Market News

For those many of you who follow these monthly presentations on Commercial Real Estate and related matters provided by Coldwell Banker Commercial The Real Estate Group, some may recall my brief reference in an earlier article regarding infrastructure deficits throughout the state of Illinois (roads, bridges, sewers, water systems, etc.), estimated to be in the range of multi-billions of dollars.

Given the impact of “serious” infrastructure deficits on all manner of commercial real estate and the multitude of attendant commercial transactions throughout the United States, it might prove illuminating to focus on the meaning of “serious” in this context.

One United States Senator refers to the quality of our infrastructure as “creating a serious threat to our economy and safety.  Another federal official has allowed that “. . . you will never be able to raise enough money federally to close the infrastructure deficit we have currently.”

ASCE (the American Society of Civil Engineers) predicts that “ . . . crumbling infrastructure could cost the economy close to $4 trillion by 2025.  Further, “. . . most of the structures that support everyday life in America are failing with roads and airports ranked the poorest of all infrastructure assets.”

So, let’s delineate specifics per the ASCE:

• Bridges: $123 billion – Federal estimate of backlog asset rehabilitation.
• Roads:  $160 billion – annual cost of fuel and time lost to congestion. $713 billion – backlog of highway capital needs (excluding bridges).
• Rail: 750,000 – northeast corridor passenger trips daily (Amtrak and commuter). 40% - Federal forecast of growth in freight shipments over the next 30 years.
• Drinking Water: 240,000 - estimated water main breaks a year. 6 billion – gallons of treated water a DAY lost to leaking pipes.

Throw in a few more infrastructure assets on the ASCE list – ports, levees, and waste management and ask yourself what the future holds in regard to our ECONOMY and SAFETY.  The answer, in addition to chaos and other negative happenings, is massive trillions of dollars.  Next question, from where?

In 2018, a United States Congress package that would have compelled cities and states to provide at least 80% of the funding for infrastructure improvement got next to no support – obviously an unrealistic burden on the cities and states.

Political gridlock is an anchor on attempts to solve the problem.  Two long-time U.S. Senators retiring in January, have described how the “Senate as an institution is in crisis” and “it doesn’t work as well as it used to”.  Gridlock at many levels of government precludes appropriate and necessary action resulting in “---kicking the can down the road.”

Meanwhile, cities and states are forced to examine means to raise an array of taxes to stem the tide.  Compounding this are current suggestions of a possible recession looming on the horizon.  Moody’s Analytics and the National Association of State Budget Offices recently reported a study entitled ‘State Preparedness for a Moderate Recession’.  Twenty-five states were deemed to be PREPARED; Fourteen states were deemed to be MODERATELY PREPARED; and eleven states, including ILLINOIS, were found to be SEVERELY UNPREPARED.  One half of the United States is “UNPREPARED” and the unfortunate view expressed is “…the problems will keep festering until a recession intensifies them.”

For many years, Chicago has considered alternatives for new transit lines and stations, but can’t move forward without federal funding assistance.  Now a statewide infrastructure bill is being considered and would include a $.20 - $.30 a gallon increase in the state gasoline.

Given the ‘dangers’ noted earlier in this article, it would seem incumbent on all of us to make known our concerns to government officials at all levels (and suggest solutions if you have one) and request their focus and action be towards solutions.  Hope springs eternal and cautious optimism abounds!