs in the hope that the energy, drive and creativity of small business owners can reinvigorate the region's economy. |
If entrepreneurship is the way out, then Detroit is positioned relatively well. There is some good business development infrastructure in place such as the Michigan Small Business Technology & Development Centers, the U.S. Small Business Administration and Detroit Entrepreneurship Institute. Add to that Bizdom U., a new entrepreneurship incubator started by Rock Financial CEO Dan Gilbert. But there are challenges to starting a business in Michigan: tax policies, infrastructure, access to capital and quality of life issues rank high on any entrepreneur's list of "must-haves." Business leaders in Southeast Michigan are serious about fostering entrepreneurship as a way to grow the economy. Last year, Detroit Renaissance, a consortium of CEOs from the region's top businesses, issued "Road to Renaissance," a six-point strategy for getting Detroit's economy back on track. One of the six points is expanding the region's entrepreneurial capacity. |
There is real consensus that one way to move the region forward is through fostering entrepreneurship. The tough part is to come together to find solutions that work to achieve that goal. All the best, Andy and David Farbman |
Automotive - Auto Show a Big Boon to Detroit Economy |
This year marks the 100th anniversary of the first auto show in Detroit. What started as a small show at Riverside Park in Detroit has grown to become an international event. The North American International Auto Show, which brings the international media spotlight to Detroit every January. In 2007, more than 45 new models were unveiled at Cobo Center in front of more than 6,000 journalists from 60 countries. The final tally is not yet in for 2007, but this year's show is expected to have an economic impact of $540 - $550 million, according to David Sowerby, C.F.A., portfolio manager and chief market analyst at Loomis Sayles & Co. "Every year, the North American International Auto Show makes a massive impact on the economy of Southeast Michigan," said Michael Kalil of NAI Farbman. "Because the show is open to the media for a week and then to the public for two weeks, NAIAS eclipses the economic impact of single-day events like the Super Bowl or Major League Baseball All-Star Game." Kalil noted that if and when Cobo Center is expanded or replaced, the resulting economic impact of the show would likely grow. |
National Office Outlook - More Gains in 2007 |
Office vacancy rates across the United States fell by one percentage point in 2006, and that rate is expected to continue to decline in 2007, according to a report by Newmark Knight Frank. The prediction assumes that the U.S. economy continues to grow in 2007. The market for office real estate was strong in 2006 in spite of challenges posed by higher interest rates, higher energy costs and a still-struggling U.S. manufacturing sector. The Newmaker Knight Frank report does not predict a wholesale reversal in the office market, arguing that economic robustness and a low level of new construction will keep office absorption rates high. "There is reason to be optimistic that 2007 will be a good year for investors in office real estate," said Andy Gutman of NAI Farbman. "The economy is growing, as evidenced by the performance of the nation's stock markets and other indicators, and vacancy rates are trending downward." |
Office - Tenants May Have More Clout in '07 |
In spite of strong growth in office real estate in 2006 and continued growth in 2007, a slight shift in favor of tenants is expected, according to the Wall Street Journal. Office rents rose 9 percent in 2006, but a slower rate of growth is expected in 2007, as tenants take a wait-and-see approach, rather than leasing large blocks of space to lock in low rates. This wait-and-see mentality is in response to economic projections for 2007, which seem to signal a slower rate of GDP growth compared to 2006. "Tenants seem to be cooling just a little bit," said Andy Farbman of NAI Farbman. "If it becomes a trend, we may see landlords offering incentives to lure tenants off the fence." |
Global Real Estate - Where to Invest Now? |
China and India have exploded onto the scene. What's next? Vietnam, Malaysia and Russia may be the global economic powers-in-waiting. Vietnam joined the World Trade Organization in January, giving investors and potential investors in the Southeast Asian country the protection of international trade agreements. The communist nation and former adversary of the United States has a sizeable market, with a population of 84 million, and GDP growth of 8.5 percent in 2005. Vietnam is also pouring vast resources into modernizing its infrastructure to woo investors. Intel recently invested $1 billion in a chip manufacturing and testing facility in Ho Chi Minh City, signaling what could be the beginning of a flood of new investment in Vietnam. Malaysia has long been a place of geographic strategic importance, straddling the Strait of Malacca, one of the world's busiest shipping lanes. It remains so today. Malaysia was influenced by several centuries of British colonialism, leaving behind the English common law tradition and widespread knowledge of the English language, both of which make Malaysia attractive to British and American investors. "Countries such as Malaysia, Vietnam and others are attracting much attention from investors as the costs of doing business in places like China and India are on the rise," said David Farbman of NAI Farbman. Finally there is Russia. Moscow is preparing to join the WTO, and is currently the largest economy in the world that is outside of the WTO. With a population of nearly 143 million, Russia is one of the eight most populous nations in the world. But Russia faces challenges to wider investment from the West. Russia has been long plagued by allegations of corruption. Private property rights do not receive the same sanctity in Russia as they do in the West. Nevertheless, companies are gearing up to expand their presence in Russia. Last year, GM broke ground on its first wholly-owned assembly plant outside St. Petersburg. |
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Entrepreneurship is the keystone of the American economy, with small businesses
accounting for as much as half of the nation's non-farm economic output.
Today's corporate giants all started small. Henry Ford and his business
partners, for example, started with $28,000 and a dream to put America
on wheels.