US CPI debate ...
In practice changing the way you measure it is probably easier than changing the target itself ... but for the time being - the fact that the US measures it differently to the rest of the world suits the Fed given a tight labour market and a roaring stock market ...
Interesting ... while the US office market is shrouded in darkness ... somewhere else in the world the sun is rising..
Sub 5% vacancy is usually associated with real ERV's rising ...
US CRE market ...
The office debacle in the US is going to create distress - the challenge will be what to do with the wreckage ... it's not completely clear what the alternate economic use is for a 1 bilion (yes that's a b not an m) sqft of empty office ...
Let's put that in context - filling it up based on 15sqm per person (which is generous by global standards but CBRE's base case) would require 6.5m new office using workers... which the average US office using staffer is less than 50% WFH is actually somewhere north of 13m actual jobs ... which (if you use CBRE's job growth portal) implies that you'd need to see at least a 30% increase in the no of people working in the industries that feed office job growth ... that's the step up from 32m to 45m ...
Based on the historic trajectory of job growth that's more than 10 years of growth (the US has added 7m jobs since 2008 (about the same 30% growth). Possible - yes ... probabe... you tell me ..
IMHO it will be almost impossible to grow your way out of this if you are levered ... my guess is that almost all of what is physically empty needs to be repurposed and probably half of what is practically empty (grey space or leased space that is only being marginally utilised) needs to go the same way... to get the market back to normal ... that's going to soak up a vast amount of capital ... and leave some pretty big holes in bank balance sheets in the US regional banking system...
Reaching back to our Jan 23 outlook ...
I found this slide ... plus ca change ...
A bit esoteric to be looking at the NZ bond market ...
But the central bank is being vocal about easing and it the curve is shifting ... which may provide some clues for other markets ...
That's a pretty remarkable transition ...
New York ...
This is why high and volatile inflation can be a problem...
It scrambles the way in which we make our decisions because we find it hard to estimate our 'margins' ...
Wow ...
