Small businesses will be at the heart of an economic recovery that's right around the corner, a Texas A&M real estate economist said Wednesday in Wichita.
But that brand of optimism from Mark Dotzour was often shrouded in a stinging bipartisan rebuke of the federal government's performance handling the crisis.
Speaking at the ninth annual Weigand Real Estate Forum at the Hyatt Regency Wichita, Dotzour waxed mostly pessimistically about the government's ability to get out of the way of a recovery that he said is already beginning in corporate America.
He blasted former Treasury Secretary Henry Paulson for inept use of stimulus money and Federal Reserve Chairman Ben Bernanke for tightening commercial credit.
He leveled equal blasts at the Obama administration and Congress for the threat of a tax hike on wealthy Americans —"the people who create jobs"— to help offset budget deficits.
"Nothing has been fixed," he said. "Not a shred.... The government is on everything right now....
"We need better service from our public servants. (President Herbert) Hoover said politics isn't a noble vocation, and he's right. We don't need one more politician. We need more public servants."
It's the threat of higher taxes and the lack of small business credit that is keeping American business owners from expanding and hiring right now, Dotzour said.
In fact, corporate America is recovering, he said — profits and hiring have turned to positive numbers.
But a commercial real estate crisis is looming, and no plan to disclose toxic commercial loans and get them off banks' books exists, Dotzour said.
More bank failures are inevitable, he said.
"That's OK. There are lots of good banks and good bankers ready to step up," he said.
The Wichita outlook wasn't as bleak, as delivered by Herb Krumsick, Weigand's senior vice president.
"Quite frankly, Wichita's in a down market, just like everywhere in the country," Krumsick said. "We've just been the least affected in the Midwest."
The office market should remain steady, Krumsick said, with very little change in any segment of the market. Vacancy rates increased slightly last year, but at 18.7 percent the number remains healthy. As a result, the market will remain too weak for landlords to increase rents.
The retail market will remain sluggish, with new activity largely confined to locally owned fast food operations like Spangles and Freddy's, Krumsick said.
Industrial vacancy rates skyrocketed to 21.5 percent last year, up from 9.9 percent in 2008. Lease rates fell to $3.99 per square foot from $4.80.
The investment market will remain largely static, with uncertainty surrounding financing and activity limited to distressed sales, Krumsick said.
The local housing market will be stimulated by the expanded tax credits for new and existing homeowners, but the result could be an increase in multifamily vacancies as renters become buyers, Krumsick said.
Dotzour wrapped up his keynote address with some optimism — he expects national hiring and commercial property values to rebound in 2011 and continue strengthening in 2012.
"Nothing but naive optimism," he said. "I don't have a shred of evidence that our government is going to try to help people get jobs in this country. I don't have a shred of evidence that we're going to fix the banking system.
"All I have is naive hope."