Business trends and development for 2011 - The Explorer: Business

Business trends and development for 2011

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Posted: Thursday, February 10, 2011 6:00 am

What current financial trends will likely affect my business in 2011?

—A. Itkin

Many business owners and stakeholders hope to find more opportunities for success in 2011. The coveted post-recession stability and growth will come when decision-makers understand and act according to trends that impact our economy. Some areas of particular interest are taxation, employment trends and housing.

The two-year extension of Bush-era tax cuts and the 13-month extension of unemployment benefits are significant factors that increased the confidence of businesses and consumers. The extended tax cuts will allow for full depreciation of equipment and likely encourage capital spending that has been on hold. 

Consumers will have slightly bigger paychecks as federal payroll taxes have been decreased by two percent and dollars from the extended unemployment benefits typically enter the market immediately. Core retail sales in 2010 performed better than expected

as growth was already above

6 percent in November.

In 2010 Tucson lost approximately 22,000 jobs and Arizona lost 300,000 jobs. According to the Jan. 14, 2010 publication by Marcus & Millchap, projections for 2011 indicate that two million jobs will be added nationally. Supporting this projection, some businesses have begun expansion by taking advantage of incentives and lower costs to acquire, rebuild and lease commercial space. 

Locally, thousands of square feet of retail space have been recently filled by national chains, such as Burlington Coat Factory (65,000) and Ultimate Electronics (30,000), thus creating new jobs. Additionally, many large vacant spaces have been divided into smaller leasable retail and office spaces.

New infrastructure in downtown Tucson has encouraged the investment of private funds and new construction, such as the Unisource project (170,000 square feet) that will bring more than 425 jobs to the area.

With the projected capital spending and estimated rise in employment comes housing needs. After a recent analysis, CBRE Economic Advisors reported that single-family rental homes have fared better in this market with a .7 percent vacancy drop, but owner occupied homes have experienced a .5 percent increase in vacancies. 

Conversely, low interest rates and reduced construction costs have encouraged multi-family housing builders in the Tucson/Casa Grande market to build at least five large (100 to 400 units) new apartment complexes in anticipation of more demand later in 20112. This rental market will become more competitive as renters seek more benefits and discounted rates.

This should be a time to plan on how and where to invest in our businesses for streamlined productivity. Investment line items should include infrastructure, equipment and human capital. Hopefully, understanding these respective trends will assist with business development plans for 2011 and beyond.

 

Humberto N. Stevens is a vice president at Commerce Bank of Arizona specializing in business development and commercial credit. He can be reached by calling 382-5578 or e-mailing hstevens@commercebankaz.com.

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