54.3 F
San Diego
Thursday, Mar 28, 2024
-Advertisement-

We’re Entering a Values-Driven Era in the Recession

Perhaps some of you remember the line from the movie, “My Big Fat Greek Wedding,” when the character Maria Portokalos screamed at her son Nicko, “Don’t play with the food! When I was your age, we didn’t have food!”

Sound familiar? In my home growing up, the version went something like, “Eat your food. After all, the children in China are starving.”

This is only a snippet from the “Depression-era” psychology that no doubt permeated most of the childhoods of baby boomers (those 75 million of us) raised in the 1950s and 1960s by parents who were, in turn, raised during the Depression of the 1930s.

Today’s baby boomers are no doubt im & #173;print & #173;ing their children with concepts like, “No, you cannot have the Nintendo this year, we are in a recession,” or even worse, “You will be changing schools because we were forced to move out of our neigh & #173;bor & #173;hood unable to afford the house payments.”

Fast forward to 2029, when the “Great Recession of 2009” is a two-decades-old memory. What will your children be communicating to your grandchildren?

The answer may very well be that they will be preaching recession-era concepts that they are acquiring right now, such as spend within your means, save, prepare, plan, and don’t be stupid in a bubble!

What we live through has a profound effect on the choices we make. The world of psychiatry is permeated with the concept that identity and behavior is rooted in how we were raised.

My mother grew up poor in Milwaukee (or so she constantly told me), the daughter of eastern European immigrants.

Even after marrying my father, a man with good job skills who took her to a middle-class lifestyle, the lessons of her youth were profound.

Which, in turn, powerfully impacted the lessons of my youth.

Just the other day my mother asked me to pick up and install a cable box, so she could save the $25 installation fee.

I begged her not to make me do this, because anyone who knows me knows that I am incompetent when it comes to fixing or installing anything. I am great with software, bad with hardware.

Predictably, I couldn’t get the cable box to work. I begged her to pay the $25 installation fee. She finally relented.

It goes on and on. There is no rationality to it. It just hangs like a psychological cloud over the Depression-era psyche. It permeates everything.

Do we really believe that U.S. consumers will ever go back to the pre-recession living and spending patterns, even after we cycle out of this event?


Adjusting Our Values

Former Federal Reserve Chairman Paul Volcker reminded us in a speech that during the run-up to the top of the cycle, U.S. consumers were spending 110 percent of their capability. That is a situation that cannot last, and is unlikely to return.

The definition of the word “value” will change. For instance, the “value” of a house involves the land, square footage, location, the amenities and the furnishings inside. All of that value has certainly eroded.

Hopefully, better core values will emerge. This means that the house is really about neighborhood, barbecues, schools, walks, family and friends and quality of life.

In an era of tight money, “values” mean a lot more than value.

It is unlikely that consumption will ever again reach its former lofty heights. Our fixation with more, better, bigger and luxurious is unlikely to re-emerge for many years, if at all.

Designer labels and luxury items may be initially regarded as just too expensive, and ultimately inconsistent with newfound values.

These values also translate into an end to the “throw away” society.

We see it in the grocery stores where products are starting to emerge with less packaging, and where canvas bags are replacing paper or plastic. Inside of those bags will be items that will see the bag for the first time , organic, fresh and less packaged.


Era Of Retrofit, Adaptive Reuse

The concept of permanence, where often preserving and improving something matters, also applies to the built environment, where the era of retrofit is upon us. The idea is to extend the useful life of buildings so that they may stay competitive.

These are market-driven decisions borne from the financial no-brainer that for at least the next investment horizon (five to 10 years), new building construction will often not be feasible, so the opportunity will emerge to retrofit old buildings and be energy-efficient.

Even today, commercial tenants are demanding certification of energy efficiency in the buildings in which they sign lease commitments.

We will also enter a new era of adaptive re-use.

This means that there are many buildings still with a useful physical life, yet may no longer enjoy a beneficial economic life, at least as to what they were intended to be.

There are many possibilities of old industrial and office buildings, or old shopping centers that can be converted to other uses to meet contemporary market and consumer demands.

The point is that it is quite likely that when we come out of this “mother of all recessions,” this very experience will inform our sense of everything around us.

We will be conservative because we will conserve. We will value permanence over transitory. We may even live in our homes longer.

Perhaps these recession-era concepts, which are likely to be imprinted in today’s children and ultimately passed on to the next generation, will make all of this pain matter for something.


Gary H. London is president of The London Group Realty Advisors, which provides real estate consulting and economic analysis. Check him out on the Web at londongroup.com.

-Advertisement-

Featured Articles

Oberon Eyes Europe for Renewable DME

Leaders of Influence in Law 2024

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-