Since the last time I notified you about adding editions of the Landauer Forecast, I have posted the volumes for 1991, 1992, 1993, and 1994 under the Consulting/Landauer pages on this website.
I’m struck by the relevance of these older publications. Why? Well, remember that the early 1990s were, like now, a period of serious dislocation - economically, for urban centers, and for real estate.
Then, it was the aftermath of the Thrifts crisis and the emergence of the Resolution Trust Company liquidation of S&L assets that roiled the waters. And cities like New York, Boston, Chicago, and Los Angeles were struggling with their white collar sectors as finance and related services were coping with the banking fallout.
Now, we have the severe dislocation of Covid-19 to deal with, and the questions about the viability of Central Business Districts given recent migratory patterns and fears that Work From Home will play the major role in ‘the new normal.’
Reviewing these decade-old reports, I’m struck first and foremost by two thoughts. The first is how the data tools developed for the Forecast project kept the commentary honest, avoiding the many temptations of denial, varying biases, and the extremes of either ‘happy talk’ or ‘gloom and doom.’ The second is that mental discipline is needed to avoid extrapolating current conditions indefinitely into the future. A less myopic perspective - a term you’ll find right in the pages of the Forecasts - enabled me to take something of a contrarian perspective about the outlook for the rest of the decade.
Regarding the data tools, the 1991 and 1992 Forecasts completed the introduction of analytical tools for all the property types. But each was a “stand alone” evaluation - that is, a “within sample” calculation. It remained for the 1993 edition to introduce the “Market Quality Rating System” that allowed readers to see how the relative ratings within each property type could be standardized in a way that fairly compared the prospects of each property type with the others. The concept was to provide an analytic that was akin to Wall Street’s bond ratings - and this was a step in the evolution of real estate’s quantitative discipline.
But, keeping in mind the need to communicate without getting trapped in the statistical weeds, we devised an easy to understand color coding system of seven levels - dark green for the best/bright red for the worst - that could be displayed on a map of the United States. This served our clients well during the 1990s downturn and its revival during that decade.
We were accorded quite a bit of intellectual freedom in developing these tools during this period, when Landauer was owned by AegonUSA, a major insurer and institutional investor. After all, institutions need to know market conditions and the outlook for change, whether times are good or not so good. So even when ‘the maps turned red’, the rating system served a good purpose.
There came a time, however, when ownership changed and Landauer became part of a larger firm whose primary business was brokerage. At the end of the recovery of the 1990s, this transactional-driven owner was fine with a map that was mostly green - but as I began to forecast the end of the Dot-Com bubble and the recessionary start to the decade of the 2000s, we received pressure to suppress the full scale of the ratings (“We have offices in those Red-Dot markets!”) and a request to shift to reporting just a “Top Ten List” of cities. When I declined to go along… well, that’s another story!
Not to get ahead of ourselves, there’s a lot of US real estate in the “Red-Dot” realm as this is written in early 2021. Yet we may consider that 2022 and 2023 will find us evolving once again. If my perspective that we need to consider the balance of this decade as a shift to something new, not a “return to normalcy” but a “change of state,” reflecting on the experience of the economy and the property markets during the years covered by these Forecasts may have something useful to teach us going forward.
Stay Tuned!