Positives cited at ESG State-of-the-Market forum.
Kudlow, economics editor of National Review magazine, and former Chief Economist for Bear, Stearns & Co., supported what he called the "populous" view of the current U.S. economy. "We are experiencing a sub-par economic recovery," Kudlow told the audience of nearly 450 business leaders from New York, New Jersey and Connecticut. "We are now three and a half years into an economic recovery, yet we are recovering at only half the pace of the recovery of the 1980s."
Kudlow predicted a rise in interest rates and a 4 or 4.5-percent inflation rate for 1995, supporting what he called a period of "cautious" investment.
"An increase in the inflation rate raises the effective capital gains tax to the point where it becomes a strong sell signal," Kudlow said. "Cash could be very sexy. I could be falling in love again."
Mortimer Zuckerman, chairman and editor-in-chief of U.S. News & World Report, owner and co-publisher of the New York Daily News, and chairman of Boston Properties, reflected on the "curious failure" of President Bill Clinton.
"Clinton has been much more successful in his programs than he's been given credit for, but he has not connected spiritually with the people," Zuckerman said.
At the same time, Zuckerman contrasted the Clinton administration with that of New York City's Mayor, Rudolph Giuliani.
"Giuliani stepped in at one of the most difficult times in New York history, and has connected with the people of this city," Zuckerman said. He added that Giuliani has done an "exceptional" job of increasing voter confidence and supporting the New York economy and area businesses.
Malcolm S. Forbes, Jr., president and CEO of Forbes Inc., and Editor-in-Chief of Forbes, also presented his views on the U.S. economy. According to Forbes, the U.S. economy is "the strongest in the world" today, on every front, from manufacturing to technology. "The technological side is where the future lies," Forbes said.
On the positive side, Forbes noted that there is "enormous liquidity" in the economy today. "You can actually walk into a bank and get a loan if you need the money," he said, feigning amazement. However, he chastised the Federal Reserve for "fueling inflation" in the U.S., and predicted a major initiative in the Congress to reduce the capital gains tax and introduce a flat tax system.
As for the state of the real estate market, Edward S. Gordon Company Executive Director Mary Ann Tighe forecasted the return of equilibrium to many Midtown Manhattan submarkets. In fact, she predicted that the term "landlord's market" may soon enter the real estate lexicon once again.
"As we near equilibrium in a number of Midtown markets, space will become scare and rents are going to reflect that scarcity," Tighe said. "That's good news for developers who happen to own a prime site; not so good for tenants with a major Midtown requirement. Tenants facing a lease expiration in 1997 or beyond would be well-advised to engage the market early."
At the same time, Tighe said the next real estate development cycle will have a decidedly different philosophy than the cycle of the 1980s.
"Development will be driven by user demand," Tighe said. "Where developers used to say, 'If we build it, they will come,' they are now saying 'If we need it we will build it.'"
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|Title Annotation:||Edward S. Gordon Co.; real estate market|
|Publication:||Real Estate Weekly|
|Date:||Oct 26, 1994|
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