In a special CRE.Converge Virtual 2020 keynote exclusively for NAIOP National Forums members, Steve Forbes, chairman and editor-in-chief of the Forbes Media empire, shared his candid take on the current economy and the far-reaching implications of the changes presented by the novel coronavirus pandemic.
Forbes began on a patently optimistic note, predicting: “After a time of turbulence, [the commercial real estate] industry will experience a great boom.”
Forbes pointed out that while the “Roaring ‘20s” also began horrifically, with the Spanish influenza, crippling inflation and soaring unemployment, when things settled down, there were major changes and it was one of the most innovative decades in human history.
“While the U.S. economy has taken a huge hit since March, it is incredible how resilient it is,” he said.
Forbes said he thinks the economy overall is showing real underlying strength, but fourth quarter 2020 will see a slower pace of recovery due to uncertainty. “What kind of economic environment will we have next year? Benign, hostile, or in between?” he posited.
The U.S. presidential election will obviously have a major impact on that.
“The situation is so utterly fluid with the election… I’d take the polls with a grain of salt,” he said, adding that he’d bet less than a penny on the outcome. Will we see higher taxes? Will there be more burdensome regulations? “If we do, I think they will be temporary, and after 2022 we’ll see a bit of a rollback,” Forbes said.
He did point to several things he believes will have a profoundly positive impact on commercial real estate:
Big changes in healthcare. Forbes sees more specific-purpose offices, not just open space, but geared to biosciences and healthcare. In healthcare, there is a continued push for transparency, more competition from new online health companies, and the proliferation of price-comparison tools for common procedures.
A renaissance of small business formations. This used to be a great source of strength in the U.S., and added vibrancy to the economy, he said. In recent years, startups have started to revive again until the pandemic hit. Forbes said the biggest number of startups by ethnic group came from the Latino community – they have established about three times as many startups as any other group. For the first time in decades, there’s been a real pickup in business start-ups by Black entrepreneurs, too. “Once they’re out of the home, [small businesses are] going to want space – it might not be much, but they will want space.”
Cheaper, safer energy sources. “What if the energy cost for your building was little to none?” Forbes said. He outlined two new sources of energy that will become cheaper and more widely used in the next decade: Molten salt nuclear power and nuclear fusion power. He called them “safer, more easily scalable and far more versatile” than the options used today.
A move toward principle-based regulations. “If the regulations we had in the 1980s had stayed generally the same, the U.S. economy today (pre-COVID) would be 25% larger,” Forbes said. He shared an example of an apple orchard in upstate New York that is subject to 5,000 different rules and regulations from 17 different government programs and agencies. Forbes said countries are beginning to move toward principle-based regulations – Canada is doing this with nuclear power – where the government defines goals in terms of safety and output, and businesses figure out how to meet those standards on their own. Forbes said this approach is more effective and helps to accomplish better outcomes.
According to Forbes, all of these major technological breakthroughs and trends could have a significant positive impact in terms of commercial development and economic output and activity.
“Bottom-line, the election will be very important short-term to the economic environment,” Forbes said. “We’ll see some turbulence, but the real underlying trends are very positive.”
In closing, he said: “Hang on. Better days are ahead.”
Brielle Scott is Senior Communications Manager at NAIOP.