Whether or not you believe we are in a recession, there is no denying that the word recession is now a part of our vocabulary. Whether you are out and about shopping, listening to the radio or watching television, it seems like that word is inescapeable. The Los Angeles Times recently ran an article titled “Shoppers play it cool in January.” Guess what word appeared in the article over and over again? That’s right, “Recession!”
The article examined the retail market, analyzed sales numbers for January and predicted what will come for the year ahead.
“Discounter Wal-Mart Stores Inc. said shoppers held on tight to the gift cards they received over the holidays or used them to buy milk and bread rather than toys or iPods. High-end Saks Inc. said customers shifted more of their spending to “promotional events” - making purchases when items were specially priced.” L.A. Times
The above quotation reflects that the entire nation is feeling a financial pinch, not just a certain economic class. The working class is beginning to pull back substantially and spend their money on necessities, while the upper class are actually looking for bargains. No one is spending money like before.
“Whether we are in a recession or not, things have slowed,” said Michael Niemira, chief economist for the International Council of Shopping Centers.
The National Retail Federation said the slump would affect U.S. ports where products destined for shopping malls are unloaded. “We’re going to see little increase in cargo on the docks,” said Jonathon Gold, the federation’s vice president for supply chain and customs policy. “Container traffic at the ports is a leading economic indicator because it reflects retailers’ expectations for sales.”
So what if we are in a recession? How does that affect me as an apartment owner?
Take the above quotation for example. The VP for the National Retail Federation is stating that the decrease in sales is going to directly impact all U.S. ports where merchandise is delivered and unloaded.
Sales have been weak and retail stores are experiencing a major slow down. If you have been out shopping recently, you will notice the lack of employees in these stores. Retailers have already reduced their workforce. The next step is for them to cut down on their stock and reduce their product orders.Â
That means less work for everyone. Take into account the various jobs that will be impacted due to lack of sales….sales personnel, shipment personnel, manufacturing personnel, corporate personnel, etc., etc… It’s the ripple effect.
If there is less work, then there is less money in our tenants’ pockets. As money becomes tighter, it becomes more difficult for them to make their rent payment every month. Suddenly, they find themselves forced to look for a less expensive place to live.
You suddenly find yourself with a vacancy or two. Being an owner for quite some time, this is part of the business that you are accustom to. You put your sign up, place an ad, yet the calls do not come. While driving your area, the amount of vacancies catches your attention. As you think of ways you can stand out from the others, you decide to offer 1 month free rent. The unit is going on the second month of vacancy. Last year, you had a waiting list, this year you don’t even have a call back list. Time goes on, expenses remain, maintenance issues develop, you feel desperate. Weathered by the amount of time and work you’ve invested trying to rent out the unit, frustration takes over you.  Forced by the market, you lower the rent by $150-$200 just to fill the place.
‘What’s going on?’ you ask yourself…The Recession.