WISDOM FROM THE TRAMMELL CROW COMPANY

Through our extensive research capabilities, we have located a document circulated among senior partners of the Trammell Crow Company in 1989 wherein each of the dozen or so partners shared their lessons learned on how the company survived the real estate downturn related to the S&L crisis of the 1980s. (In the interest of disclosure, I was a summer intern with Trammell Crow in 1995 – I wrote their industrial market report for Houston -- that is not how I got it.) You can read the full document here, but we’ve selected the most relevant lessons below:

• Don’t rely on inflation to make a project work
• Don’t assume a project will exceed the market – it should work at market or at 10% below market
• Keep a conservative strategy – it doesn’t pay to say “it can’t last much longer”
• One bad project can make up for five good ones
• Don’t be tempted by thin deals just to keep everyone busy
• Quality is important in tough markets … buyers will give credit to quality
• Build a project that is “truly special” in nature, or don’t build at all
• Be selective in choosing projects and adhere to yield and profitability requirements
• When times are tough fewer people are available and more is required of them.
• We had great people …While often we focus on what’s wrong … we need to take pause and remember there are a hell-of-a-lot of people in this company made out of the “right stuff.”

A great company survived a terrible time relying on this advice.  We can sell you a report for a file if that’s what you need. But we would rather help you answer these kinds of strategic questions – can you make a project you bought a year ago profitable again? What does a quality project look like in today’s market? How to find the right inventory for 2024? We know many of you have already cut back quality people – maybe we can help you by quickly producing the kind of intelligence you used to get when you had a larger staff. We have aggressive rates and quick turnaround times and are ready when you need us.

TELL ME AGAIN ABOUT THE STRONG EMPLOYMENT ENVIRONMENT

Yesterday's job report showed the US added 223,000 jobs in December - apparently a strong number. But if you look at the internals on the report, the total number of full-time jobs has declined by 288K in the past ten months, which however has been more than offset by the 886K increase in part-time jobs. And, multiple jobholders have increased by a massive 684K over this period. Contrary to conventional wisdom, some 684K jobs added in the past 10 months were not the equivalent of 684K workers finding a job, but 684K workers finding more than one job to afford life during this latest episode of soaring inflation, and in December specifically, the entire employment increase was thanks to part-time workers.

Hours worked remain below the pre-COVID trend - demand for labor may have increased during the pandemic period, but still hasn't reached 2019 levels.

Business applications remain well above pre-COVID trend. New business startups were exceptionally high during the pandemic – probably a function of the amount of financial support provided by the government. But new business startups historically increase during recessions – and these companies usually grow more slowly and remain smaller than companies founded during booms even when they are no longer in recessions.

Wage growth is falling, and falling fastest in low-wage categories.

Almost 40% of adults run out of money every month, relying on credit cards or family members to make ends meet. 70% of workers have taken or are considering gig work to help cover their expenses.

US’ HIGH FIXED RATE MORTGAGE SHARE WILL PREVENT PRODUCT FROM COMING BACK TO MARKET.

SALES EXPECTATIONS WORSE THAN MARCH 2020

NAHB reports that builder sales expectations increased slightly – only to still remain below expectations from March 2020 at the onset of the pandemic.

HERE WE SIT LIKE BIRDS IN THE WILDERNESS

Waiting for the Fed to realize rents have gone down.

IT’S HARD TO MAKE PRICES GO DOWN WHEN THERE IS HISTORICALLY LOW INVENTORY

Of course, it’s easy to have low inventory when we are building historically low levels of single-family homes per capita. Certainly inventories show gains YOY but remain historically low for days on market, new listings and active listings. And the chart of the 50 major markets show comparatively small changes in the number of homes listed and changes to days on market.

WHY DO INVENTORIES REMAIN SO LOW? IT TAKES 50% LONGER TO BUILD A HOME THAN 40 YEARS AGO.

JOBS!

Anywhere

• Director of Real Estate Asset Management
• Director of Real Estate
• Sr Director Real Estate and Facilities

Houston

• Global Real Estate Director
• Land Superintendent – BTR
• Director of Forward Planning – Land Development
• Real Estate Manager

Dallas

• Vice President Asset Management
• Director of Real Estate
• Director of Acquisitions
• Director of Real Estate Finance
• Division President
• Land Acquisition Director
• Vice President of Construction