Bad Omens No Matter What You Call Them

Closures, Lay-offs, Bankruptcies, Notices of Default… Bad Omens no matter what you call them

In the world of investment and office real estate there are many factors that influence the supply and demand for commercial space. A major factor that stimulates demand is job growth – we have never been quite sure what to politely call “job decline”. What to call it is not a new problem. Back in 1848, John Russell Bartlett, wrote a book titled the “Dictionary of Americanisms”. It is reported in Scott Sandage’s Book ; Born Losers A History of Failure in America; that Bartlett was great at listening for the slogans or slang that became those day’s expressions known as “the mouthful’s about failure”. Here are a few of them from 1848.
Busted, Flat broke, Dead Broke, Up a Tree, Hand to Mouth, Hard up, Hard Pushed, or Hard Run. And the results were often; Face the Music, Go through the Mill, Wind up, Wipe Out, Peter Out, Flunk Out, Flat Out, Fizzle Out…

In 2008 many of those expressions are still in use. Today a new group of more modern expressions – but with much the same meaning; Closures, Lay-offs, Bankruptcies and the like result in less demand for commercial real estate.

Here are a few headlines we want to bring to your attention from June 2008.

Sacramento’s Own ; McClatchy Newspaper Company, publisher of newspapers in Miami, Sacramento, Fort Worth, Kansas City, Charlotte and Raleigh, plans to reduce its workforce by about 10%. "The effects of the current national economic downturn -- particularly in real estate, auto and employment advertising -- make it essential that we move faster now to realign our workforce and make our operations more efficient," said McClatchy CEO Gary Pruitt. McClatchy is reducing workforce through both voluntary and involuntary separations, as well as managed attrition, involving about 1,400 full-time equivalent employees. http://www.costar.com/News/Article.aspx?id=E9FB572BF5C23C36D165C0E2216E2C7E#num2

DR Horton, Greater Sacramento's biggest homebuilder just two years ago, this week abruptly scaled back staffing in its Rancho Cordova office that serves as the Sacramento division headquarters. A three-person crew will run the office that once housed dozens of workers, according to several industry sources. http://sacramento.bizjournals.com/sacramento/stories/2008/05/19/story6.html?q=layoffs%20in%20Sacramento


UOP: State's in mild recession
Thursday, June 26, 2008 Story appeared in BUSINESS section, Page D1
California is in a mild recession and has been since the last few months of 2007, according to the latest report from the University of the Pacific.The UOP quarterly forecast, to be released today, is perhaps the boldest pronouncement by an economist to date that California's sluggish economy has crossed the line into recession.Jeff Michael, director of the university's Business Forecasting Center, said the recession figures to be fairly long-lived but not severe. http://www.sacbee.com/103/story/1040362.html

Sacramento Red Cross Cuts Over Half of Paid Staff
SACRAMENTO, CA - It's been four years since Courtney Miller began working for the Red Cross, and she still talks about it like it's the best thing that ever happened to her."I love giving back to the community," said Miller, "and this organization is just amazing. You really do learn life's lessons here at the Red Cross."If she wasn't so positive, it might be understandable. The same organization that she loves just handed her a pink slip."It's definitely not something that you plan for," said Miller.She is not alone. In her building, several workers were laid off in March."It wasn't enough," said Sacramento-Sierra Red Cross CEO Cindy Jackson of the job cuts. "Unfortunately, we also had to layoff some additional staff in May." Written for the web by Will Frampton, Reporter/Multimedia Journalist http://www.news10.net/tools/printfullstory.aspx?storyid=43788

Elk Grove Ford dealership shuts down
By Mark Glover and Darrell Smith - mglover@sacbee.com
Elk Grove Ford, arguably the automaker's anchor dealership south of Sacramento, closed down operations early Friday evening in the Elk Grove Auto Mall.In the surreal final hour before the 6 p.m. closing, customers were still trying to close deals on vehicles as sales staff patrolled the store boundaries, trying to keep the media out of the showroom."I'm looking at driving off the lot today," said DeLorean Dixon, an Elk Grove shipping and receiving manager who was shopping for a fuel-efficient Ford Focus. Exactly why Elk Grove Ford shut is unclear. Its owners, Sacramento-based Keil Enterprises, did not return calls seeking comment. http://www.sacbee.com/103/story/1046012.html

RV dealer to close; furniture chain files for bankruptcy
By Mark Glover - mglover@sacbee.com
Published 2:35 pm PDT Friday, June 27, 2008
Rough economic conditions have swamped two Northern California retail chains.
Dan Gamel, the 57-year-old, Fresno-based recreational vehicle dealer, said Friday he is selling off his $40 million RV inventory and plans to close all six of his California stores, including the Rocklin RV Center at 4429 Granite Drive.The other Gamel dealerships are in Salida, Anderson, Bakersfield and two in Fresno. The RV chain employs more than 200.
The RoomSource Furniture & Accessories, a six-store chain based in Sacramento, filed for Chapter 11 bankruptcy protection on Wednesday, according to records at U.S. Bankruptcy Court in Sacramento.The 11-year-old retailer operates a showroom at 1821 Exposition Blvd. and has a distribution center at 849 N. 10th St., in Sacramento. Other RoomSource outlets are in Rancho Cordova, Rocklin, Modesto and Stockton. http://www.sacbee.com/103/story/1045519.html

Sacramento area restaurants struggle as gas, food costs rise
By Jon Ortiz - jortiz@sacbee.com
Published 12:00 am PDT Friday, June 27, 2008Story appeared in BUSINESS section, Page D1
It would have been easier for Rick Zibull to take it if his restaurant was closing because the competition beat him.But Z's Wine Bar and Bistro in El Dorado Hills is shutting down Saturday night for reasons beyond its owner's control: Gas at $4.50 a gallon. Soaring food costs. And that rotten housing market.
"People having to make a choice: 'Do I spend a hundred bucks to put gas in my tank, or do I spend a hundred bucks on a night out?'" Zibull said. "You can guess which way that decision goes." Sacramento's eating and drinking establishments are entering a shake-out phase. Summer, already a traditionally slow season for restaurants, will severely test who can stand up to higher costs for everything from eggs to employees as sales wobble.The sluggish economy has already forced some out of business. http://www.sacbee.com/103/story/1043291.html




Sacramento Builder Owes $973 million
Sacramento Builder and Developer John Reynen Hopes Personal Sacrifice Spares Company
According the latest filings in the Chapter 11 bankruptcy reorganization case of Sacramento builder and developer John Reynen, co-owner of Reynen & Bardis Communities, Inc., owes $973 million in various personally guaranteed loans taken out during the housing boom, the Sacramento Business Journal reported recently . Reynen filed for Chapter 11 bankruptcy in April. It was a move intended to give Reynen & Bardis, which Reynen founded with Christo Bardis in 1969, its best chance for survival, company spokeswoman Michele McCormick told Builder. http://www.builderonline.com/business/sacramento-builder-owes-973-million.aspx

Housing bust takes toll on contractors, economy
Jun 2, 2008
LOS ANGELES — Robert Lindsey was not surprised by new data last week that showed new home sales in the United States have fallen more than 40 per cent from their peak almost three years ago. He can tell from his company's bank account."We're literally losing money every month," said Lindsey, general manager of Signature Drywall Inc., in Sacramento, which installs drywall in new homes and apartments in the Sacramento and San Francisco areas.In 2005, the firm raked in some US$30 million in sales. Last year, sales were less than half that, and this year Lindsey hopes he can make $8 million."It's kind of like bleeding to death," he said.http://canadianpress.google.com/article/ALeqM5idGvltUr8_3X3Pq5etGhTPPLEitQ


In a future posting we will do our best to find an equal – although we suspect it will be less- number of positive indicators on factors that are stimulating the regional economy and increasing the demand for commercial and investment real estate.

If you have questions about this Post of if you would like to discuss commercial and investment real estate services with you please call Jim Gray at (916) 617-4255 or Nahz Anvary at (916) 617-4257.