Fed ‘Vigorous Recession Fighter,’ Says CBRE’s New Chief Economist
- Jan 23, 2008
Raymond Torto, former principal & managing director of CB Richard Ellis Inc. subsidiary Torto Wheaton Research, has been named CBRE’s global chief economist. In this newly created position, he will direct the company’s worldwide team of commercial real estate market analysts and will speak on macro economic issues in the commercial real estate market. And with the announcement coming only a day after the Federal Reserve dropped the federal funds rate from 4.25 percent to 3.5 percent, Torto certainly has plenty of economic issues on his plate already. Torto (pictured) told CPN that yesterday’s events will only have a minimal impact on commercial real estate initially and shows that the Fed is a vigorous fighter against the recession. Meanwhile, “Investors will be cautious but will continue to participate (in the market),” he said, adding that some investors are happy that credit crisis has driven out some competition, reducing the number of bids on properties and keeping prices realistic–something that was not seen in the first half of 2007. Torto added that he does not see this as the “Bernanke put,” and noted that Federal Reserve System chairman Ben Bernanke is just responding to make sure the U.S. economy does not go into a recession. “He’s been enormously tested by the market, and no matter what he does, he’s being criticized,” he said. “But I see it as a very strong advocacy of not going into a recession. He’s focused on keeping our financial systems stable, with stronger growth and lower inflation.” And today’s economic conditions are a whole different ballgame for commercial real estate, he pointed out. The financial market has been hit, but real estate fundamentals remain strong, especially with rising rental rates. This is unlike the recession of the early 1990s, when overbuilding and the savings and loan crisis pummeled the real estate industry. On the international side, he said that a European rate cut is unlikely, although there is some concern with a housing bubble in both the United Kingdom and Spain. He noted that there has been some discussion of a European subprime problem, but it has just been conversation in the market. Torto holds a Ph.D. in economics from Boston College, and is the author of four books and numerous articles on financial markets, real estate and tax policy. He was also a professor of economics & director of the McCormack Public Policy Institute at the University of Massachusetts for 25 years, and currently is an adjunct professor at Harvard University School of Design. Prior to his newly announced position, he worked for Wheaton Research, a real estate advisory and research organization that he co-founded with Bill Wheaton, Ph.D., in 1982. The company has been a CBRE subsidiary for the past 20 years.