FRIDAY, JANUARY 29, 2010
by Mark ThomtonChicago |
| Inland's G. Joseph Cosenza address the Chicago Association of Realtors |
The State of Illinois never recovered from the 2000 recession, and, now with budget woes and unemployment still rising, the state is on the verge of extending its own lost decade into two lost decades, said a University of Illinois professor.
"If we (the State of Illinois) were a separate country, we would have to call in the IMF," said Geoffrey Hewings, director,
Regional Economics Applications Laboratory (REAL) and professor, University of Illinois at Urbana-Champaign. REAL prepares the Crain's Chicago Index. "The state is really a basket case."
Hewings addressed the Chicago Association of Realtors at the Holiday Inn Chicago Mart Plaza yesterday. Before he began his presentation, he apologized to the room for the bad news he was set to unleash. His presentation ended with an indictment of politicians in Springfield, who he believes have too long ignored the State's problems and have taken little initiative in correcting its ills. As the numbers and figures poured out, it may have been difficult for audience members to disagree with his view.
Since 2000 the state has lost 440,000 jobs. This can equate to almost $1 billion in lost revenue for the state, with a conservative figure of $400 million in sales tax and $500 million in income tax figured into those jobs, said Hewings.
"While the U.S. recovered from the 2000-2001 recession in 2005, Illinois was not as productive," said Hewings. "It continued on a downward trend. We have now experienced 13 years of no job growth."
The pattern of the State's sluggishness when compared to the broader economy can be traced back to 1990. The state has only outperformed the U.S. economy three times since 1980, all of those years falling before 1990.
A typical response to this trend is to point to the manufacturing sector and argue that Illinois fell into the same malaise that most Midwestern states did during the last 30 years, as core manufacturing jobs were shipped to less expensive labor sources overseas.
This may be true for many states, but Hewings said that this argument holds little weight with Illinois, which has for some time mirrored the U.S. economy in its employment base. In short, Illinois ceased being a manufacturing driven state long ago, yet it has failed to keep up with the job growth in other states it now competes with.
Hewings predicts that the state will lose another 100,000 jobs throughout 2010.
"The general attitude has been to not worry about the situation and rely on our considerably large economy to simply work though it," he said. "We are on the verge of a 20-year recession. The alarm bells should be going off, but that is not happening. This has received little attention in Springfield."
On the residential housing front, Hewings said that sales should steadily increase throughout 2010, but with foreclosures still working their way through the market, year-to-year prices will be down 7 percent in the Chicago-area.
G. Joseph Cosenza, vice chairman/director of
The Inland Real Estate Group Inc. and president of Inland Real Estate Acquisitions Inc. addressed the crowd and delivered a brief commercial outlook. He also shed some light on the success of his firm, which, despite current conditions, is beating all national averages in all property types.
The firm owns 90 office facilities nationwide and has a 91 percent occupancy rate, said Cosenza.
On the industrial side, national vacancy rates are hovering around 19 percent, while Inland puts its vacancy rate at 4 percent.
The only portion of Inland's portfolio Cosenza was decidedly negative on was its 15,000 hotel rooms. He puts the vacancy at 64 percent, still above the national average, but suggested that the hotel market was hardest hit by the recession.
While most institutions were on a buying freeze throughout 2009, Inland took the opposite approach and raised hundreds of millions to purchase properties throughout the U.S. The firm's strategy was to simply research lending institutions across the country and make calls to the key players.
"We would find out who did the deals, and we called more than 400 institutions last year," said Cosenza. "We wanted 55 percent financing on our deals. We got a ton of financing."
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