Pace Burt Believes Economic Recovery Will Be Years in the Making
Wednesday, August 24th, 2011
Consumers are worried about the economy. Preliminary August readings by Thomson Reuters/University of Michigan showed U.S. consumer sentiment had fallen to its lowest point since May 1980. Interest rates remain low and the Federal Reserve recently announced its intention to keeps rates low at least until mid-2013. The housing market in many cities continues to decline and unemployment remains stubbornly high at 9.1 percent nationally in July.
“I think it will take years to work our way out of this bad economy,” said Pace Burt, owner of Pace Burt, Inc., an Albany-based real estate development company with multi-family, retail and other projects throughout the southeastern U.S.
“We need government to stay out of the way of the private sector so that it can create the jobs that will fix the economy. That’s the only way it’s going to happen.”
Burt believes the government should focus its efforts on spending more wisely the money that it currently collects. Re-evaluating tax codes with an eye to encouraging investment can help facilitate economic growth.
Reading the Current Real Estate Market
According to Burt, “there is so much product available in the retail market, large tenants expect rate reductions in every new lease.” In contrast, the multi-family market is stable. Many young families that had owned homes are now renting apartments again.
“Younger people who were buying homes as an investment are back to renting. They’re going to wait and see what happens with the economy. I think it will be a couple of years at least before that changes,” Burt said.
What will it take to change that wait-and-see attitude into a willing-to-invest attitude? Burt believes it will take jobs. The closing of Cooper Tire and reductions at the Marine Corps Logistics Base are recent examples of job losses in the Albany area.
“Albany is not unique by any means. We’ve got double-digit unemployment throughout the southeast. In fact, Albany often can weather downturns better than other areas because we never experience the bubble effect here,” he explained.
Diversify, Limit Exposure and Manage Risk
In this environment, Burt’s development company has shifted its focus to smaller, higher-end projects that are geographically diverse. While 250- to 300-unit projects were typical several years ago, currently his company is focused on 40- to 100-unit projects. Smaller projects help Burt limit his financial exposure.
“It’s more difficult to get loans these days and banks are looking for more money upfront. They should have done it a long time ago,” Burt said.
Pursuing projects in a variety of geographic locations also helps mitigate risk. Among Burt’s recent projects are a 100-unit complex in downtown Asheville, N.C., a 50-unit project in Columbus and 40-units at Marsh Landing in Albany.
Diversifying, limiting exposure and managing risk are Burt’s strategy to navigate through the current economic times. It’s a strategy that can deliver positive returns even as markets and consumers wait for a recovery to take shape and gather momentum.
