Beware the Minefield Mentality

Of all the lousy news in my e-mail inbox lately, one nasty tidbit stood out. (Something about “fear” and “panic” in the headline grabbed my attention.) A day or two before Halloween, the chief economist for NAI Global released his financial outlook for the coming 18 months—and proffered this analogy for how the global economy arrived to its current state:

“It’s like we’re walking along in a field on a beautiful fall day, and suddenly saw someone blow up. Somebody yelled, ‘Minefield!’ Everyone would immediately stand still, stare at their feet and start sweating.”

Wow. There’s a perspective you don’t hear every day. The economist, Dr. Peter Linneman, went on to describe “the great Capital Strike,” in which the financial markets blew up, lenders stopped lending, investors stopped buying, businesses stopped expanding and consumers stopped buying. And, so, here we sit.

Let me amend that. Not everyone is just sitting passively, reading the bad news and accepting defeat. I’ve talked to mall owner after retailer after mall owner who have chosen a path of action, rather than inaction or, worse, fear and panic. These business stalwarts have examined the minefield, calculated the risks of blowing up, and decided to cautiously and strategically pick their way through an explosive economic environment—mitigating, but not completely avoiding, risk.

For this month’s real estate supplement on the mid-Atlantic states (see page 83), I talked with 10 retail real estate developers who are actively building in New York, New Jersey, Pennsylvania, Ohio, Virginia, Maryland, Delaware, West Virginia, North Carolina and South Carolina. Not one of the developers told me that his job was a walk in the park. But no one mentioned being “afraid” or “panicked” either.

Taylor Chess, senior VP, investments, of Jacksonville, Fla.-based Regency Centers, in discussing the Washington, D.C., metro market, told me, “There are still opportunities, although they are very few and very selective. We have the advantage of having capital to do developments, but it’s extremely precious capital. We have reduced our pipeline of new developments to be very specific and selective, making sure, for example, that all the tenants are signed before we close on the property and start the development.”

I remember a time when talking openly about internal money matters was akin to announcing your monthly salary over a PA system. It was, to quote my mother, gauche. But in a tanking economy, silly etiquette rules go out the window. It’s a badge of honor to discuss precious capital, to admit that the pipeline has shrunk, that you’re picking your way through the minefield in order to emerge on the other side alive and whole.

Dr. Linneman didn’t give a lot of economic hope for the near future. He forecasted per capita income declines in 2009, rising unemployment, and to “expect another 1 million lost jobs in the coming six months, a 1% to 2% drop in absolute GDP and a slight acceleration in retail store closings.”

The way I see it, we have two choices. We can either sit back and accept defeat, or we can navigate the economic minefield and mitigate the subsequent risks as best we can.