Outlook: Not too shabby

There’s no question the national economic situation is affecting a wide spectrum of businesses in Southwest Washington. Those connected to residential real estate seem to be feeling it most, but many remain optimistic in the region’s economy and expect business to be close to normal within a year.

In this issue, nine representatives of local industries tell the VBJ what the economy looks like from their windows.

Area real estate is appreciating

Dick Riley

Owner, President

Riley and Marks Appraisals, Vancouver

Riley and Marks was in business during the savings and loan crisis in the early 1980s, and now we’re here in this crisis. At that time, the rest of the economy wasn’t in as bad of a state as it is now. This oil problem is beating the bejeepers of as many things as you can think of.

It is going to take a while for all of this housing inventory to be sold and washed out, and sales are going stay pretty flat for the next couple of months. By fall, you’re going to see the market start to turn.

There are parts of Clark County where residential real estate is appreciating – Southwest Washington isn’t a declining area. It has 2 percent to 3 percent appreciation per year but that wouldn’t have mattered two or three years ago.

I see it being a little more promising as we go into the summer and some of this inventory is starting to move along. Lenders are working with people who are strapped to maintain their mortgages rather than foreclosing.

Commercial demand is decent

H. Roger Qualman

Executive Vice President

NAI Norris Beggs and Simpson, Vancouver

With the exception of anything related to the development of single-family, detached residential property, NAI Norris Beggs and Simpson hasn’t felt any kind of slowdown yet. We primarily handle office, industrial and retail properties.

Demand (from those seeking commercial space) continues to be good, not great. Nobody really knows what we’re headed for and, as a result, there’s a fair amount of hesitancy in the market. Potential clients are spending a lot more time kicking the tires, and there is little in the way of new development.

The vacancy rate for industrial spaces in Vancouver is 2 percent, and there is very little in the pipeline we can deliver to potential tenants. Office is about 12 percent vacant, but there are almost no large spaces available. There is 6.8 percent vacancy in retail spaces.

The cost of doing business in every type of real estate is going up – land and infrastructure costs are rising. But I expect we’ll work through this residential slowdown and get back to more typical demand in the marketplace in the next 12 months.

Tourism is  strong, with room at the inns

Kim Bennett

President, Chief Executive Officer

Southwest Washington Visitors and Convention Bureau, Vancouver

Tourism continues to grow locally. There has been tremendous growth in the last six years, and we’re expecting it will continue in the next year, but a bit slower.

Southwest Washington is a meetings destination, and groups are booking one or two years out. We have signed contracts for groups that will come into the community as far as 2012. A little legwork on the front end helps safeguard this industry from the slowing economy.

Leisure destinations generally don’t book out in advance and those will see the slowdown much quicker than meetings destinations. The region is definitely OK for the next year or two. After that, we’ll see where the economy goes and shift our strategy accordingly.

We’re working toward diversification – hotel brands and selection, places to eat, more dining options at the Reserve and more transportation options for visitors.

Our goal is to make sure we are filling the hotels that we currently have – we are sitting at an average of 62 percent occupancy. While we have seen tremendous growth over the past six years, we have a lot of room still, quite literally.

Hospital ready for slump

Dave Willie

Chief Financial Officer

Southwest Washington Medical Center, Vancouver

At this point the hospital hasn’t seen a noticeable uptick in people trying to access care without insurance, but I’m sure if we get into a recession a little ways there will be an increase. More people without jobs means more people without insurance.

I’ve been in the health care business for 24 years and have gone through a couple of recessions. You usually see the effect after (a recession) has been in place for six months to a year, and that’s highly localized to your market.  

Our general policy as a nonprofit institution is to treat anyone in need regardless of their ability to pay. When someone is in that situation, the hospital tries to qualify them for Medicaid or other government programs, COBRA or some kind of coverage. If we can’t, there is a charity policy based on the federal poverty guidelines, for which we aren’t reimbursed. We just agree to write it off.

Ultimately, depending on how severe the situation is, we could lose money. But I don’t think there has been a hospital that’s failed because of the cost of treating the uninsured. I think we’re well reserved to deal with a downturn in the economy.

Retail tied to housing

Tom Craig

Owner

Sparks Home Furnishings, Vancouver

In the furniture business, it’s been slow since the fall nationally, but the Pacific Northwest has done a little better than Florida and Arizona.

Furniture is tightly connected with the housing market so we have to weather the storm. Consumers are deferring their purchasing. The store has had to cut back a little bit, waiting for the economy to pick up, but it found a niche in patio furniture for higher end customers. I’m hoping things will get better. Most people will get their $600 in May or June, so we’re hoping to dodge a bullet.

It was definitely worse in the early ’80s when the prime rate went to 17 or 18 percent. Home loans were 12 percent – the housing market just collapsed and the whole lumber industry retracted.

It’s slow, but we’ve been in for business 125 years. My father told me it was a good day to sell one screwdriver during the Depression – that will give you a little perspective.

Global demand helps tech companies

John E. Marck

President

Sharp Microelectronics of the Americas, Camas

The softness everybody is seeing in the overall economy is having minimal to no effect on our business.

The predominant products Sharp sells are liquid crystal displays, and we sell to a wide variety of customers throughout the Americas. We’ve been very successful engaging several major customers in MP3 music players, hand-held GPS and PDA applications, and those market segments have just gone through the roof. It was really a strategic, very smart practice to initiate and we’ve been reaping the rewards.

We are also looking at a new initiative of supplying TV panels to a wide variety of manufacturing customers in Mexico. 

We don’t want to get overly confident or think we’re omnipotent, which is absolutely the kiss of death. We are very cautious and honest with ourselves, and if there is a problem we will be proactive about it.

We could be in a recession, but I don’t think this is going to be a very deep recession or very prolonged. I think there’s a lot of demand for U.S. products around the world. If it weren’t for these other economies around the world doing so well, I would be concerned.

Northwest faring better financially

Bill Roller

President, Chief Investment

Officer

BR Financial Inc., BR Mortgage Inc., Vancouver

This company is going to do very well this year. We’re reasonably new and looking to add more advisers.

The Northwest looks better compared to places like Detroit or the Midwest where there has been a huge decline in manufacturing. Southwest Washington has a different kind of economy.

We’re seeing more interest rate volatility than usual. Rates have decreased, but there is concern about inflation on things like 30-year mortgages. Part of the problem is that during the ’90s, the United States got used to a very high rate of growth and we’ve been lulled into it. Since the ’80s, the recessions have been getting shallower because of the Fed, so we haven’t seen a real dramatic downturn since then.

But it is not going to be sweetness and light all the time.

The time to be alarmed is when things are going so well, stock brokers and real estate agents are treated like heroes. Now is not the time to be alarmed – now is the time to look for assets that are undervalued.

Giving reflects economy

Mike Wilson

Vice President of Development

Innovative Services NW, Vancouver

Innovative Services is in a major capital campaign to inspire donors at all levels, and has received more than $1.8 million in support from several regional foundations.

There’s been no change in heart, but liquidity is challenging for some companies and our donors. Previous donors who have had a strong proclivity to support us are now very much tied to the economy, particularly if they’re in the building industry.

We’re making more calls, but there are 10 nonprofits before us calling for fundraising and there will be 10 more when we’re done.

This is a two-person department and we are fundraising through our annual appeal and events. That’s the heart and soul of our day-to day-giving. We’re also receiving more in-kind contributions.

For nonprofits with established programs, there is always going to be a philanthropic opportunity. There just aren’t any bad nonprofits out there, so distinguishing your (organization from the many others) through events and philanthropy is key.

In fundraising, we do see the front end of the economy in patterns of giving.

Shortage hits home

Lisa Nisenfeld

Executive Director

Southwest Washington Workforce Development Council, Vancouver

More and more people are leaving the workforce with the retirement of the baby boomers. We’ve known this was coming for a while but it’s starting to strike home. 

This area will have a skills shortage regardless of the health of the economy because there will be fewer people entering the workforce than leaving it. Those shortages are especially acute in health care, where demand for skills will increase as retirements increase.

On average, a person older than 65 requires four times as much health care as a person younger than 65.

There are a number of people who are unemployed and don’t have the job skills that match the needs of the market now. The needs are substantial in manufacturing, especially occupations where people have advanced skills.

Quite a few construction workers are not finding work, particularly in home construction. 

Corrections officers and public occupations skills sets are also in demand now, as are teachers – especially for kindergarten through high school – and human resource professionals.

These problems are not going away. Businesses need to be planning for people retiring and ways to replace them. It’s not going to be as easy as it used to be.

— From conversations with Charity Thompson