Outlook for Houston economy: Getting better, slowly

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Bustling global trade and a healthy U.S. economy could accelerate Houston’s economic recovery next year, but a sluggish comeback in the oil industry could impede the region’s job growth, a local economist said on Friday.

If the Energy Department is correct in its projection that crude prices will stay below $55 a barrel in 2018, then the Houston area could add around 45,500 jobs next year, about 15,000 shy of a normal year, as oil companies struggle to make money and expand payrolls, according to a new forecast by the Greater Houston Partnership.

“Maybe about half of the industry is profitable. The other half is losing money,” said Patrick Jankowski, the GHP’s senior vice president of research, during a presentation in the Galleria area. “We will not see significant hiring again in the oil and gas industry until it’s profitable again.”

Jankowski said it appears the worst of the oil industry’s layoffs are over, but continued job cuts will probably offset any job gains in the oil business next year.

Construction companies will likely shed jobs in 2018 as work slows significantly in commercial real estate and the petrochemical industry. The value of construction work for chemical plants could fall by almost 12 percent next year, according to Sugar Land research firm Industrial Info Resources.

GHP projected job growth for local manufacturing, retail, transportation, financial services, real estate, professional services, health care and several other industries. But the energy industry, it said, won’t gain or lose jobs in 2018 – an improvement over 2015 and 2016, when oil companies shed tens of thousands of jobs.

Still, stagnation in the oil business could be a big drag on the local economy. The oil and gas industry makes up about a third of Houston’s economy – without even factoring in how much money energy workers spend in local stores and restaurants.

But strong economic growth around the world will keep Houston growing. The global economy could expand at a healthy clip of 3 percent next year, according to Oxford Economics.

The city has the nation’s top port in foreign tonnage, as well as roughly 450,000 jobs and almost 5,000 local companies that depend on the sales of goods overseas, according to GHP. On average, the region’s publicly traded firms get 30 percent of their revenue from international sales.

Almost a fifth of Houston’s gross domestic product is tied to exports, Jankowski said. And low oil prices have boosted growth in emerging markets around the world, said Adam Karson, Chevron Corp.’s senior economist.

“We’ve seen growth momentum in the fourth quarter and going into 2018,” Karson said.

GHP’s forecast assumes U.S. employers will add 200,000 jobs each month on average next year; that oil prices won’t spike because of rising tension in oil-producing nations; and that Houston doesn’t get hit with another natural disaster like Hurricane Harvey.

Houston’s oil explorers currently employ about 85,700 workers, down from 114,600 in late 2014, before companies shed tens of thousands in the worst oil downturn in a generation. Oil field equipment makers companies cut almost 20,000 jobs, about half the sector’s workforce, the GHP said.

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Greystar and Its Choice to Use Amazon Hub Lockers

Greystar’s decision in October to use Amazon Hub for its residents’ package deliveries created a stir among apartment operators. Mixed reactions included that Amazon’s product was unproven and insufficient and the world’s largest online retailer could soon come to dominate deliveries (if it hasn’t already) and therefore there was merit to go with the leader.

AvalonBay, Equity Residential and Bozzuto also signed agreements with Amazon.

Greystar’s Senior Managing Director of Advantage Solutions, Gardner Rees, recently sat down with unitsMagazine last month to discuss his company’s decision.

Q: What package locker systems did you use prior to signing on with Amazon Hub? Will Greystar remove any existing lockers and replace them with Amazon Hub, or will only Hub be used going forward?
Greystar has a very diverse portfolio with various owners having installed locker systems from most of the major providers. We have selected Amazon as our preferred provider since they offer one of the most comprehensive solutions in the space. If a client has installed an alternative locker system prior to the Amazon Hub becoming available, it will be their decision if they would like to replace it with a Hub.

Q: How long will it take for Amazon to begin installing these lockers throughout your communities?
We currently have commitments from approximately 125 communities to install the Hub by Amazon locker systems over the next several months. In 2018, we plan to continue offering this locker system opportunity to all Greystar owned and managed communities.

Q: Can you approximate how many packages are delivered on average per day to Greystar properties?
During the past few years, we have seen a steady increase in the number of packages being delivered to our residents and as of today, based on industry averages, we estimate that a typical 300-unit apartment community receives upwards of 45 packages per day, and even higher volumes during November and December. We expect the volume to continue to increase in 2018 based on current e-commerce trends.

Q: What ratio of lockers to number of residents or apartment homes will Greystar install?
The first six-foot section has 42 compartments and each additional three-foot section would add 23 compartments. Amazon recommends the base unit would satisfy the demand for an average 100-unit property (with an additional three-foot section for each additional 50 units) based on average delivery volume. Geographic trends may cause variations to these recommendations.

Q: In your opinion, what were the primary benefits of choosing the Amazon Hub solution?
The Amazon lockers declutters apartment lobbies and storage rooms by allowing deliveries to be loaded directly into the package lockers and be picked up by residents 24/7, saving time for both residents and staff. The Hub by Amazon makes the package delivery process convenient and seamless for the resident—another way for Greystar to improve the resident’s experience.

Q: Will Greystar consider charging its residents a fee for the convenience of having Amazon Hub in the community?
With increased online shopping, our industry is finding new ways to accommodate our customers’ needs. We believe The Hub is a convenient amenity and we will offer the service at no additional charge to our residents.

Q: To this point, has working with Amazon been a smooth process?
We are very excited to have the opportunity to work with Amazon and they have done a great job of making the process easy for our team.

Read the original article here.


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New Tax Plan, December 2017

Amazon Reinforces Importance of Brick-and-Mortar Presence, Leaps Into Grocery Business With Acquisition of Whole Foods

New tax laws hold modest change for investment real estate. The highly anticipated tax reform legislation making its way through Congress could be signed into law by President Trump this month. For real estate investors, the final versions appear relatively benign, with only modest changes to key provisions such as the 1031 tax-deferred exchange, mortgage interest deductibility and asset depreciation. The two versions, one from the House of Representatives and one from the Senate, have yet to be reconciled, but neither version holds any significant changes that will radically impact real estate in-vestment.

Finalization of tax rules to reduce uncertainty. Over the last year, elevated uncertainty generated by the range of potential government policy changes, including tax laws, caused many investors to move to the sidelines. A more cautious outlook pervaded the industry as investors awaited clarity on taxes, fiscal policy and a change in Federal Reserve leadership. This perspective could begin to ease as the implications of the new tax laws firm up and investors better understand how the new rules will affect their investments. With both versions of the tax plan offering generous tax cuts for corporations and pass-through entities such as Limited Liability Companies (LLCs), investors may see the new tax laws as an opportunity to reconfigure their portfolios. The new tax structure will apply to 2018 income for tax filings in 2019.

To read the full report from Marcus & Millichap, please click here.

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The 10 Best and Worst U.S. Cities to Retire in 2017

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Some clients may turn to you for guidance on the best places to retire in the U.S., but it may not be the sunny golfing spots that typically come to mind. In fact, many of the top cities to retire are in the cold Northeast, including Pittsburgh, Boston and Providence, R.I., according to BankRate.com’s latest ranking.

The website reviewed 50 metro areas according to several factors that would be appealing to retirees, such as local weather, cost of living, crime rate, health care quality and affordability, taxes, cultural vitality and public transportation. The ranking even takes into consideration the percentage of the local population ages 65 or older.

“Oftentimes people focus their retirement search on warm weather locations, but there are many important factors to weigh when it comes to where to live in your later years,” Bankrate.com analyst Taylor Tepper said in a statement. “Sun and sand are great, but finding high-quality medical care and an affordable cost of living are important, too.”

Read the original article here.

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States Challenge Eviction Laws and Policies

The eviction process has long since been a focus of tenants’ rights activists and state and local policymakers. It has witnessed renewed fervor following the release of Matthew Desmond’s book, “Evicted: Poverty and Profit in the American City.” As Desmond continues a tour to promote his work, NAA expects the issue of evictions to remain a priority in many local jurisdictions around the country and strives to work with affiliates as they engage in the discussion.

In light of the recent activity on this issue, NAA has collected examples of the resulting challenges to current eviction laws and policies that allow owners to screen residents.

According to Desmond, there could be disparate impact implications from evictions, having a disproportionate negative impact on protected individuals under the federal Fair Housing Act. The American Civil Liberties Union (ACLU) of Washington emphasized this point, even citing Desmond, in their complaint against a property owner in federal court earlier this year. The ACLU’s case is the first to challenge apartment owners’ screening policies related to evictions. The ACLU argues that an owner should not have the ability to deny housing indiscriminately based on any prior eviction proceedings of the resident. The ACLU takes issue with the idea that owners can deny housing based on filings or proceedings that did not result in a judgment favorable to the owner.

In an ACLU press release, Sandra Park, Senior Attorney with the ACLU Women’s Rights Project said, “These unjust screening policies mean that doors are slammed shut for families based on a prior landlord’s decision to file an eviction case, not the applicant’s own actions. Qualified tenants should not be blacklisted because of an eviction case that lacked merit or is several years old.”

While the case recently settled, the Washington Multi-Family Housing Association (WMFHA) continues to monitor the situation. The ACLU continues to look for another such case, ultimately with the goal of setting legal precedent on this issue.

New York
In August, New York City became the first market in the country to guarantee legal representation to renters in housing court. The law was signed by Mayor Bill de Blasio to support any low-income resident (those whose income is 200 percent of the federal poverty level or less) who is facing eviction. According to CityLab, renters’ rights advocates believe legal counsel could help residents navigate the legal system, negotiating to keep the eviction off the resident’s record, or assist in finding alternative housing.

In addition to the above, the New York City Council is considering a pending bill that would put the onus on tenant screening companies to obtain so much information about a housing court case as to make it impossible to report the data. The bill is likely to die in committee during the session ending in December.

NAA affiliate, Associated Builders and Owners of Greater New York, Inc. (ABO), raised concerns about both pieces of legislation. During the screening process, ABO argues that the prospective resident always has the ability to get out in front of a potential issue by explaining to the owner if applicant feels he or she was in the right or that there were extenuating circumstances. The association continues to monitor the Council’s work on multifamily housing issues.

New Jersey
In August, U.S. Senator Cory Booker (D-NJ) introduced S.1758, the Tenant Protection Act. Similar to the lawsuit in the state of Washington, the Senator is concerned about reported “blacklisting” of applicants. The legislation amends the Fair Credit Reporting Act (FCRA) to enact more stringent regulations on reporting agencies and would impact screening companies’ access to resident information.

Specifically, the legislation does the following:

  • Prohibits consumer reports from including information from a landlord-tenant court or other housing court record unless the case to which the record pertains resulted in a judgment of possession in favor of the landlord.
  • Requires any person who takes an adverse action with respect to a consumer report to provide the consumer with a free copy of the report.
  • Allows the consumer to seek damages against a person for creating reports with inaccurate housing court records.
  • Requires the Consumer Financial Protection-centralized clearinghouse though which consumer may annually obtain a copy of their report from each “tenant rating agency” (a nationwide specialty consumer reporting agency as defined by FCRA) free of charge and correct any inaccuracies.
  • Requires the CFPB to con duct a study and submit to Congress a report on tenant rating agencies and their compliance under FCRA.

In addition to the federal bill, state-level legislation remains pending in New Jersey that mirrors many of the provisions of Senator Booker’s legislation. New Jersey bill S-3037, is sponsored by state Senators Codey and Rice (D-Essex).

The New Jersey Apartment Association (NJAA) has an ongoing dialogue with Senator Booker on this issue. Additionally, NAA and NMHC met with Senator’s staff in D.C. to support NJAA’s efforts. Senator Booker remains committed to the issue and is slated to participate in a public policy forum with Matthew Desmond this year.

North Carolina
In 2016, Desmond served as keynote speaker for a housing awareness meeting in Denver that was hosted by tenants’ rights groups. During the meeting, the group outlined 28 possible legislative proposals that would be unfavorable to the industry, including eviction law revisions.

Tenant activists in Denver continue to challenge local policy on this issue. In September of this year, advocacy groups aggressively targeted attorneys who handle evictions in the city, as part of Renters’ Week of Action. In addition to a planned protest at the offices of one particular firm, the advocates sent this letter, claiming that in 2016, 45,000 evictions were filed in Colorado, and while many owners have legal representation in eviction cases, few residents do. They argue that given its work, the firm should support Denver’s proposal for a tenants’ legal defense fund.

The protests coincide with the release of a study by the Colorado Coalition for the Homeless and the Colorado Center on Law and Policy, titled, Facing Eviction Alone. The study’s findings form the basis for the arguments made by Denver’s advocates and mirror Desmond’s disparate impact claims. The report states that, “Physical addresses of defendants suggest that evictions disproportionately affect neighborhoods with more people of color and areas of rapid growth and gentrification.”

The Colorado Apartment Association and Apartment Association of Metro Denver are actively engaged in the issue.

In Charlotte, Desmond discussed Evicted before a crowd of 700 on Sept. 27 as part of an event sponsored by a broad cross section of community groups, including the Greater Charlotte Apartment Association (GCAA). There is active local discussion and research taking place around the problem of a lack of economic mobility in Charlotte, and the event was in high demand.

Desmond’s presentation focused on his research and referenced several passages from his book, including his idea that evictions have a disproportionate impact of on certain populations. One key takeaway from Desmond’s remarks was his finding that only 25 percent of households who are eligible for housing subsidy receive it, because of a chronic underfunding of subsidy programs. He called for much more public money to be devoted to voucher programs.

A panel discussion following Desmond’s talk featured local stakeholders who spoke about evictions and homelessness in Charlotte. The panel included long-time GCAA leader and member of the NAA Board of Directors Scott Wilkerson, Chief Investment Officer at Gingko Residential. Gingko focuses on workforce housing, specifically for those earning between 60 percent and 80 percent of area median income. Gingko’s units have an average rent of $827.

“If our residents don’t pay our rent, it’s the landlord that doesn’t get paid that month,” he said. “The city still wants taxes, we’ve got to pay insurance, payroll — a simple fast eviction in North Carolina and Charlotte takes about two months. The landlord then loses about two months’ rent.” Other panelists included representatives from Legal Aid – covering the eviction court processes and lack of counsel for lessees – and the Salvation Army who suggested widespread reluctance of landlords to accept households with evictions, including those with portable vouchers.

GCAA is now working with community leaders to process the implications of Desmond’s talk. The University of North Carolina at Charlotte has authored two related in-depth pieces (with a third one expected shortly) about the process and implications of evictions, including Charlotte-Mecklenburg Part 1: An Introduction to Evictions in Charlotte-Mecklenburg. One immediate result of the Desmond talk is a call for better lessee education on legal rights and responsibilities through a partnership between Legal Aid and Crisis Assistance Ministry. Other strategies include decreasing the impact of evictions on lessees, better case management, and affordable housing/better income opportunities.

In September, Philadelphia Mayor Jim Kenney signed an executive order establishing a task force to address what the city views as an “evictions crisis.” The group includes 27 members who are appointed by the Mayor and have experience in housing, landlord-tenant matters, legal services and other related fields.

The group is tasked with:

  • Developing a clear understanding of the Philadelphia eviction landscape, including who is impacted by evictions, documenting the eviction process, and current services and policies.
  • Determining best practices, identifying gaps, and supporting the development and implementation of a comprehensive plan to prevent evictions and reduce the deleterious effects of eviction in Philadelphia.
  • Identifying additional funding streams to support actions and activities recommended by the taskforce.
  • Producing a concise report of actionable recommendations for reducing eviction and other related findings.

The Mayor’s task force builds upon increased engagement by the City on this issue. Earlier in 2017, the City Council allocated $400,000 for an eviction defense fund for low income renters, while the Department of Planning and Development allocated an additional $100,000. For its part, last year the Pennsylvania Apartment Association East (PAA East) presented testimony during the Philadelphia City Council’s hearings, led by Councilmember Helen Gym, on the city’s evictions crisis.

“Eviction is a necessary last resort tool for rental owners to assure responsible and efficient property operations,” said PAA East, Government Affairs Director, Christine Young-Gertz. “The more difficult the evictions process becomes, the fewer apartments will be available. Rental owners will have to be increasingly more selective of residents in the screening process to avoid the financial hardship that inevitably results from restrictions on evictions.”

PAA East remains actively engaged. The association is currently collaborating with a coalition of real estate organizations in Philadelphia to address concerns with the Mayor’s task force.

Now What?
NAA expects the issue of evictions to remain a priority in many local jurisdictions around the country. Adding to the local coverage of the issue, Desmond is currently engaged in a cross-country tour to promote the work. The locations for his tour dates may be good indicators of where eviction policy may gain prominence next.

NAA continues to work with its affiliates as they engage in the discussion. To that end, NAA is developing several resources to assist with local advocacy efforts. Some of those are available now and linked below, including resources on crisis communications in the event of protests. Other resources will be added soon.

The following resources are available now:

  • Legal Assistance Program (Amicus/Friend of the Court Brief Program)
  • Industry Mobilization Fund (Member log-in required)
  • Crisis Communications – Addressing Protests and Protestors
  • Eviction-Specific Talking Points
  • General Affordability and Demand Talking Points

Read the original article here.

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Ten-X Says CRE Property Prices Decline for Seventh Straight Month

The commercial real estate sector remained in the doldrums in November, with nationwide commercial pricing edging down by 0.1% — the seventh consecutive month of contraction for the index, according to the latest research from Ten-X. November pricing data suggests that investors are increasingly cautious about both CRE fundamentals and property values one year after a presidential election that introduced major uncertainty to U.S. policy and prompted an increase in interest rates.

The pricing gauge is now a meager 1.5% higher than its year-ago level, the weakest pace of growth in this cycle.

Ten-X Chief Economist Peter Muoio says, “The U.S. presidential election is a year behind us, but the events of intervening months have done nothing to alleviate investors’ wariness. Instead, the Ten-X CRE Nowcast’s annual growth rate continues to reach new lows. Pessimism about fundamentals, a policy environment in a constant state of flux, and impending interest rate hikes are all adversely affecting commercial real estate, and the market’s outlook at this stage is wary.”

Read the original article here.

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Real Estate power players split on cityʼs chances to win Amazon HQ

Stephen Ross would, perhaps, have the most to gain if Amazon chose New York for its next headquarters.

After the e-commerce juggernaut issued a request for proposals from interested municipalities, the city floated four potential landing spots. The first location, with the biggest pool of potential employees and the most available office space, was Midtown West and Hudson Yards, the new live-work-play neighborhood being constructed by Ross’s Related Companies on the Far West Side, was the crown jewel.

Still, the billionaire developer isn’t holding his breath.

“I don’t think New York has a chance of winning,” Ross said during an all-star panel hosted by the NYU Schack Institute last week.

Convened during the institute’s annual Conference on Capital Markets, the so-called “Golden Apple” panel consisted of a justifiably proclaimed “Mount Rushmore of New York City Real Estate,” including Ross, Rudin Management chief executive Bill Rudin, Forest City Ratner president and CEO MaryAnne Gilmartin and RXR Realty chairman and CEO Scott Rechler.

More money, more problems

During the conversation, which began with tax policy and wrapped up with the growing specter of terrorism, Ross argued that New York had done enough to distinguish itself from other big cities hoping to attract Amazon, particularly the likes of Newark, which offered $8 billion in tax abatement.
New York left tax rebates out of its proposals, hoping to avoid an outright bidding exchange with other competitors, but state officials said it would be willing to negotiate privately.

“Amazon is leaving Seattle because they don’t want to be competing so much for the jobs that they’re looking for and the cost of doing business from that standpoint,” Ross said. “In New York, the cost of doing business is so great and they’re not offering that much. Other cities … it’s important for them and they’re offering incentives like you wouldn’t believe.”

The panel was split on the city’s prospects of landing Amazon.

Gilmartin agreed that the economics of the situation make a New York headquarters for Amazon “difficult to imagine.”

She acknowledged the potential for her company’s portfolio — which includes the MetroTech center in downtown Brooklyn as well as several properties in the Pacific Park area around the Barclays Center — Gilmartin said the arrival of a major employer such as Amazon would benefit the entire city.

“Rising tides raise all boats,” she said. “It doesn’t matter much to me whether they end up at Pacific Park, whether they end up at the (Brooklyn Navy Yard) or whether they end up in Midtown because it’s good for New York.”

Big Apple, bigger opportunities

Rudin, on the other hand, said he was confident in New York’s ability to win over Amazon, comparing the collective efforts of business, government and educational institutions in the city’s bid to the efforts that went into the successful campaign for Super Bowl XLVIII and the less successful 2012 Olympics bid.

“There is obviously a cost factor, but when you weigh that against the talent pool, the educational institutions that are involved in this … there’s an infrastructure already in place here to provide the workforce for Amazon and all the other companies that want to come here,” he said. “And that’s our strength, that’s going to overcome some of our cost differentiations.”

Rechler, who has worked with Gov. Andrew Cuomo, previously as a commissioner of the Port Authority and now as a board member of the Metropolitan Transit Authority, said the state is ready to roll up its sleeves in the Amazon fight.

“The state’s been clear, it’s not going to put out offers for unknown choices,” he said. “If Amazon comes back and says ‘I want one or two of these sites in New York,’ trust me, the state is going to put a very, very robust package out.”

Rechler said the Amazon race embodies a greater challenge for the city: appealing to the best minds the world has to offer. “It’s a war for talent,” he said.

Like Rudin, Rechler said the city’s biggest selling point is its workforce. He also acknowledged that many of today’s market trends — the flood of premium rental housing; reimagined office layouts; retail innovations and new amenity offerings — cater to the wants of the world’s top university graduates.

Feeling SALTy about tax reform

More than the cost of doing business, the panelists counted the cost of living among the greatest hurdles to attracting major employers. Exacerbating that concern is the proposed elimination of the State and Local Tax, or SALT, deduction from the federal tax code, a move called for by Republicans in the U.S. House of Representatives.

“It has serious implications for this city and for young, urban professionals who want to live here and raise families here, so I am very concerned,” Gilmartin said. “I think this has the ability to really have a pretty seismic impact on the near-term prosperity of New York.”

The issue was such a concern that Gov. Cuomo, who was scheduled to give a keynote address at the event, had to cancel at the last minute to instead attempt to dissuade New York representatives from supporting the bill. Despite his efforts, the House passed the $1.5 trillion tax cut that afternoon.

Rudin said the tax reform package, as it stands, would both help and hurt real estate in New York if it became law. While caps on tax rebates would hurt homeowners throughout the Metropolitan region, lower tax rates on real estate investors and holders will benefit the industry.

“[The tax bill] is a very serious issue for us as well as other high-tax states, but as we’ve talked about before over the last 20 years, we’ll figure out a way to deal with that,” he said. “The state and the city will have to be more efficient and lower taxes and perhaps do things in a more efficient way to attract and retain people to come to our city.”

Ross said he doesn’t believe the elimination of the SALT deduction does not pose as much of a threat to New York as it did the last time it was discussed in 1986 when Connecticut had no state income tax and New Jersey had only a modest one. With a more level playing field in the region, Ross said the state has less at stake.

“Everybody says, ‘well, I wanna move to Florida,’ but if you think about it, the jobs aren’t there and I don’t think there are enough industries that can move to Florida,” he said. “So, I think that while it will have an impact, I don’t think it’ll be quite as great as we thought it might be in ’86.

“I’m not so sure this tax bill is going to get passed,” Ross added, contributing to the panel’s broadly held skepticism of the Republican-controlled Congress and White House.

Bridge and tunnel crowding

However, as the GOP tax plan picks up steam, Rechler said the biggest threat it poses to Greater New York is the elimination of money that was promised to pay for crucial infrastructural improvements, with those funds being redirected to offset the deep cuts to personal income and corporate taxes.

“One of the most critical things we need to do is reinvest in our 20th-century infrastructure so we can stay competitive for the 21st century,” he said. “A lot of that, we’re able to do without the federal government ,but the major projects, like the tunnel under the Hudson River, cannot be done without the federal government. So while this tax bill is happening, it might ultimately be putting a tax on our children to take care of that in the future.”

When asked what other issues keep them up at night, both Gilmartin and Rechler spoke about mass shootings and other acts of terror that seem to be ever more prevalent in the U.S. and around the world.

“It has nothing to do with real estate, nothing to do with business, it has to do with being a resident of a sanctuary city, being a woman and being a mother,” Gilmartin said of her biggest fear. “Thinking about the political environment and the need for us to remember the rule of law and things that are so basic and so fundamental that have come under challenge if not threat in the recent year.

“It’s disturbing, hopefully not destabilizing, but it does keep me up at night,” she said.

Ross said his concerns center on paradigm-shifting technology, such as autonomous cars, and how prepared his and other companies are to embrace it.

“Change is accelerating at a pace that we’ve never seen before and impacts are so much greater,” he said. “As you look out and see the impact of artificial intelligence and technology and where that’s leading us and we talk about changes and we need certain things repaired, like the subways. What’s that going to be in the long term?

Read the original article here.

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