It is hard to ignore all the noise from the press, who promote the impending recession of the US economy as well as the global economy.
Trade wars, Brexit, US politics, a bull market historic run (how long can it go?) melting ice, ferocious hurricanes, rain forest fires. You name it.
But we say, not so fast. Here is our take:
First… Why all the recession talk?
Slowing trade concerns – this is global poker.
Bond interest rates – a reflection of investor’s pessimism.
Business investment is lagging – A sell fulfilling prophecy for future unknowns?
Rather than succumbing to fears let’s be prudent in our planning and think “what if” scenarios.
How would a recession hurt the Puget Sound?
Boeing
A recession gives Democrats a better chance at presidential election in 2020. Democrats do not spend as much on defense.
Recessions increase budget pressure. Defense is by far the largest category of federal spending.
Reduced air travel requires less airplane sales.
Tech
Companies with weak balance sheets will run out of money – WeWork?
Companies dependent on ads for revenue will struggle (traditional media, Twitter, Snap, Pinterest, etc.)
Hiring tech employees will become far easier and more affordable.
Retail
Everyone instantly thinks Amazon but our guess is that Amazon thrives in recessions. They are the most competitively priced, have the largest infrastructure, and have enough business lines to weather the storm while other companies fade away.
Discretionary Income based tech – dog walking, retail subscriptions, media, etc. will struggle.
Construction
From feast to famine, construction will likely see the most dramatic swing. The trade war will not help.
Our market has created consumer frustration with construction. The companies that have performed, been fair, and have history will stick around. The others will not.
Office Space
WeWork: As the second largest tenant in Seattle and with an IPO looming that has created more uncertainty to their survivability in a down market, their failure would affect the Real Estate Investment population globally.
A recession likely provides sublease opportunities as firms downsize or go out of business. This helps office users from a pricing perspective. Landlords may be impacted by defaults.
However, unlike 2009, there is very little spec development not already preleased which puts Seattle in a very responsible position as we consider near term recessions.
Regardless of the unknowns, OUR ADVICE:
Lean out – are you using space efficiently?
Flexible or long-term leases: each company has a different need. Are you in the right type of lease?
Is your office helping or hindering your recruiting and retention efforts? Do you know what your office looks like compared to your peers?
Is a downtown Seattle office necessary? It is expensive so it better be worth it.