December 10, 1997

1998: Time to consolidate

By CLIVE SHEARER
Special to the Journal

From manufacturing to support industries, our region has entered an era of growth and prosperity. Yet, there are three circumstances that pose a danger to our surging economy; one local, one national and one international.

Boeing has bitten off more than it can chew, and if it does not solve the current production bottleneck soon, we'll see order reductions and cancellations. This is just what the competition, Airbus Industries, hopes will occur so that their fortunes may soar while Boeing's sags. Just because Boeing has been a long time leader in aircraft production does not mean that it will always be so. At one time, the Swiss were the undisputed leaders in time piece production. Then the Japanese came on the scene, did the impossible, and took the lead as the world's most prolific maker of time pieces. If Boeing does not repair the damage quickly and the airlines lose confidence, this will prematurely slow down our current economic pace to the point where we may again become vulnerable to the vagaries of micro-economic changes.

A second scenario also poses a danger. The U.S. is experiencing an unprecedented era of stability. If more and more companies compete in manufacturing, prices will drop because of an oversupply of goods. This could lead to a deflationary period, which eventually ruins businesses because they can't make a profit. The only way around this is to increase productivity and I believe that most companies are striving to be more productive.

The third situation is the economic market weakness in Asia. If stagnation continues, the U.S. dollar is strengthened and we benefit from lower import prices. However if Asian markets cool down, then we can't sell our goods and that could hit the economic health of the Pacific Northwest. However, the inherent buying power of Asia is enormous, and I believe that this is a short-term crisis.

So let's be positive and assume that our prosperity will continue. There will be a price to pay. The price will be increased crowding, greater demand for social services, traffic congestion and the erosion of values. When I came to this area in 1976 I was struck by the friendliness of the people who lived here. There was a small town aura in a large city environment and a lot of that has been lost. The pace is up several notches, businesses are strained and so are nerves.

RTA will alleviate some of our congestion, but growth in population will worsen the situation. Even though the result is status quo, a regional transportation system is overdue. Without it we would be in a far worse situation in the years following 2000. In Europe, light rail, commuter rail, busses and subways are a safety valve, but the road congestion matches the worst in America. Ever tried to drive down Oxford Street in London or the Champs Elyses in Paris on a weekday? It's a nightmare. Yet both of these cities have public transportation systems that rival the best in the world.

The RTA will succeed if the following conditions are satisfied: Schedules fit the needs of the riders. Access is convenient. Prices are reasonable.

Seattle has a wonderful opportunity to capture additional world recognition by building a viable monorail network. Here is a great chance to acquire a landmark that will draw tourists and also be a useful people mover. If private industry gets involved, and gets involved quickly, we could see the monorail leapfrogging the RTA process and forcing the RTA to integrate it into their system. The sooner this is done, the fewer the cost overruns. RTA authorities are forging ahead with the mandate given to them by the voters, and I'm hoping that they will take off the blinkers and have the courage to look at the benefits of an elevated system. If we can elicit a measure of visionary thinking, I predict that we will see a fruitful coalition between the monorail movement and the RTA planners to find the best way to serve our communities.

Now let's look back to my predictions published in December 1996 to see what may lie ahead in 1998.

RETAIL: Last December, I predicted that this segment would keep busy for years to come because of our population growth. No change in this prediction for 1998.

OFFICE AND INDUSTRIAL: I believed that this market would get hot because vacancies were down. No change in this prediction for 1998.

MULTI-FAMILY: I stated that we could expect to see a lot of activity here and this will continue through 1998.

OUTLYING NEIGHBORHOODS: Development will continue as predicted last year.

SPECULATIVE BUILDING: I did not believe that this form of development would re-emerge. I was wrong. While "build-to-suit" is still the leading mode, a number of speculative projects have been built. However, I'm convinced that these are more of a novelty than a prime way of life for developers.

ANOTHER BOOM-BUST CYCLE? In the 1980's there were a plethora of developers, many in for a quick profit by building fast to preserve their property rights in an evolving GMA environment. Today we do not see the feeding frenzy of those days because the stock market offers returns to rival real estate investment and market demand is driving development rather than speculation. So we have the potential -- if the dangers can be overcome -- to continue this very strong economy.

Previous columns:

• It's the little things that count, 11-12-1997
• Dealing with the difficult person, 08-13-1997
• Searching for the time to add value, 07-09-1997
• Don't wait for a fire to build a fire station, 06-11-1997
• Four reasons to stay with the firm -- or to leave, 05-14-1997
• THE DETERIORATION OF SYSTEMS OVER TIME, 03-12-1997
• FOLLOW UPS CAN MAKE OR BREAK A BUSINESS, 02-12-1997
• LEARNING THE RULES OF THE GAME, 01-08-1997