Brad Paisley was a student at Belmont University in Nashville in the early 1990’s, and he was wracking his brain. He sang in church, sang in his small hometown, but now he was selected to sing in a student concert at Belmont. You see, Brad’s music wasn’t funny. In fact, he sang mostly ballads, which the old folks and his hometown preacher loved. But this was different; there would be girls there, and he was on a mission to make them laugh and of course, compel the females to like him.
So, Brad asked his pal and fellow student Frank Rogers to help.* Frank (who would later become Brad’s record producer) and Brad worked up a little ditty called “I’m Gonna Miss Her (The Fishin’ Song).” They must have had a great time writing the irreverent ditty. The song centers on a disturbingly common issue in the South: a male who is hassled by his girlfriend for fishing all the time. When she threatens to leave if he doesn’t come home from his current fishing trip, the man pauses for a moment and considers his options. Then he resolutely says “I’m Gonna Miss Her.”
Brad was worried that women would be offended by his masterpiece, but he took a risk and performed the song at the student concert. He was rewarded with a huge laugh after the punch line in the first verse and got positive reviews from the whole audience – including the girls. He was the big man on campus. Soon, he would become the big man in country music too.
Brad went on to win three Grammys (so far) and chart 25 singles on the Billboard Country 100, with 16 songs reaching number one. He’s sold millions of albums
and is one of the most successful country artists of all time. Not bad for some college boys trying to make college girls laugh.
By the way, he married Kimberly Williams who appeared as the forlorn girlfriend in the video. Apparently, he can fish and get the girl after all.
Lets Go Fishing
In the business world I know we should still be worried about the “girl,” I mean, the economy. There continues to be hand wringing over Europe, North Korea's dud missiles, the Fed, and any number of concerns that could pull us back into the recession like a bad argument with a girlfriend.
But I’m ready to hit the water and wet a hook. I think a few folks might just want to come along with me and cast off the recession blues. We can tell this recession (all together now: "I'm gonna miss her"). Its my belief that even if you wanted the cycle to stay in recession that this downturn has run its course. Sorry bears, the bulls are back.
Commercial Real Estate Recovery
This positive attitude is beginning to pervade the commercial real estate markets. As this article in National Real Estate Investor indicates, “Real estate investment performance continues to display favorable conditions,…. very limited new supply and rising demand is buoying real estate fundamentals for most property types.”
In the office world, optimism among landlords is becoming a common as a bad romance in a country music song. A few reasons for this ownership gusto:
- Historically low interest rates
- Debt fuels commercial real estate. When lenders are willing to lend in both corporate and real estate arenas, we can all tap the investment accelerator.
- Incredibly healthy companies
- This article in the Wall Street Journal (WSJ) points out that "big U.S. companies have emerged from the deepest recession since World War II more productive, more profitable, flush with cash and less burdened by debt." ""U.S. companies became leaner, meaner and hungrier, said Sung Won Sohn, a former chief economist at Wells Fargo."
- Modest inflation outlook
- Despite many hand-wringing economist’s predictions, inflation is moderate. Therefore, true economic growth is eminently more achievable.
- Lack of New Construction
- A recent CoStar article highlights the effect that the dearth of construction is having on markets. It's simply a macro economics question, and with no new supply of significance in over 3 years, a fuller, quicker market recovery will occur.
As we've written here before, US companies have been the recipients of a wonderful real estate sale over the past few years. This is clearly about to end because asset managers read the same papers you and I do.
On a nationwide basis, there is still a high vacancy rate in the office market, however companies are beginning to grow. Evidence of this: large tenants in many markets are already reaching the point of friction and have to split up their occupancy into multiple buildings or even build their own buildings.
Gateways cities of New York, San Francisco, San Jose, and Boston are all experiencing significant improvement in their markets. A REIS report released April 5th suggests that a surge in demand from technology and energy industry tenants led the U.S. office market to its fifth straight quarterly gain in net occupancy. Landlords had absorption of leased space of almost 6 million square feet in the three months through March, compared with 6.1 million square feet a year earlier. The US vacancy rate dropped to 17.2 from 17.6 percent in the first quarter of 2011 according to REIS.
What’s In It For The Good Guys?
Tenants are the guys that pay the rent and (at least in my view) make this whole real estate party possible. Sure, developers take entrepreneurial risk, but without a well paying tenant, no one wins. Alas, tenants are about to be on the wrong side of the real estate cycle. Most have done what they can to lock in obligations and prepare for the market shift.
So what do the users need in the coming real estate market recovery? New product. Even 6 months ago you could get cussed out in several languages for suggesting that it was time to build. But times they are a-changing – and fast.
So we say to asset managers, private equity kings, and insurance money bags: now is the time to deploy your capital in more and more cities in the US. As businesses grow and our economy recovers, large tenants (especially) will need a home, and you can help.
So go fishing for that next building deal and you have a much better chance of setting the hook in 2012 than anytime in the past five years. Heck, look what a little fishing ditty did for Brad Paisley’s career. Take well researched risk and I bet you you can "get the girl too." And she'll let you go fishing anytime you want.
*Roberts, M. B. (2004-11-23). "Story behind the song: "I'm Gonna Miss Her (The Fishin' Song)"". Country Weekly