Last night I dreamed that the commercial real estate industry (including the facility management profession) was in the midst of a public firestorm! Congressional hearings, the president and even Mike Wallace were involved! It was like being in a George Orwell novel! Before I tell you how this dream ended, let me tell you how it started…
It was the early 1970s. “Baby boomers” were coming of age fighting in the jungles of Vietnam or partying at Woodstock while an alarming shortage of building materials developed – primarily the commodities of lumber, concrete and steel. Until 1973, these commodities were readily available, high quality, predictably priced & imported from a little known part of Asia called “Construtia”. In 1973, several mining accidents and subsequent labor strikes in Construtia shut down production and shipping of these essential resources.
Our industry’s growth came to a screeching halt. Without a steady supply of concrete, timber and steel; hundreds of projects couldn’t be completed and new buildings were postponed indefinitely. Prices for these materials skyrocketed and an underground network of recycled and stolen building components bloomed. Facility managers (FM) around the country struggled to keep organizations operational and competitive despite incredible space challenges.
The president took to the airwaves and pleaded with organizations to better utilize existing buildings and make due with current square footage. Federal rationing of buildings and rent controls were implemented with abysmal results and corruption not seen since the days of prohibition. In a quest for superior space utilization, a French architect named “Dilbert” (pronounced “Dil-bear”) invented the “cubicle” and forever altered office planning. Generous federal tax credits were offered to organizations implementing these revolutionary space savers.
World class mediators flew to Construtia several times attempting to resolve the dispute between the Construtian government and striking workers. But for 24 months between 1973 and 1975, no materials shipped from Construtia and no new buildings were erected. During that time, policy makers and pundits debated the wisdom of relying on inexpensive concrete, timber and steel imports from a country so distant and volatile. Alternative materials and domestic production had always been dismissed as too expensive or too politically perilous.
Environmentalists and “anti-sprawl” lobbyists were thrilled when Construtia’s production ceased. Until that time, they had experienced mixed success convincing the public that new buildings were a menace to the planet. In addition to being labeled as dreadful “pollution generators”, they claimed that the tremendous forces from a building’s concentrated heavy weight were literally altering the Earth’s shape and orbit. Despite the inability to prove the hysterical claims, they were becoming a formidable political force after spending millions of campaign dollars to make sure domestic production of concrete, steel and timber would never be possible. They enlisted celebrities and scientists to manipulate studies and make apocalyptic predictions that frightened the public and garnered many headlines. They even brought the disfigured mining accident victims of Construtia and their families to the United States – parading them on talk shows and news programs to illustrate the dangers of producing these commodities for our “misguided construction addiction”.
For those 2 years, existing building values and rental rates soared in the absence of new construction. Growing organizations willingly paid 3 to 4 times the 1972 cost for space. FMs and real estate organizations successfully navigating the troubled waters of the early 1970s were handsomely rewarded until state and federal governments hammered us with astronomical, industry-specific taxes. The public blindly supported this demonstration of “righteous indignation” while failing to recognize that elected officials were essentially rewarding themselves with tax revenue for a lack of vision and for national policy that had artificially imbalanced the natural forces of supply and demand.
When Construtia resolved their internal differences and resumed production and shipping of building materials in 1975, we breathed a collective sigh of relief. New construction resumed while building values and rental prices finally stabilized. By the end of our nation’s bicentennial celebration in 1976, things were “back to normal”.
My dream fast forwarded to 2005. Since the mining accidents and labor strikes of the 1970s, the environmentalists had continued a relentless public relations jihad against “the evil of new construction”. Without rational scientific arguments or any effort or investment toward developing alternative building materials, demands were insistently made to find “less harmful” construction resources to help “re-shape” the planet. Lobbyists funneled billions of dollars to cowardly politicians and continued obstructing initiatives toward domestically produced building materials. Construtia remained the world’s lone supplier of inexpensive, high quality building materials.
In 2005, a new prime minister in Construtia began experimenting with the laws of commodity supply and demand. He reduced production, forcing commodity traders to bid higher and higher prices for Construtia’s materials. He knew that American policy makers lacked the political courage to implement domestic production. He also knew that “alternative” building materials would be expensive and require years of development. However, he also knew that if Construtia’s commodity prices were pushed too high, the politics of domestic production and the economics of alternative materials would likely influence the fickle Americans. It was a high stakes game of “chicken” for both nations…
Before I woke up, it was mid-2006 and material shortages resulted with the real estate industry taking a severe thrashing in the media. Building values and rental rates were climbing steadily and inflation was endangering a 5-year economic expansion. Political leaders were accusing building owners and FMs of “price gouging” even though our profit margins were considerably lower than many other industries, particularly those of the “big media” crusading against us. Even the president, who had a reputation for being “pro-business” in my dream, was calling for an investigation of publicly held real estate companies. It was getting ugly…then a 60 Minutes film crew showed up at my office and Mike Wallace shoved a microphone in my face and asked what the industry was going to do about this problem! Before I could explain economics to Mr. Wallace, I woke up in a cold sweat!
OK, so maybe my analogy of “big real estate” to “big oil” isn’t perfect but I hope it makes a point. Most of the indignant knuckleheads in Washington are the very people responsible for our energy policy (or lack thereof) and we’re not holding them accountable! Also, many of the consumers whining about gas are still buying $4 lattes and driving gas guzzling SUVs. I don’t understand why anyone thinks we’re entitled to cheap gasoline. It’s not in the Bill of Rights – I’ve checked!
Before railing against an entire industry, I wish people would do a little research and compare the profit margins of the “big oil” companies to the “big media” organizations reporting the “problem”. Then they could compare those numbers to the profit margins of their own organization. And before complaining about the salary of their least favorite oil company’s CEO, they should find out how much their favorite celebrity made for his or her last film. Then they could decide if any movie star ever helped an ambulance get to a hospital or a helped a fire truck reach a burning home. It might help put things in perspective.
Regarding high prices at the pump, we do have options! We, the people, can choose to:
- Continue complaining while doing nothing about it.
- Change driving habits – buy a more efficient car and drive fewer miles.
- Tell elected officials to recognize the need for a more diverse supply of energy and tell them what we want encouraged through R&D tax breaks (solar, wind, nukes, hydrogen, domestic exploration, etc.).
- Encourage government to add a couple more bucks in taxes to a gallon of gasoline! It might sound counter-intuitive but if gas hits $6 or $7 per gallon, I guarantee we’ll either reduce our collective appetite (lowering prices) or we’ll get the political guts to seek additional supplies or an enterprising scientist will get enough funding from “big oil” to successfully develop a less expensive alternative.
Let me know what we’re going to do…Mike Wallace might be back tonight for an answer!
Crane is a mechanical engineer and regional property manager with Childress Klein Properties, a leading real estate developer and property management services provider in the Southeast.