Market Reports Also Fight Crime!

There has been a spat of recent break-ins at vacant industrial warehouses in the City of Industry. Thieves are stripping the copper from the walls and ceiling. This causes hundreds of thousands of dollars in damage. Not only is the monetary cost significant but the landlord has the additional headache of dealing with the police, fixing the problem and delaying any potential move-ins from a serious tenant. Crime is not an amenity.

It is also dangerous. The current in some of these buildings runs as high as 3000 amps (1 amp is enough to stop your heart, 3000 amps could set a person on fire).

When a break-in occurred at one of the larger listings we had in the City of Industry the police were able to apprehend the culprits but not before the damage was done.

To prevent this from happening in the future the police would need a list of vacant buildings since they are sitting ducks for copper bandits.

But where to find such information? And would it be available at regular intervals so new buildings could then be monitored by the police?

The answer is yes.

The market information that I gather includes an ever-growing list of newly vacant buildings. This information is now being used by law enforcement professionals in the apprehension of copper thieves.

Yet another value add service provided by Colliers Research.

MAPI Index falls to 21

From Supply & Demand Chain

Business Outlook Survey Offers Bleak Forecast as MAPI Index Hits Second Straight Historic Low
Manufacturers Alliance's composite index falls from 28 in December 2008 to 21 in March as manufacturing faces continued headwinds, companies respond to the sharp downturn
By Editorial Staff

Arlington, VA — April 16, 2009 — The already battered manufacturing base appears headed for further decline, as the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook, a leading indicator for the industrial sector, registered a drop to 21 from the previous historic low of 28 reported in the December 2008 report, the alliance reported today.

At this level, the index indicates that overall manufacturing activity is expected to contract over the next three to six months. The index is at its lowest level since the survey originated in March 1972.

The survey was conducted on a semi-annual basis from 1972 to 1991 before being conducted on a quarterly basis in 1991. It should be noted, however, that the index measures the direction of change rather than the absolute strength of activity in manufacturing.

The March 2009 survey marks the third consecutive quarterly reading below 50, the demarcation point between growth and contraction, and lies in stark contrast to an index of 57 just one year ago.

Prior to the recent string of sub-50 readings, the last time the MAPI index was below 50 was when it registered 40 in December 2001.

Maersk Line is Returning To Seattle

Globalization isn't easy, it is not without cost or without failure. If this trend continues there will be more than belt-tightening in the Inland Empire. Slow suffering followed by silence, the loneliness of protest.

Puget Sound:

Twenty-four years after leaving Seattle for Tacoma, ocean carrier Maersk Line is returning to the Port of Seattle’s Terminal 18 this spring.

The move is a victory for the Port of Seattle in another way as well, because the carrier simultaneously will be moving the service from the Port of Los Angeles, and focusing it in Seattle.

The reason for leaving Los Angeles is “avoiding potential congestion,” according to an earlier statement by Maersk.

The Danish carrier, which gained global recognition recently by fending off pirates off the coast of Somalia, is one of the largest in the world.

Maersk will be calling Seattle through an alliance with GMA-CGM, a French carrier. The service will include 13 vessels on the weekly service to Seattle, seven of them operated by Maersk.
The service will call at the Asian ports of Singapore, Hong Kong, Yantian and Shanghai, China, and Busan, Korea, starting May 14, according to an earlier release by Maersk.

The new service will come as a relief for the Port of Seattle, where cargo volume was down 25 percent in March, compared to a year before.

Port of Tacoma spokeswoman Tara Mattina downplayed the move, saying that Maersk cargo through Tacoma had been declining. She expects the last Maersk ship to be in Tacoma in the first week of June.

Port of Los Angeles spokeswoman Lori Kelman said the string that is moving is a “small fraction” of Maersk’s service there. She said the carrier will “bring in other services to compensate.”

Its Time - GGP Files For Bankrupcy

Reuters:

April 16 (Reuters) - General Growth Properties Inc GGP.N,the second-largest U.S. mall owner, filed for bankruptcyprotection on Thursday as the credit crisis claimed its biggestreal estate victim. The company has assets of $29.56 billion and total debts of $27.29 billion, according to its bankruptcy petition. General Growth has warned since November that it may have to seek
protection from its creditors because it was unable to refinance maturing mortgages.

The following is a list of the largest U.S. bankruptciessince 1980, according to court records and the websiteBankruptcyData.com:
COMPANY/YEAR TOTAL ASSETS
Lehman Brothers Holdings Inc (2008) $639,000,000,000
*WorldCom Inc (2002) 103,914,000,000
Enron Corp (2001) 63,392,000,000
Conseco Inc (2002) 61,392,000,000
Texaco Inc (1987) 35,892,000,000
Financial Corp of America (1988) 33,864,000,000
Refco Inc (2005) 33,333,172,000
Washington Mutual Inc (2008) 32,900,000,000
*Global Crossing Ltd (2002) 30,185,000,000
Pacific Gas and Electric Co (2001) 29,770,000,000
General Growth Properties Inc (2009) 29,560,000,000
*Lyondell Chemical Co (2009) 27,392,000,000
UAL Corp (2002) 25,197,000,000
Delta Air Lines Inc (2005) 21,801,000,000
Adelphia Communications Corp (2002) 21,499,000,000
MCorp (1989) 20,228,000,000
Mirant Corp (2003) 19,415,000,000
Delphi Corp (2005) 16,593,000,000

* - from court documents

Beige Book

From the Federal Reserve:


TWELFTH DISTRICT–SAN FRANCISCO

Economic activity in the Twelfth District continued to slow during the survey period of late February through early April, albeit with tentative signs of stabilization or a slower rate of decline evident in some sectors. Upward price pressures eased further, and upward wage pressures remained virtually nonexistent. Retailers reported generally sluggish sales and a continued shift towards less expensive items, and demand for services softened further.
Demand remained extremely weak for manufactured products on net, although slight firming was reported for information technology products. Demand held largely steady for agricultural producers but fell further for oil extractors. Activity in District housing markets stayed feeble, and demand for commercial real estate continued to decline. Contacts from financial institutions reported that overall loan demand weakened further and credit availability remained quite tight.

Wages and Prices

Upward pressures on prices eased further during the survey period, despite recent increases in oil prices. Other than oil, commodity prices in general remained largely stable or declined further. Vigorous discounting continued to hold down the final prices for a wide variety of retail items, and the prices of selected services fell during the survey period, most notably for transportation, lodging, and selected professional services such as accounting.

Upward wage pressures remained virtually nonexistent overall. Contacts in many sectors continued to report that they have frozen or cut wages and reduced benefit costs, for example by increasing employee copayments on medical expenses covered by employer health plans.
Unemployment rose further, and companies with open positions reported significant increases in the quantity and quality of job applicants, further reducing upward pressures on wages.

Retail Trade and Services

Retail sales remained very weak on net, with the exception of inexpensive necessities. Department stores and specialized retail stores saw continued dismal sales, with further declines noted in some cases. However, consumers’ focus on necessities, such as food and health products, prompted modest sales gains for some discount chains. Sales strengthened a bit further for grocers, and they and other retailers noted a pronounced demand shift from brand name to less expensive private-label products. Demand remained anemic for furniture, appliances, and electronic items. While demand for new automobiles continued to be feeble, sales strengthened
further for used vehicles, especially large pickups and SUVs. Unit sales of gasoline have firmed and were running slightly above their levels from 12 months earlier.

Demand for services fell further since the last survey period. Restaurants throughout the District continued to see their business drop, resulting in more layoffs and closures. Providers of health-care services saw further declines in activity. For providers of professional services such as accounting, business consulting, and legal services, demand continued to decline, and further
layoffs were noted. Demand for transportation services dropped substantially in recent months, with container traffic at ports reported to be down on the order of 20 percent compared with 12 months earlier. Travel activity in the District continued to fall: in Hawaii, visitor counts and spending remained down by double-digit amounts from12 months earlier, and contacts in California and Nevada also reported pronounced ongoing declines in tourist activity.

Manufacturing

District manufacturing activity remained weak overall during the survey period of late February through early April. Activity for producers of wood products continued to languish, with further curtailments in production and employment reported. Contacts in the metal fabrication industry continued to report very weak demand and extremely low levels of capacity utilization. New orders and sales of semiconductors and other information technology products firmed somewhat, causing inventories to fall, but the pace of sales remained well below the level from 12 months earlier. Production activity continued at high levels for aerospace manufacturers, although ongoing reductions in airline passenger and cargo capacity have started to cause order cancellations and delivery deferrals for new aircraft. Food manufacturers saw
further sales gains and continued to operate at high levels of capacity utilization.

Agriculture and Resource-related Industries Demand was largely unchanged for agricultural producers but weakened further for oil extractors. The pace of sales remained solid for assorted crops and livestock products. Supply conditions generally were favorable as costs fell further for fuel and other agricultural inputs, although drought conditions have prompted farmers to reduce planted acreage in some areas. Oil extractors reported further reductions in global demand and increases in inventories.

Real Estate and Construction

Housing market conditions in the District remained very weak on net despite sustained sales gains in some areas, and demand for commercial real estate fell further from already low levels. Substantial ongoing declines in home prices spurred in part by high rates of foreclosures have combined with low mortgage rates to increase affordability and cause a significant pickup in the pace of home sales in some areas. However, the overall level of new and existing home sales remained very low in most areas, as did construction activity for new homes.

Demand for commercial space continued to deteriorate, with some tenants requesting deferrals of lease payments amidst rising vacancy rates. Contacts reported that the lack of available credit has severely constrained construction activity and sales transactions for commercial real estate*.

*I wonder who the Fed contacts are

Financial Institutions

District banking contacts reported that lending activity and credit quality continued to weaken during the survey period. Demand for commercial and industrial loans fell further on net; some community banks reported a slight pickup, but the gains were held down by difficulties in securing secondary funding for large loan amounts. Bank lending standards remained very tight, with unusually stringent conditions imposed on many types of loans, and credit quality deteriorated further along with business and household balance sheets.

Cross Docking White paper

From Saddle Creek:

Some interesting findings:

Of those who have implemented cross-docking, 28 percent are veterans, having cross-docked for more than 10 years. Another 30 percent have been cross-docking for four to 10 years. However, the practice is still drawing new practitioners, as 32 percent of those who cross-dock have been operating a cross-dock for just one to three years.

Typically, cross-docks can be developed using a variety of strategies such as (but not limited to) the following arrangements:
• Either pre-picked to a customer order or bulk-picked to a pooling location to handle the "last-mile" shipment to the customer.
• Pre-picked orders to a less-than-truckload (LTL) carrier break-bulk facility from where the LTL carrier’s network is used.
• Pre-picked orders transferred to LTL through the use of a third-party warehouse facility to handle the cross-docking process.
• From multiple plants (deconsolidated) into a third-party cross-dock that, within hours, picks and consolidates all products from all plants into customer or route orders and then delivers.
• Consolidating LTL into truckload which reduces the number of deliveries to retail outlets.


Cross-docks generally can be divided into three levels of complexity:
• One-touch – Products are touched only once, as they are received and loaded outbound without being placed on the warehouse dock. This is highest velocity "load-as-you-go" and the focus is on cross-dock productivity.
• Two-touch – Products are received and staged on the dock then loaded outbound without being put into storage. The focus is on outbound load optimization and gaining transportation efficiencies.
• Multiple-touch – Products are received and staged on the dock, then reconfigured for shipment and loaded outbound directly from the warehouse dock. This method offers the greatest opportunity for customization and end-user value-add.


Cross-docking makes the most sense when:

• Current order cycles and traditional distribution methods cannot handle customer needs.
• Outdated distribution strategies and networks create extended cycle times and compromise shelf-life guarantees.
• Inefficient distribution networks create plant inefficiencies.
• Transportation networks become over-extended, creating unacceptable on-time performance rates at excessive cost.
• Distribution cost increases outpace sales growth.

Commercial Loans @ Smaller Banks

Article in Business Week on smaller banks with large commercial real estate exposure.

One more example of moral hazard, people loaning money that is not theirs have little incentive to watch over how it is spent. Especially during a rising asset bubble.

If vacancy rates rise, banks will roll over the loans instead of seizing the properties (because the properties cannot be sold).

Take a que from the S&L crisis: "A rolling loan carries no loss"

I thought this quote was pretty interesting

The missing piece to the commercial lending puzzle that's critical is whether—and in what form—securitization will return, says Ross. "We had a lot of [commercial mortgage-backed] securitization, and that's typically how banks [were able to hand off the loans]." he says. "To survive in real estate, you need an exit. I teach that to all my students."

April Article

SB Sun:

The Inland Empire industrial market has shown continued weakness in the first quarter of 2009. Over the past 12 months, the industrial vacancy rate for the Inland Empire has increased from about 8 percent to its current rate of 14.6 percent. Average asking rents have declined in response to rising vacancy rates, from $0.43 PSF per month last year to $0.37 PSF per month currently.

Over this same time period, industrial employment in the Inland Empire has been declining as well. According to the State Employment Development Department, between February 2008 and February 2009, the Trade, Transportation and Utilities sector has shed 22,600 jobs, construction employment has decreased by 23,400 jobs and the manufacturing sector has declined by 13,200 jobs. These industries are heavy users of industrial space and employment cuts in these sectors generally precede increases in the vacancy rate.

One of the drivers behind the rising unemployment rate and decreases in industrial demand has little to do with the local economy but is influenced more by national and global economies.
Over the past decade, the industrial base of the Inland Empire has dramatically increased as some of the largest and most modern warehouses and distribution centers in the world were constructed here.

The reason for this buildup is fairly simple: There were only two West Coast ports that could handle the flood of imported Asian goods, and both were located here in Southern California.

Right Shoring - Part 2

Yesterday we talked about why you might want to shrink your supply chain. Here are some ways to do just that.

Again from LM:

Menu of Right-Shoring Options and Opportunities

There is now an unprecedentedly high need to balance supply speed (service quality) against cost-effectiveness. In this multi-polar world—characterized by more risk, more exacting customer demands, and more economic hardships—what can companies do to "keep their balance?"

As noted earlier, one direction is right-shoring; or acknowledging that far-shore operations remain an essential part of your company's global strategy, but that far-shore decisions must be aligned (and potentially combined) with other options to form a single right-shoring strategy.

Those other options include:

Operational hedging:
This involves managing risks with adjustments to manufacturing, sourcing, and selling locations—creating flexibility in the supply chain and market-facing activities. For existing and new products, such flexibility can help mitigate the impact that large and long-term changes in dollar rates have on revenues and profits.

With existing products, manufacturing facilities can be located near the customer and in low-cost countries, with total landed cost calculations used to decide the percentage of total demand addressed at each manufacturing location. New products pose a different challenge. With the quality of innovation a strong point in the U.S., launching new and better products at a fast pace should be an ongoing focus for U.S. operations.

Early in a new product's life cycle, it is difficult to estimate demand, so the inherent service disadvantages associated with off-shore manufacturing make this a risky proposition. A more practical approach may be to manufacture certain new products locally at first and then shift production to low-cost countries as demand stabilizes.

Near-shoring:
Across North America, near-shoring has become more popular since the signing of NAFTA and CAFTA. With wages in most Central American member countries at one-third the level of U.S. wages, sourcing from CAFTA countries could offer a particularly significant cost and proximity advantage.

Split-shoring:
Keeping manufacturing processes that are not too labor intensive on-shore is another strategy to consider. For example, the final assembly of foreign-made mobile phone batteries, circuits, cameras, and outer casings could be completed closer to the customer, thereby shortening the time needed to respond to market changes and simplifying customization to meet changing consumer demands.

Peak-load manufacturing:
Manufacturing operations could be divided so that some of a company's products and components are manufactured domestically, with others produced overseas. For example, local manufacturing capabilities might be used to accommodate surges in demand while off-shore venues are deployed for longer or more stable production runs.

Figure 2 describes how these various strategies might be assessed to create a single approach that weighs total landed cost differential against demand variability and stock-out costs.

Right Shoring is Key to High Performance

A right-shoring strategy—one that cost-effectively meets consumer demands for the right price and the right quality—must be supported with sound information for decision making. This highlights the need for econometric models that can help a company continually evaluate the impact of changing scenarios, such as changes in crude oil prices, shifts in the value of the U.S. dollar, or the influx of European and Asian competitors onto U.S. soil.

All of these scenarios are more or less inevitable. It is the degree of change that is nearly impossible to predict; and this is why right-shoring—the ability to understand and adjust manufacturing and distribution options—is so valuable. In today's economy, companies must be able to rapidly reshape their business approaches as macro-economic factors change.

Right Shoring?

Another nail in the coffin of the IE if this catches on. We depend on Asian imports, and if they stop coming, we stop growing. This is a pretty long article, so I will break it up into 2 pieces. This first piece talks about why it might not be the best practice to do all of your manufacturing overseas.

From LM:

Right shoring: A flexible strategy for tough times

Although far-shore operations can often equate to cost-savings, a better plan is right-shoring, or combining on-shore, near-shore, and far-shore operations into a single, flexible, low-cost, and service-centric approach to supply chain and logistics management. Here is a menu of right-shoring options and opportunities.

By Amit Gupta & Ganesan Ramachandran, Accenture -- Logistics Management, 4/1/2009

Controlling manufacturing and distribution costs is doubly important in a down economy. However, if a company's cost-reduction efforts are too aggressive, the result could be alienated or disenfranchised customers—customers that may not return when the economy rebounds. This is potentially the case for companies that over-committed themselves to off-shoring—relocating production (and, concurrently, some warehousing) operations to far-shore, "low-cost" countries.

Are we implying that far-shoring is no longer a viable strategy? Not at all. The point is that worldwide economic problems and changes have drastically altered the cost dynamics associated with manufacturing and distribution network strategies. So much so, in fact, that companies may no longer assume that far-shore operations are less expensive in the long term. After all, companies that are over-invested in far-shore operations are the ones most at risk as crude oil prices fluctuate wildly, labor costs rise in developing countries, and the value of the U.S. dollar shifts unpredictably.

Too much reliance on far-shore operations also makes it more difficult to meet surges in consumer demand. Quality of service—which is always linked to cost of service—could suffer, which is the last thing you need when the economic chips are down. Perhaps more than ever, companies need a low-risk supply chain strategy that balances supply speed and cost effectiveness. Think of this strategy as "right-shoring" or the formulation of flexible, customer-centric strategies that base a product's manufacturing and distribution locations on total landed cost.

Over the next few pages we're going to cover today's most significant influencers of total landed cost as well as a variety of right-shoring approaches that can be considered, evaluated, and blended to ensure flexible, low-cost operations that also meet customer needs.

The True Costs of Far-Shore Operations

Looking back, the genesis of off-shoring sourcing, production, and distribution was a dramatic labor cost differential between U.S. workforces and workforces in countries such as China and India. However, after a decade, it's becoming evident that the potential for cost advantage derived solely from far-shore operations is waning.

Consider that even though labor costs in China are far lower than those in the United States, productivity levels in China are also lower. As a result, savings are not nearly so substantial when the two countries' "labor cost per unit output" is compared. China's double-digit salary increases are also reducing the gap in labor costs.

Still, labor costs are hardly the only factor. Logistics and transportation costs, exchange rates, fluctuating customer demands, and the cost of quality can quickly erode the advantages of a near-sighted, far-shore operating strategy.

Transportation Costs

Crude oil prices have fluctuated wildly over the last year. Transportation costs, therefore, have been equally unknowable. Factor in higher costs of warehousing and inventory holding, in-transit insurance/security, duties, customs clearance and documentation, and your potential logistics costs are significantly higher and a great deal less predictable than just a few years ago.

When transportation cost is a significant portion of a product's total landed cost (such as with a low-cost, heavyweight product), the impact is even higher. Tesla Motors—producer of a zero-emissions, electric-powered sports car—recognized this fact and recently moved assembly of battery packs from Thailand to San Carlos, Calif., near its headquarters. Thailand's low labor costs no longer offset the high costs of shipping 1,000-pound battery packs across the Pacific.

Fluctuating Customer Demand

One of the biggest challenges faced by today's companies is responding quickly to fluctuating customer demand. Demanding consumers are nothing new; but advancements made in recent years have shortened most product lifecycles. This is true for technology-intensive products such as mobile phones, computers, cars, and electronic gadgets, as well as apparel, sports equipment and fashion accessories—some of the products most commonly produced off-shore.

Stiff competition is part of the same daunting equation: When manufacturing takes place 10,000 miles from the consumer, the time needed to counter competitive moves increases significantly, potentially resulting in lost market share and customer trust. Steps to counter this (e.g. by increasing inventory) only heighten total landed cost.

With a typical transit lead time of 30 days from an Asian country to the U.S., a shipload of containers could even become partially obsolete, as needed changes to packaging, promotion, or even the product itself arise before a shipment arrives. To supplement the surges in demand for a particular item, air freighting becomes more of a necessity, which can further raise costs

Cost of Quality

Historically, the U.S. labor force has produced the highest number of innovations, quality products, and products that meet the needs of the largest consumer base in the world. In fact, Toyota leadership had stated that an educated and ethical U.S. workforce was one of the main reasons the company set up a manufacturing base in the state of Mississippi.

While the quality of products coming out of low-cost countries cannot be termed poor, many products rank low in differentiation and innovation. And although off-shore manufacturers work hard to ensure consistent quality, slipups still happen. Recent difficulties faced by pet food companies, toy companies, and software companies point to the potentially fatal cost of low quality. A major issue with product quality can have horrendous consequences.

Partly cloudy with a 71 percent chance of job cuts

From Newsweek:

WASHINGTON — Nearly three-quarters of CEOs in the Business Roundtable expect to cut workers in the next six months as sales sag, a survey showed Tuesday, suggesting further deterioration in the job market is likely at least through the end of the year.

Seventy-one percent of CEOs said they expected to cut workers during the next six months, up from 60% when the quarterly survey was last conducted in November and the highest percentage since the survey began at the end of 2002, the Business Roundtable said. Twenty-one percent expected to keep payrolls unchanged; 7% said they planned to add workers.

The survey of 100 CEOs of the nation's largest companies was conducted March 16-March 27.

The grim outlook for the job market comes as CEOs anticipate lower sales and business investment over the next six months. Sixty-seven percent said they expected their sales to drop, up from 45% in the last survey, while 66% said their company would likely cut spending on equipment and other capital goods, up from 52%.

The CEOs on average expected U.S. gross domestic product, the widest measure of the nation's economic output, to fall 1.9% in 2009 after rising 1.1% in 2008. If realized, it would be the first annual drop in GDP since 1991 and the biggest since 1982, when the economy was in a deep recession. In November, the CEOs expected 2009 GDP to be flat

Pulse Of The Ports Part 2

It is now on-line

Of particular interest was the Alameda Corridor Transportation Authority which sees a possible recovery in traffic by 2015.

Around the same time that the Panama Canal becomes competitive again.

This got my wheels spinning about discretionary cargo and its impact on the IE.

We really need that discretionary cargo more than any other industrial market in Southern California and if we do not get it, the market will never return.

The IE would then be like an old-timey fishing town where everyone reminisces about the cod returning.

Once the discretionary cargo goes someplace else, forget about it. Because its gone.

Businesses Printing Money: Could It Work For The IE?

To keep money local, a bunch of local businesses have decided to print "money" that acts like a collective coupon for the people that accept it. Like a chip at a casino or Disney Dollars.

It is not supported by the local government, so you cannot pay your property tax or gas bill with them (as I was hoping when I read the article). If this was the case, you could have some pretty interesting developments with fiat money, local currencies and inflation rates. Problems the US government got rid of when it stopped letting the individual states print their own money

From USA Today:


By Marisol Bello, USA TODAY

A small but growing number of cash-strapped communities are printing their own money.

Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.

"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."

About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.

Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.

During the Depression, local governments, businesses and individuals issued currency, known as scrip, to keep commerce flowing when bank closings led to a cash shortage.

By law, local money may not resemble federal bills or be promoted as legal tender of the United States, says Claudia Dickens of the Bureau of Engraving and Printing.

"We print the real thing," she says.

The IRS gets its share. When someone pays for goods or services with local money, the income to the business is taxable, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. "It's not a way to avoid income taxes, or we'd all be paying in Detroit dollars," he says.

Pittsboro, N.C., is reviving the Plenty, a defunct local currency created in 2002. It is being printed in denominations of $1, $5, $20 and $50. A local bank will exchange $9 for $10 worth of Plenty.

"We're a wiped-out small town in America," says Lyle Estill, president of Piedmont Biofuels, which accepts the Plenty. "This will strengthen the local economy. ... The nice thing about the Plenty is that it can't leave here."

East Inland Empire First Quarter 2009 Industrial Report

This report is now available. Here it is.

The vacancy rate increased to 23%. This was not only due to construction completions (as was the case in the past) but also tenants shrinking their space.

Big move outs for the quarter include:
405,515 Sf In Moreno Valley (Lowes)
435,860 SF In Rialto (MGA Entertainment)

There were about 50 new listings this quarter that were vacant representing a potential net absorption hit of -2.9 million SF.

There were about 30 listings that were occupied but available, representing around 1 million SF.

So for the quarter, almost 4 million SF of space hit the market, a little less than what happened last quarter.

Since Q1, 2007 15.5 million SF of space has become available and since then the vacancy rate has almost tripled - from 8% in Q1 2007 to 23% in Q1 2009.

I am not really sure you can call it a crash if it lasts 2 (plus) years. A crash conjures up images of a sudden collision and eventually people getting on with their lives. This sinking feeling that I am left with on this market is the only life I can remember.

Despite the spectere of increasing availability some major deals did occur.

517,346 SF In Redlands (Kenco Logistics)
407,948 SF In Moreno Valley (O'Reilly Auto Parts)
289,683 SF In Redlands (Performance Team Logistics)
100,900 SF In Redlands (Madcatz)

Firms still want to come to the East Inland Empire. Just not in the numbers that supported the massive overbuilding that is now our legacy.

We really need consumers to import more goods and we really need the ports of LA / Long Beach to remain competitive long term. We sink or swim on the global economy, and until recently (2007) it seemed like a safe bet.

West Inland Empire Industrial First Quarter 2009 Report

I think this may be the earliest my reports have come out.

The link above works, so you can access the report that way.

Or you can click this link if you are lazy.

Rents dropped by a lot this quarter. I think landlords are starting to get the message. Seeing a lot of teaser rates listed and some brokers are adding concessions right in the comments of the listings.

That is making it a lot harder for the TBD (to be determined) listings to get my attention. There is nothing to be learned from a TBD listing.

Brokers have an idea of what it takes to move a building, because buildings are moving. 3.8 million SF moved this quarter, the most quarterly activity in the last 4 quarters.

Of the 37 buildings that leased this quarter, only 4 were listed as TBD. By contrast, 3 leased that had teaser rates.

Big deal right?

Well, 28% of the listings on the market now are TBD as compared to only 4% of the listings that have teaser rates.

So it looks like teaser rates work.

This is especially true when you look at the effective rent for these two buildings. While the TBD buildings do have a higher initial rental rate, there is still a lot of free rent involved and over the term of the lease it all about evens out.

Except that TBD buildings have stayed on the market longer.

With price conscious tenants, it may be better to list a low price and get bodies in the buildings instead of hiding behind a TBD listing and hope for 2007 rents (with 2009 concessions).

If I was a landlord, I think I would prefer 1/2 rent to no rent.

But I do not get to decide these things.

The market will.

And as is often the case in matters like these, if you cannot adapt and change to the times, the punishment will be swift, harsh and without prejudice.

Ernst & Young - Global Supply Chain Report

Here is the 16 page report.

Interesting ways to improve your supply chain and how other professionals are dealing with the economic downturn.

From the report:

It may be a lot easier to get money out of your supply chain than out of your banker.

Ouch!