. FedEx Corp. posted a 12 percent increase in revenue and a 33 percent jump in net income for its fiscal fourth quarter compared with a year ago, citing an improved economy and strong customer demand across all transportation segments. The company forecasts earnings per share of $6.35 to $6.85 in fiscal 2012, up from $4.90 in FY 2011 and $3.76 in FY 2010. This implies more goods flowing through corporate supply chains, stronger trade, and growth in both consumer spending and business capital spending – helpful tailwinds for the industrial property market.

. Gas prices are falling. The average price of a gallon of regular gas averaged $3.65 this week across the U.S., down by 32 cents over the past six weeks. This puts more money in consumers’ pockets for other spending, which is good news for the economy (consumer spending accounts for 70 percent of GDP) and especially good news for retailers and shopping center owners.

. Real Capital Analytics reported that commercial property sales in May totaled $15.6 billion, up 124 percent from May 2010. According to RCA, “the growth trend was broad, as every property type registered its most active month this year and both pending deals and new offerings point to a strong June.” Year-to-date property sales are more than double the first five months of 2010, a sign that investor demand is spreading into secondary markets and non-core assets.

Back to the Fed’s downbeat forecast: There is a silver lining. Inflation, which rose to 3.6 percent in May compared with a year ago, is expected to fall back into the range of 1.5 to 2.0 percent over the next two years as gas and commodity prices recede. This would be at or below the Fed’s informal inflation target.

Despite the angst surrounding the crisis in Greece, many economists still anticipate a second half rebound for the U.S. economy. It appears that Greece will need to restructure its debt in the near future. The only question is how the pain is shared between governments and European taxpayers on one side and the holders of Greek bonds (especially European banks) on the other. Assuming that can be finessed, the outlook for the U.S. economy is looking better. Consider that:

. Corporate profits and cash reserves are robust;

. Exports are surging;

. Gas prices have receded in recent days;

. Auto manufacturing will pick up in the second half as supply chains return to normal following the Japanese quake.

Check out some recent comments from noted economists Mark Zandi of Moody’s Analytics, David Malpass of Encima Global and Mark Vitner of Wells Fargo on a CNBC panel last Wednesday (click here http://video.cnbc.com/gallery/?video=3000027887 ). All are moderately bullish with second half GDP forecasts in the range of 3.5 to 4 percent versus the disappointing first quarter performance of 1.8 percent.

Remember, a double-dip is what you order at your favorite ice cream parlor.

Have a great weekend.

Exports are a bright spot for the economy, increasing by 1.2 percent in April according to newly released data from the Department of Commerce. The weak dollar played an important role by making U.S. goods and services relatively cheaper overseas. Because imports fell in April by 0.4 percent (led lower by oil and autos), the trade deficit narrowed, meaning that net exports could be on track to make a better-than-expected contribution to second quarter GDP. The drop in imports could be temporary, however, as vehicle imports bounce back from the recent disasters in Japan.

Rail traffic reflects growing trade volumes and the expanding movement of goods through corporate supply chains. Year-to-date through May, rail intermodal loadings are up 8.5 percent from the same period last year according to the Association of American Railroads. One reason is that year-to-date volume at six major U.S. ports tracked by the AAR is up 8.2 percent from the same period last year, and rail service is needed to carry the containers to and from the ports.

Several indicators show that manufacturing activity has decelerated recently along with other sectors of the economy, but it remains a relative bright spot. It is one reason why my colleague Rene Circ, Grubb & Ellis’ National Director of Industrial Research, thinks speculative construction of industrial space could bounce back more quickly than commonly expected. Click here http://www.grubb-ellis.com/Research/IndustrialInsight.aspx to read Rene’s article.

Have a great weekend.

May 2, 2011

http://www.grubb-ellis.com/Images/bobsbox/bobsbox_110502.jpgSource: Bureau of Economic Analysis, Grubb & Ellis

The economy grew at a disappointing 1.8 percent annualized rate in the first quarter according to the advance estimate of gross domestic product from the Bureau of Economic Analysis. Consumer spending made the biggest contribution, adding 1.9 percentage points, although this was below the 2.8-point contribution made by consumers in the fourth quarter. Inventory additions and business spending on equipment and software also contributed to growth. Subtracting from growth were business investment in structures and homebuilding — which were affected by inclement weather — as well as net exports and government outlays. Late last year, many economists raised their GDP forecasts in response to the $858 billion package of tax cut extensions and new tax cuts passed by Congress in December. But recently many have lowered their forecasts due to rising energy prices and the uncertain outlook for the Middle East, Japan and the eurozone. The Employment Situation report, which the Bureau of Labor Statistics will release this Friday, will be even more important than usual because it will reveal whether the drags on economic growth are spilling into the labor market, which is a major driver of demand for commercial real estate.

Merger will create single commercial database of 2 million listings

By Inman News, Wednesday, April 27, 2011.

CoStar Group Inc. is acquiring the most heavily trafficked online commercial real estate marketplace, LoopNet.com, in an $860 million deal that will create a single database of 2 million active listings.

The merger, which has been approved by the boards of directors of both companies and is expected to close by the end of the year, will double the size of CoStar’s subscriber base to 160,000, and create a company with more than $300 million in annual revenue.

“CoStar and LoopNet have been at the cutting edge of innovation in their respective businesses and we believe the two companies will be even stronger together,” said Richard Boyle, chairman and CEO of LoopNet Inc., in a statement http://www.sec.gov/Archives/edgar/data/1057352/000105735211000063/press_release.htm . “This transaction combines the capabilities and best practices of two successful and very complementary companies.”

LoopNet shareholders will receive $16.50 in cash for each share of LoopNet common stock — nearly 15 percent more than Wednesday’s closing price — plus 0.03702 shares of CoStar Group common stock, representing a total equity value of approximately $860 million, the companies said.

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Currencies of Broad Group of Trading Partners

After a multi-decade run of appreciation, the U.S. dollar has fallen in value by some 26 percent since 2002 against the currencies of a large group of major U.S. trading partners. The dollar spiked during the credit crisis of late 2008 and early 2009 as investors piled into safe U.S. Treasuries, only to resume its decline when the worst of the crisis passed. The weak dollar reflects the U.S. economy’s sluggish growth prospects relative to other countries where interest rates are higher. It also reflects expansionary monetary policies pursued by the Federal Reserve to stimulate the economy, i.e. policies to keep interest rates low, and it may reflect negative investor sentiment over high levels of deficit spending by the federal government. The weak dollar benefits U.S. exporters by making their wares cheaper for overseas buyers, but on the negative side, it contributes to inflationary pressures in markets that import U.S. goods, and it could be a harbinger of inflation in the U.S., already evident in gas and food prices. For commercial real estate, the weak dollar has stimulated demand for industrial properties by exporters, but if gas and food prices continue to rise, the weak dollar is likely to dampen core retail sales (which exclude gas and food) and, by extension, leasing activity in shopping centers. The weak dollar makes U.S. properties more affordable for overseas investors, which could add to the already-strong demand for Class A properties in primary, supply constrained markets – the niche most favored by these investors.

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Average Price Per Gallon

Good News in the Big “O”

Most of you probably have never been to Omaha, where I sit in my hotel room before attending a conference, but bear with me. This is a story of redemption and recovery. I lived here in the late 1980s when I took a job managing the research department at Upland Industries, the land development subsidiary of Union Pacific. InterNorth had just pulled up stakes, moving to Houston where the company changed its name to. Enron. ConAgra, the food giant, was threatening to leave, and the rumor around UP was that a relocation to St. Louis was imminent. In short, the city was on the verge of becoming irrelevant.

Flash forward 25 years: ConAgra and UP have built new headquarters downtown as has Gallup, which has a dazzling riverfront campus that finally linked downtown with the Missouri River. Mutual of Omaha has built Midtown Crossing, a stunning mixed-use complex adjacent to its headquarters, and the University of Nebraska has dramatically expanded its medical campus, degree offerings and research activities in Omaha, with stunning new facilities to show for it. The level of redevelopment, revitalization, civic involvement and corporate commitment is mind-boggling for a former resident who had not kept up with the changes.

Which brings me to my broader point: there are plenty of similar success stories. Look no further than Pittsburgh, once the poster child for rust-belt decay and population flight. The city evolved into an educational, medical and technology hub and is now attracting energy companies seeking to extract natural gas from the Marcellus Shale http://geology.com/articles/marcellus-shale.shtml that underlies a vast four-state region. Energy is also the story in Oklahoma City, largely stagnant for two decades following the energy bust of the mid-1980s. Devon Energy is now building a new 50-story headquarters downtown. New York, a magnet for institutional real estate capital, looked like it was down for the count when the city nearly declared bankruptcy in the mid-1970s. All of these metro areas were touched by the Great Recession and job losses, but all held up much better than the U.S. average and are on the way to recouping their loses.

Could Detroit someday become a turnaround story and a symbol for America’s capacity to reinvent itself? It may take several decades as it did in the cities profiled above, but I think it will happen.

Have a great weekend.