What lies ahead

Still smarting from the economic woes of 2009 and the previous year, businesses are tiptoeing ever so gingerly into 2010.

By most accounts, the worst that the two-year recession could dish out has passed -- or is in the process of passing.

At least that's what just about everybody is banking on. From President Barack Obama to the laid-off unskilled worker, the question is: Is that the case?

Ah, questions: As it turns out, they drape the murky entryway to 2010.

For example:

How will Boeing Co.'s new 787 plant, to be built in North Charleston by mid-2011, elevate the economy this year?

Will the uptick in area home sales stay the course once a federal subsidy expires? What if mortgage rates jump?

And the biggest question of all: Will the sky-high jobless rate start falling again? Put another way, will businesses start hiring again?

All good questions for 2010.

Banking

The banking business in 2010 still will be wringing out the lending excesses of the last decade, but most bankers are hopeful that 2010 will mark a small improvement over 2009.

'I think we're slightly past the bottom,' said Hugh Lane (pictured, right), president and chief executive officer of the Bank of South Carolina.

Describing the assessment by his bank's accountants, Lane said, 'What they expected was the banking industry was going to have more of the same: a lack of profits, still dealing with problem creditors, and everybody seems to be concerned about commercial real estate.'

One issue affecting all banks and shareholders is the mandate to replenish the ravaged coffers of the Federal Deposit Insurance Corp., the government entity that guarantees deposits for account holders at failed financial institutions. That means profits for FDIC-insured lenders will remain strained as a cut of their earnings will be steered that way. A $45 billion industry-wide assessment was due Thursday

and, as Lane noted, that funding resolved only 45 percent of the problem.

Tom Hood (pictured, left), CEO of First Financial Holdings Inc., said he hopes 'the folks in Washington sort of settle down' after changing regulations.

Hood said meaningful top-down foreclosure relief needs to be a top priority in restoring the home sales business, which supports everything from banks to retailers.

'We still see that as a key piece to the expansion of the economy in the future — that is, getting people stabilized in their homes,' Hood said, adding that he expects more foreclosures.

But Hood said residential sales could get a sustained boost (even after the federal tax credit for buyers expires in April), because interest rates on mortgages and most other consumer loans are not likely to move up too quickly. He also pointed out a paradox: Tough times make it difficult for borrowers to qualify for credit.

Hood and Lane agreed that Charleston is in better shape than most markets. The Boeing Co. expansion, for instance, should start to yield dividends for the economy this year.

By John McDermott

Medical

On the medical front, two new hospitals will breathe to life in the Lowcountry, and both of them are in Mount Pleasant.

East Cooper Medical Center (pictured, top), which recently dropped 'regional' from its name, plans to open its 140-bed, $153 million facility near Interstate 526 and U.S. Highway 17 by April 1. Farther north on U.S. 17, Roper St. Francis Healthcare (pictured, bottom) plans to open a $143 million, 85-bed hospital Nov. 1.

'Competition makes everyone better, and certainly we take that seriously and will continue to enhance our quality,' East Cooper Chief Executive Janie Sinacore-Jaberg said.

Over in Berkeley County, it's a different diagnosis for two proposed hospitals.

One health care provider thinks competition will be a hindrance, not a help, and it's going to court to try to prove it.

Trident Health System filed a lawsuit challenging the state Department of Health and Environmental Control's decision to issue certificates of need to both hospitals in 2009. Roper, which maintains that the county can support both hospitals, countersued to protect its position.

'We had no choice but to do the same,' said Roper spokeswoman Tricia Crimminger.

'It's a defensive move to receive equal consideration under the law.'

The case has been assigned to an administrative law court judge, but no court date has been set.

'It could be a very long and expensive battle,' Crimminger said. 'If Trident drops their lawsuit, we would gladly drop ours. We support both projects.'

Trident is holding steadfast to its stance that Berkeley needs just one hospital.

'We are continuing with the administrative and legal processes, and our position has not changed,' Trident spokeswoman Julie Plummer

said.

Roper wants to build a 50-bed hospital near Carnes Crossroads near Goose Creek. Trident wants to expand an existing facility in Moncks Corner with its own 50-bed facility.

By Warren Wise

Unemployment

While other industries and economic indexes can look forward to a rosier 2010, uncertainty looms over unemployment.

With consumers hesitant to spend and small-business owners reluctant to hire, South Carolina economists don't expect the state's unemployment rate to fall back into the comfortable single-digit range for months.

The statewide rate, which stayed above 10 percent during the first 11 months of 2009, rose to its highest point of 12.3 percent in November.

University of South Carolina economist Doug Woodward predicts the rate will average 11.2 percent this year. It will take years, however, for South Carolina employers to hire the same number of workers they had on staff before the boom.

Economist Don Schunk of Coastal Carolina University, who specializes in labor research, expects the rate to peak at 13.5 percent in the spring or early summer before receding.

The future unemployment rate increase, in that sense, will be based on a technicality. But unemployed workers will still face a tough market until companies begin to hire again.

Charleston's economy could see some businesses begin to take on more workers because of their ties to tourism, defense contracting and medical sectors, which have held up reasonably well throughout the recession.

And much of the Lowcountry's job market recovery hangs on Boeing's 3,800-worker expansion in North Charleston.

This year could bring a flurry of announcements from suppliers who need a South Carolina presence to support the 787 Dreamliner assembly line. It also should give a bump to construction business as work begins on Boeing's new factory.

But Schunk cautioned that the Boeing effect by itself won't trigger widespread job growth.

'These small businesses aren't going to start hiring just because they feel good about Boeing,' he said. 'They'll hire when they start to see improvements in their sales.'

Instead, Schunk puts that indicator's health in the hands of consumers. Workers who made it through the recession with a job finally could gain a sense of security and, as a result, open up their wallets, he said.

'If there was a burst of consumer confidence among folks earning income, they can help us pull out of this sooner.'

Job market recovery, on the other hand, could be hampered by major financial market hang-ups or if the real estate market begins to worsen.

By Katy Stech

Port

State Ports Authority Chief Executive Jim Newsome calls recovering container volume, which fell to 40 percent below the highs set in 2005, his top priority as he enters his first full calendar year at the helm of the maritime agency.

That said, he expects a gradual process, akin to turning around a big cargo ship.

'There aren't a lot of quick fixes,' the former shipping company executive said recently.

Pointing to the so-called V-shaped recovery some optimists are hoping for in the new year, he said, 'I'm certainly not an economist, but that's not going to happen.'

In the meantime, Newsome is gearing his agency to diversify its cargo base by seeking to attract more of the type of bulky freight that can't be shipped in containers.

SPA officials also may consider refocusing the agency's North Charleston Terminal away from containers and potentially expanding the BMW car-handling operations on the site.

The long-awaited redevelopment of Union Pier, the south end, at least, also will be on the to-do list for 2010, a year when residents will see the Celebrity Mercury and Carnival Cruise's Fantasy tied up there on a regular basis. The SPA and city will release the findings of a new master plan for the cruise passenger terminal and the port's surrounding waterfront property.

The plan calls for a cruise embarkation facility that fits into Charleston's historic backdrop, meets federal security requirements, reduces cruise-related impacts on traffic and infrastructure, increases public access to the waterfront, and develops future purposes for the rest of Union Pier.

Also, the SPA will continue moving forward on construction of its new container terminal on the former Navy base property and planning a joint terminal with the Georgia Ports Authority on the Savannah River in Jasper County.

Newsome also said he hopes to get funding for dredging the underused Port of Georgetown so that it can retain and attract business.

By Allyson Bird

Real estate

The modest momentum that the Charleston real estate market generated last year could carry over into 2010, but local experts agree that any recovery is at the mercy of broader economic forces.

Market conditions improved during the final months of 2009 with an extended and expanded federal tax credit for buyers, historically low interest rates and more affordable home prices. Led by the Boeing Co. aircraft plant, a handful of major economic development announcements signal that the Lowcountry's economy, overall, could be heading toward a recovery, and that renewed optimism has spilled over into the real estate business.

Pam Bishop of Carolina One Real Estate, for example, said she saw buyers emerge as the region's confidence picked up, with 'all signs pointing to good things in the future.'

But the remaining challenges — a steady onslaught of foreclosures, lingering unemployment woes and a near-record number of homes for sale in the region — hang over the local real estate market recovery, casting uncertainty over its sustainability.

'I don't think anybody's thinking it's going to be that much better than last year, but there's some optimism,' said Phillip Ford, executive vice president of the Charleston Trident Home Builders Association.

Patty Scarafile, who heads Carolina One Real Estate, the region's largest residential real estate firm, predicted that the region's home sales volume will increase about 10 percent and prices will slide 5 percent. She agreed with many national economists that mortgage interest rates likely will remain low.

Nationally, home sales are expected to rise 10.8 percent and the median closing price is expected to rise 3.6 percent, according to the National Association of Realtors. The unanswered question is what will happen to the market when the federal tax credit expires in the spring.

The region's commercial real estate market also hinges on consumer confidence, loan availability and job growth, said Jeremy Willits, a commercial real estate agent with Grubb & Ellis|WRS and 2010 president of the Charleston Trident Association of Realtors.

If state lawmakers reform current property tax rules by changing so-called point of sale assessments, that could boost sales activity, he added. Right now, income-producing properties and second homes are reassessed for tax purposes — usually at a higher value — when sold, which the industry says has scared off buyers.

Willits said the region's office market likely will continue to stabilize next year. Vacancies have climbed in the past two years as many employers, including businesses that feed off the real estate industry, closed or cut payrolls.

'We're probably bumping and scraping along the bottom, and we'll likely be here for a couple of quarters,' he said.

Ford of the local home builders group has heard about the same swings from his membership.

'You see them and they say they're doing well, but then you see them the next time and it's, ‘Oh, the phone stopped ringing,' ' he said.

By Katy Stech

Tourism

The most noticeable change for the tourism industry for 2010 will weigh in at 14 million pounds and dock once a week at the foot of Market Street in Charleston.

For the first time in Charleston history, a cruise ship will call year-round beginning in May.

The 2,056-passenger Carnival Fantasy alone will more than double the number of pleasure excursions in the city this year. The hope for the hospitality trade is that the ship will draw more first-time tourists who may decide to return later for an extended visit.

The issue of air service also will likely command attention in 2010. In the wake of discount carrier AirTran's departure, the Charleston County Aviation Authority launched its first-ever incentives program to court new airlines and services.

By December, authority chairman David Jennings said the agency was 'getting close' in its discussions with potential new carriers.

As for visitor numbers in general, Charleston Convention and Visitors Bureau executive director Helen Hill said she is staying focused on group business, which took a hard hit in 2009.

With direct marketing to regional cities and other nontraditional campaigns, her staff brought in more first-time visitors, since attraction attendance proved strong for the year. That's an indicator, she explained, because 'if you've been to Charleston 15 times, you don't go to the same things.'

Hill also hopes to see growth as future employees at the new Boeing Dreamliner assembly line scout out prospective homes.

'Those people have to stay in hotels and eat at restaurants,' she said.

As for specific attractions, state-run Patriots Point Naval and Maritime Museum starts a new year with a new dilemma: where to exhibit its famed World War II destroyer Laffey when it returns from dry dock repairs. More challenging, it also must figure out how to repay the state loan that paid for the work and whether it can afford to keep its remaining three warships.

Across the harbor at the S.C. Aquarium, officials will say a reluctant goodbye this March to the Penguin Planet exhibit, which was credited with record attendance numbers in 2009. Next up: an albino alligator.

By John McDermott

Retail

Most retailers probably have two words for the year that just passed: Good riddance.

Brutal economic conditions pinched sales, lowered inventories and relegated many big and small retailers to the dust bin. So they probably are asking themselves if the new year will increase their fortunes.

Discount chains fared well during the recession, and customers have come to expect big markdowns. Will the trend continue? Job growth will be key.

'We expect the beginning of 2010 to be more of the same with consumers remaining cautious about the economy,' said Scott Krugman,

spokesman for the National Retail Federation. 'We think there should be a major improvement in the unemployment rate before consumers feel confident again about spending.'

Krugman said it's interesting that the financial sector is coming back first in the recession.

'We need to see credit loosen up for businesses,' he said. 'Once that happens, you will see new jobs being created. That will, in turn, give more confidence to the consumer. Inventories will remain low until consumers demonstrate the ability to start spending again. We are holding out hope that we will see some good improvement in the second half of the year.'

As for the auto industry, which took a drubbing in 2009, sales are projected to rebound. The Ann Arbor, Mich.-based Center for Automotive Research said last month

that sales could rise 20 percent in 2010, buoyed by pent-up demand and stronger credit markets, as the industry starts recovering from its worst year in almost three decades.

Deliveries will climb to 12.4 million from 10.3 million in 2008, it said.

'No recession has ever been this long in terms of cumulative job loss,' said Sean McAlinden,

the center's chief economist. 'Will we ever see the 17 million sales levels we saw a few years ago? No, that was truly an automotive sales bubble.'

By Warren Wise