Signs of life in commercial real estate

Summary

Marketplace: Signs of Life in Commercial Real Estate

Host: Kai Ryssdal
Release Date: December 19, 2024

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Economic Growth and Export Dynamics

Timestamp: 00:51 - 03:54

Kai Ryssdal opens the episode by highlighting the latest economic growth figures, where the Bureau of Economic Analysis reported a 3.1% annual GDP growth rate for the third quarter—a revision upward from previous estimates. This growth acceleration is largely attributed to a 10% increase in exports during July, August, and September compared to the prior quarter.

Stephanie Hughes delves into the specifics of these exports, emphasizing that the United States has seen a surge in capital goods, particularly semiconductors and information communication technology (ICT) products. She notes, “The components and the bits and the bobs and the machinery are moving in and out almost like respiration, like breathing” (02:12). Emily Blanchard from Dartmouth explains the symbiotic relationship between importing and exporting computer-related goods and services, suggesting that while the U.S. imports numerous computer parts, it also exports them alongside specialized engineering services.

However, Ishwar Prasad, a trade policy professor at Cornell, raises concerns about the sustainability of this export growth, pointing out that the global economic slowdown in other countries could dampen future demand. Ryan Monarch from Syracuse University adds that the anticipated tariffs by the Trump administration have led both companies and consumers to accelerate purchases ahead of potential price hikes, potentially undermining long-term export stability.

Tariffs and International Trade Tensions

Timestamp: 13:02 - 17:28

The discussion shifts to the looming threat of new tariffs under the incoming Trump administration. Ryssdal outlines the proposed tariffs: 10% on all imports, 25% on goods from Mexico and Canada, and an additional 10% on Chinese goods, cumulatively reaching 23% as seen in past implementations.

Jennifer Pack reports from Wuhan, China, where Su Ng Wu, an entrepreneur selling U.S.-based water treatment equipment, shares his struggles with increased costs due to tariffs. Su mentions, “I absorbed the additional costs some $290,000 between 2018 and 19” (14:20). The narrative highlights the retaliatory measures by China, including potential exemptions being temporary and the challenges faced by American exporters.

Cameron Johnson, a supply chains expert in Shanghai, observes that despite tariffs, China remains a primary manufacturing hub for high-end products. He notes a lack of significant reshoring to the U.S., as companies prefer maintaining production in China or shifting to other Southeast Asian countries.

Commercial Real Estate: A Resilient Sector

Timestamp: 03:54 - 07:26

Returning to the episode's central theme, Ryssdal discusses the current state of commercial real estate. He notes that office vacancy rates hover around 20%, especially in Class B buildings, while Class A properties in desirable locations like Fulton Market in Chicago, Uptown Dallas, and Downtown Miami are experiencing increased leasing activity and rising prices.

Thomas LaSalvi from Moody's Analytics attributes the vitality of these neighborhoods to their vibrant amenities, including restaurants, parks, and walkable environments. David Smith of Cushman and Wakefield emphasizes that the era of companies rapidly shedding office space is waning, with firms now focusing on expanding their portfolios to accommodate returning employees.

The conversation also touches on the shift from Class A to potentially revitalized Class B office spaces, which have benefitted from post-pandemic upgrades such as fitness centers and tenant lounges. However, Mike Watts from CBRE points out a cultural challenge: “You still have to work out in front of your co-workers, which you don't have to do at home” (06:03), underscoring the personal adjustments companies and employees must make in shared office environments.

Labor Market and Corporate Challenges

Timestamp: 04:26 - 05:12

Ryssdal briefly addresses Amazon's labor issues, where thousands of workers across seven fulfillment centers have gone on strike. Although Amazon claims that holiday deliveries will remain unaffected, the company is grappling with office space shortages as it plans to require corporate employees to return to the office full-time starting the new year. This situation is compounded by the broader office real estate challenges, where high vacancy rates persist despite some demand in premium locations.

Environmental Policies and Electric Vehicles (EVs)

Timestamp: 07:26 - 12:46

The EPA's recent decision to allow California and 11 other states to ban the sale of new gasoline-powered cars after 2035 serves as a segue into a discussion on Norway's EV adoption. Kari Lundgren from Bloomberg explains Norway's remarkable transition to EVs, now comprising 96% of new car sales. She attributes this success to consistent government policies, subsidies, and the nation's substantial oil wealth, which has been strategically reinvested into EV infrastructure.

Kari emphasizes the importance of government consensus in maintaining steady policies across different administrations, ensuring that EV incentives remain effective. She remarks, “Norway was a first mover here and there's always a cost to being a first mover, but now what you're seeing is that the price of the cars has come down a lot” (10:12). The conversation highlights that while fossil fuel cars still dominate the roads, Norway has managed to create an environment where EVs are both accessible and desirable, reducing resistance and making sustainable choices the norm.

Wall Street and Market Updates

Timestamp: 17:28 - 20:19

Ryssdal provides a stock market recap, noting that the Dow Jones Industrial Average ended its longest losing streak in 50 years by a narrow margin, while the NASDAQ and S&P 500 saw slight declines. Noteworthy movements include Micron Technology's significant drop of 16.2% due to weaker-than-expected fiscal guidance and Lennar Homebuilders experiencing a 5.2% decline after missing earnings expectations.

The 10-year Treasury yield rose to 4.56%, indicating shifts in bond markets that contrast with Fed Chair Jay Powell's positive outlook on the economy.

Restaurant Industry Trends

Timestamp: 20:45 - 23:13

Shifting focus to the restaurant sector, Ryssdal discusses the mixed performance within Darden Restaurants, which oversees brands like Olive Garden and Longhorn Steakhouse. While fine dining establishments have faced challenges due to consumers seeking more affordable options, casual dining brands have thrived. Andrew Sharpy from Alex Partners observes that customers are "trading down from fine dining to casual and casual to fast casual," driven by a desire for value without sacrificing quality.

Sam Okas from Nations Restaurant News supports this trend, noting that delivery services have become a critical factor for casual restaurants, allowing them to meet consumer demand without the overheads associated with luxury dining experiences.

Legal System and Insurance Concerns

Timestamp: 23:13 - 27:42

The episode delves into the rising phenomenon of nuclear verdicts—jury awards exceeding $10 million—highlighting a recent case where Exxon was ordered to pay $725 million to Paul Gill for developing blood cancer and secondary colon cancer due to workplace exposure. Chad Marzin from Penn State explains that these exorbitant verdicts are unsettling for the insurance industry, leading to increased premiums and reduced coverage options.

Rhonda Hurwitz from the American Property Casualty Insurance Association expresses concern over the unpredictability of these verdicts, while Matt Webb from the U.S. Chamber of Commerce attributes the surge to factors like lawyer advertising and increased litigation funding. The segment underscores a disconnect between insurance costs and actual safety data, exacerbating challenges for industries like trucking, where premiums have soared by 15-40% annually (26:10).

Government Shutdown and Debt Limit Debate

Timestamp: 27:42 - 29:02

In the episode's closing remarks, Ryssdal touches on the imminent threat of a government shutdown and the contentious debate surrounding the federal debt limit. President-elect Trump has advocated for eliminating the debt limit entirely, arguing that it would provide more flexibility for tax plans requiring significant borrowing. This stance is controversial, as the debt limit has traditionally been used by Congressional Republicans as a bargaining chip, often leading to political brinkmanship.

Ryssdal concludes by reflecting on the importance of a stable civil justice system and the broader economic implications of these political maneuvers, leaving listeners to anticipate potential developments in the coming days.

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Notable Quotes:

• Emily Blanchard on ICT exports: “The components and the bits and the bobs and the machinery are moving in and out almost like respiration, like breathing.” (02:12)
• Ishwar Prasad on export sustainability: “When the rest of the world is in crummy shape, economically speaking, the reality is that they're just not going to be able to buy much stuff or services from the U.S.**” (02:59)
• Kari Lundgren on Norway’s EV success: “Norway was a first mover here and there's always a cost to being a first mover, but now what you're seeing is that the price of the cars has come down a lot.” (10:12)
• Matt Webb on nuclear verdicts: “The rise in nuclear verdicts tracks with ad spending by lawyers and an increase in outside groups funding lawsuits as a form of investment.” (26:04)

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This episode of Marketplace provides a comprehensive overview of the current economic landscape, with a particular focus on commercial real estate's resilience amidst broader economic challenges. Through expert interviews and detailed analysis, it explores the interplay between international trade policies, labor dynamics, and consumer behavior, offering listeners a nuanced understanding of the factors shaping today's economy.

Transcript

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[Kai Rysdal]

Economic Growth A little commercial real estate and a steak dinner to top it off. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Thursday today. This one is the 19th of December. Good as always to have you along, everybody. Remember yesterday when Fed Chair Jay Powell said the economy's in a good place? This is part of what he was talking about. The Bureau of Economic Analysis let it be known this morning that the final update on gross domestic product showed an annual growth rate of 3.1% in the third quarter. That's an upward revision from the last estimate, and it means economic growth actually sped up in July, August and September compared to the previous three months. One driver of that growth? Exports. They were up nearly 10% over the past quarter. Marketplace's Stephanie Hughes gets us going with this look at what we're selling that the rest of the world is buying.

[Sponsor Announcer]

The US exported more of what are called capital goods in the third quarter. These are things that help businesses make other things, especially semiconductors and other ICT products, information communication technology, think computers and stuff. Emily Blanchard studies international economic policy at Dartmouth. She points out that the computing industry is highly dependent on global trade, and while the US does import a lot of computer parts, it exports them too. The components and the bits and the bobs and the machinery. This is all going in and out, almost like respiration, like breathing. Blanchard points out that the increase in computer related goods lines up with an increase in the export of computer related services. You sell the machine, but you also sell the engineers who can fly over.

[Co-Host]

And help you set up the product.

[Sponsor Announcer]

Or go and maintain the product. This export growth might not be sustainable, says Cornell trade policy professor Ishwar Prasad. He says the US Economy is doing really well, but other countries are stumbling.

[Co-Host]

When the rest of the world is in crummy shape, economically speaking. The reality is that they're just not going to be able to buy much stuff or services from the U.S. prasad.

[Sponsor Announcer]

Points out that imports also increased in the third quarter, underscoring the US Economy's.

[Co-Host]

Growth, especially because a lot of this growth has been driven by consumer demand. We are buying a lot more stuff from the rest of the world.

[Sponsor Announcer]

Those imports could be going up, says Syracuse economics professor Ryan Monarch, as both companies and consumers rush to buy things before anticipated tariffs from the Trump administration. Let's get it on the boat. Let's make our orders. Let's buy our car now before we have to pay more for the parts, right? Monarch says if more US Tariffs are imposed, he expects other countries will impose tariffs on our exports too, making our stuff more expensive, which means they might buy less of what we're selling in the future. I'm Stephanie Hughes for Marketplace.

[Kai Rysdal]

More on tariffs coming up a little later in the broadcast. On Wall street today, the Dow snapped its longest losing streak in 50 years, but just by the hair on its chinny chin chin. We will have the details when we do the numbers. The Marketplace organized labor macroeconomic word of the day today is leverage because just in time for the holiday crunch, Amazon is having some union troubles. Thousands of workers at seven of the company's fulfillment centers across the country have gone on strike. Amazon does say that it doesn't figure the strike is going to disrupt holiday deliveries, so there's that. Meanwhile, though, the company is facing an altogether different problem with its office workforce. Starting in the new year, corporate Amazon employees are supposed to return to the office five days a week, but Bloomberg is reporting the retailer is delaying some of those plans because it just doesn't have enough places for those people to go. And Amazon's not alone. Premium office space is once again at a premium. As Marketplace's Matt Levin reports, generally speaking.

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The office real estate market is still not good. Vacancy rates across all types of office space are around 20%, and higher tier properties are still struggling to find tenants. If your return to office pitch is, hey, you can cosplay last of us, in this vaguely post apocalyptic central business district, your employees are going to prefer Zoom, but for some very fancy offices in certain locations, yeah, demand is back.

[Kai Rysdal]

Fulton Market, West Loop, Chicago, Uptown Dallas, Downtown Miami.

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Thomas LaSalvi is head of commercial real estate at Moody's Analytics. What do those neighborhoods have in common?

[Kai Rysdal]

They have life. They have restaurants and bars. They have parks. They have walkability.

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The era of big companies rapidly shedding office space is just about over, says David Smith at Cushman and W.A. field. As return to office plans finally leave the planning stage.

[Kai Rysdal]

So now they're looking at their portfolio.

[Sponsor Announcer]

And saying, okay, we're going to need to expand over the next couple of years as we grow and as we bring people back. Leasing activity and prices were up this year in elite Class A offices in desirable areas. And it's not just being driven by big tech. The legal sector has actually been setting records in terms of leasing space the last couple of years. Smith says that's partly because law firms want young associates to spend more time getting face to face mentorship. Thing is, the number of shiny new Class A office buildings under construction is set to decline, which could bring some life back to Class B office buildings, especially those that have made post pandemic upgrades, says Mike Watts at cbre. That would be a fitness center, that would be a conference center, that would be a tenant lounge. One obstacle though, even if that fitness center is nicer, you still have to work out in front of your co workers, which you don't have to do at home. I'm Matt Levin for Marketplace.

[Kai Rysdal]

Don't know if you saw this yesterday, but the Environmental Protection Agency made some news. It decided to let California and 11 other states ban the sale of new gasoline powered cars after 2035. The clock of course, is running on the Biden administration's policies. But as the political fight over the EV sales plays out here, let us turn our eyes to Norway, shall we? Kari Lundgren wrote in Bloomberg the other day about how Norway is oh so very close to the only new cars being sold there being EVs. Kari, welcome to the program. Good to have you on.

[Co-Host]

Yeah, nice to be speaking with you.

[Kai Rysdal]

There are so many ways that EVs should not be working in Norway, right? It's cold, there's lots of hills. And yet somehow they've done it. How?

[Co-Host]

It's been an amazing journey. I mean, if you look back about a decade, there were only 3% of the cars on the road were EVs. And today it's close to 30% and about a 96% of sales are EVs. So that's been an incredible journey. I think we can if you looking back to sort of the mid-90s, there was actually a homegrown EV. It wasn't the greatest of EVs. It was boxy and awkward. But there were a lot of policies put in place at the time to sort of incentivize that car. Then fast forward, you started seeing other models being made available. And because those incentives had been in place since the mid-90s, they were actually price competitive with Fossil fuel models. And that was really key to them taking off in Norway.

[Kai Rysdal]

When you're driving around Oslo, first of all, do you drive an ev?

[Co-Host]

I don't, I don't actually have a car.

[Kai Rysdal]

All right, well, when you're walking around Oslo, what does it look like? I mean, are there, you know, high powered chargers all over the place and all that stuff? The infrastructure?

[Co-Host]

Yeah, I mean it's incredible. You see just the range of EVs on the road. I mean, all sorts of different Chinese models, Xpengs, NEOs, voyeurs and then, yeah, chargers. Chargers on pretty much every block of all sorts of different descriptions. Some are from the city, some are, you know, Tesla one, some are Circle K, like the one I read. Circle K, Circle K, yeah, Circle K, Circle K. They actually have been really pushing EV charging and it's interesting because initially, you know, the government did subsidize some of the charging network, but now, you know, they don't need to do that anymore because it's actually competitive for companies like Circle K and some of the other oil and gas companies to actually be installing the chargers.

[Kai Rysdal]

Since you mentioned oil and gas, Norway has, has a huge reserve, shall we say, of oil and gas buried underground, but also the money in the bank that helped here.

[Co-Host]

Right, yeah. You know, I think it's quite, it's an interesting aspect of this because I often get people saying, well, Norway had lots of money, so like, how is this relevant for the rest of the world? And I think what is important to realize that Norway was a first mover here and there's always a cost to being a first mover, but that, you know, this was expensive 10 years ago, but now what you're seeing is that the price of the cars has come down a lot. So where the money has helped has been sort of for building some of that infrastructure. You know, these people weren't actually paid to buy any. What happened is that through taxation it was more costly to buy a fossil fuel car. So people naturally chose an ev. But what has happened is that in the tax budget, normally the taxes you would have made off of having bringing in revenue from fossil fuel car, the registration tax, nor we can forego that because we have this, there's this excess of oil wealth.

[Kai Rysdal]

Right. You do mention in this piece that government policies have been remarkably consistent over the decades and that has really helped. And obviously I'm thinking here now of what's going on, going on in the States and how we are, you know, not consistent in our policies.

[Co-Host]

Well, and it's so Interesting. I mean, you mentioned earlier the oil wealth. And if I were to actually say to you, like, what sets Norway apart, I would say that that government consensus has been really critical because, like, you've had left leaning governments, you'd have had right leaning governments, and either way, they've basically kept these policies in place. So all that, like, you know it and it's a small place, I think. Yeah, there's been a bit of pride that we're a world leader or Norway's a world. I shouldn't say we, but Norway's a world leader in this. There's something about that as well.

[Kai Rysdal]

Yeah, we should say here, just on the way out, gas powered vehicles are still the majority of cars on the road over there and they're going to be there for a good long while.

[Co-Host]

Yes. And I think that is actually also has underpinned this policy in some ways, is that people aren't being forced to choose an ev, like they're being incentivized to do so. And if you're a farmer up in some of these valleys, you may have legitimate reasons for why you just don't think an EV makes sense for you, or you may be somebody who just loves driving a fossil fuel car. So I think that's been really also important in that it takes the air out of the balloon in terms of the controversy around it. People just are like, oh, I'm gonna get a car and it happens to be an ev. And I'm excited about that. It's like one of the guys in one of the shops I went into and he's like, you know, five years ago it was always a discussion about like, ooh, are you gonna buy an ev? That's gonna be kind of different. And now it's like the opposite. Oh, you're buying a fossil fuel car, that's kind of different. Why are you doing that? You have to explain yourself, you know. But as you say, there are still fossil fuel cars on the road and they will be for a while yet.

[Kai Rysdal]

Kari Lundgren at Bloomberg. Kari, thanks a bunch. Appreciate your time.

[Co-Host]

No worries. Thanks.

[Kai Rysdal]

The thing about tariffs, tariffs, as we know, President elect Trump's favored trade tactic, the thing about them is that they happen not in a vacuum. We obviously can't know exactly what the once and future President has in mind until he tells us. But at the moment, the offers on the table are for 10% tariffs on everything coming into this country from anywhere, 25% on goods from Mexico and Canada, and another 10% on top of the current duties on goods coming from China last time around in 2018, when then President Trump imposed tariffs on Chinese goods, China countered with tariffs of its own. See also tariffs not happening in a vacuum. This time it's going to be same same. And businesses in China that import from the United States are bracing themselves. Marketplace's Jennifer Pack reports from the central Chinese city of Wuhan.

[Co-Host]

At a restaurant in a Wuhan mall, I meet entrepreneur Su Ng Wu for dinner. Business has been good, he says, but not as good as it used to be. Su sells water treatment equipment for cooling systems, mostly from the US to Chinese data centers. He started the business in 2018, the year the first Trump administration imposed tariffs on Chinese exports.

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When Trump imposed extra tariffs on Chinese exports, China fought back by levying an extra 10% tariffs on American exports, so the total tariff rate for us became 23%.

[Co-Host]

He says he absorbed the additional costs some $290,000 between 2018 and 19.

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Today the counter terrorists remain, but the Chinese government also has a policy to exempt some firms. We applied and we were exempted from the extra 10% duty.

[Co-Host]

But that exemption might not last. Last month, President elect Trump made headlines when he said he will impose another round of tariffs, an extra 10% on all Chinese exports once he gets into office. China's Foreign Ministry reacted by saying no one wins in a trade war. Then Chinese Vice Minister of Foreign Affairs Hua Chunying posted a video on the social media platform X.

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You cannot protect the data in this type of export.

[Co-Host]

China, it said, would be ready for whatever happens. What cannot kill you will only make you stronger. There followed a list of China's great modern achievements, from its first supercomputer in 1983 to its own satellite system. Today, Cameron Johnson is a supply chains expert based in Shanghai with the consultancy Tidal Wave Solutions. Johnson says in 2018, one of then President Trump's stated goals in imposing tariffs was to bring manufacturing back to the US but so far there's really no.

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Reshoring whatsoever to the US he says.

[Co-Host]

If you want high end products and lots of them, China is still the place to make them. Though some Chinese manufacturers have also opened a factory site elsewhere.

[Sponsor Announcer]

Often it's in Southeast Asia, perhaps Vietnam, Thailand, Malaysia.

[Co-Host]

Meanwhile, he says Chinese counterterrorifs have hurt firms selling American products in China by making them more expensive, and European and.

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Other Asian companies took market share from them.

[Co-Host]

Entrepreneur Su Ngwu says he started selling US Equipment because Chinese goods couldn't match their quality.

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Many Chinese people also believed that American products were the best and wanted them.

[Co-Host]

But not if prices go up because of tariffs or anything else, su says. Already his American suppliers have increased prices twice because of inflation. In the US.

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I absorb the extra cost because my Chinese clients won't. All I can do is take a cut in profits. So I've been importing less from the US and looking for substitutes from the domestic market.

[Co-Host]

And are some of those Chinese substitutes possibly copying Americans and designs? I ask. Possibly, he says. In Wuhan, I'm Jennifer Pack from Marketplace.

[Kai Rysdal]

Coming up, the jury rendered a verdict.

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In his favor for $725 million.

[Kai Rysdal]

That is real money. But first, let's do the numbers. Dow industrials picked up 15 points today. Less than a tenth of 1% finished at 42,342. Did the blue chips. The NASDAQ down 19 points, a tenth percent. 19,003 72. The S&P 500 gave back 5 points, just shy of a tenth percent 5,867 there. Micron technology tumbled 16.2% today after the chipmaker issued weaker than expected guidance for its fiscal second quarter. Homebuilder Lennar gave back 5.2% after posting fourth quarter earnings that missed expectations. The firm said high mortgage rates limited its sales. Toll Brothers off 1 1/2 percent. Bonds fell. Yield on the 10 year T note rose to 4.56%. Take that, Jay Powell. You're listening to Market.

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[Kai Rysdal]

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[Kai Rysdal]

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[Co-Host]

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[Kai Rysdal]

This is Marketplace. I'm Kai Rysdal. If you've been to an Olive Garden lately or a Longhorn Steakhouse, Ruth's Chris Steakhouse, Cheddar's or the Capital Grill, Darden restaurants would like to thank you because they have had a good couple of months. Sales were up 6% in Darden's second quarter, but that is an overall number. At its more casual brands, things were good at its more fine ish dining establishments, though not so which, as it turns out, most things do can tell us a little something about this economy. Marketplace's Samantha Fields is on it.

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At the Capital Grill, you can get.

[Co-Host]

A filet mignon or a dry aged.

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New York strip steak for about $60. Or there's always the porcini rubbed bone in ribeye for 80 at Longhorn Steakhouse, meanwhile, you can get a filet or a New York strip for around $30 these days. Andrew Sharpy at Alex Partners says more people seem to be opting for the latter. Longhorn It's a good quality steak in the minds of the consumer at a reasonable price. It's not inexpensive, but it's not overly expensive either. Sam Okas at Nations Restaurant News says 2024 has been a year of people looking for deals and value. And when it comes to eating out, customers are trading down. Trading down from fine dining to casual and casual to fast casual casual dining brands. I think are really benefiting from people who still want a high quality experience. They still want a great meal, but they don't want to spend as much money. A lot of companies don't want their employees to spend as much money these days either. And Sharpie at Alex Partners says that has posed another challenge for expensive restaurants. You know, the business traveler drives a lot of the higher end finer dining. And as folks are being told to be mindful of their expenses, that's creating some headwinds in fine dining. Casual restaurants have another advantage over fancier ones these days, too. Steven Sagor at Columbia Business School says that's delivery. Delivery has become a force in restaurants.

[Kai Rysdal]

And you see it much more frequently in more modest priced restaurants, more casual.

[Sponsor Announcer]

Restaurants than you do in luxury restaurants. Because if you're going to spend $60 or $80 on a steak, you probably want the nice tablecloth and the ambiance to go with it. I'm Samantha Fields for Market.

[Kai Rysdal]

Saw this in a publication called Reinsurance News the other day. Reinsurance, of course, is the industry that insures insurance companies. It's a way for those primary insurers to lay off a bit of their risk in case of big claims. Anyway, Reinsurance News is reporting that a division of Lloyd's over in London, one of the insurance biggies has launched a new index to track global personal injury awards. And in point of fact, the size of jury awards in personal injury cases here is up quite a bit. As Marketplace's Sabri Benishore reports.

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Paul Gill worked as a mechanic for an oil company in the 70s. He would use gasoline as a cleaning material, came into contact with it a lot. As a result of his exposure to benzene in the gasoline as well as.

[Kai Rysdal]

From other sources, he developed a blood cancer.

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Patrick Weigel is one of Gil's attorneys. Gil had to get a stem cell transplant and go on immunosuppressant drugs. He developed a secondary colon cancer as a result of the immunosuppressive treatment and he's currently undergoing chemotherapy. Gill sued Exxon and won, and the jury rendered a verdict in his favor for $725 million. Exxon is appealing. Verdicts like this often fall on insurers, and insurers have a term to describe them. Nuclear. Nuclear verdicts are typically defined by those in the insurance industry as those verdicts which exceed $10 million. Chad Marzin is a professor of business law at Penn State. There's also a related term known as a thermonuclear verdict, which involves jury verdicts in excess of $100 million. The size of such verdicts has been growing. The average compensation awarded by juries for personal injury increased around 250% between 2009 and 2019, according to the Swiss Re Institute. In 2023, there were 89 verdicts of more than $10 million, 27 of them more than $100 million. That's a record, according to Marathon Strategies. This is making insurers increasingly nervous. Our civil justice system should be predictable, stable, efficient, and these verdicts are not predictable. Rhonda Hurwitz is senior director for the American Property Casualty Insurance Association. She says these mammoth verdicts are often not driven by punitive damages, but rather for compensation for pain and suffering, things that are very hard to quantify. We're not saying that if there is a legitimate injury that they shouldn't have their ability to receive compensation. Matt Webb is senior vice president for legal reform policy at the U.S. chamber of Commerce. What the concern is, though, is that when you look at verdicts in the nuclear category, there's not really any rational basis for where the numbers are coming from. I mean, literally numbers are being picked out of thin air. He and insurers argue the rise in nuclear verdicts tracks with ad spending by lawyers and an increase in outside groups funding lawsuits as a form of investment. Others point to rising anti corporate sentiment. Lawyers counter the high amounts reflect the value juries place on pain and suffering in life. Florida attorney Kuri Padic has won multiple jury awards of well over $100 million. But our founding fathers guaranteed the right.

[Kai Rysdal]

To trial by jury of our peers.

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Because the rich and powerful can't control a jury.

[Kai Rysdal]

It is an expression of the will of the people.

[Sponsor Announcer]

Patrick Weigel, the attorney in the Exxon case, says insurers concerns are a PR campaign. So obviously the insurance industry has an interest in trying to do whatever they can to denigrate significant jury verdicts. But appropriate or not, the growth in massive jury awards has had consequences. Insurers are covering less and premiums are going up. Dan Murray is with the American Transportation Research Institute. He says trucking has borne the brunt of this, with premiums rising 15, 30, 40% a year in some cases, total.

[Kai Rysdal]

Disconnection between insurance costs and safety data. It's sort of the Wild west out there.

[Sponsor Announcer]

Numerous trucking bankruptcies, he says, cite increasing insurance costs in New York. I'm Sabri Benishore for Marketplace.

[Kai Rysdal]

This final note on the way out today, there may or may not be, by the time you hear this, a deal in Congress to avoid a government shutdown that looms tomorrow come midnight. But a word here about something President Elect Trump has injected into the debate the federal debt limit. Trump said he wants it lifted now, no doubt because his tax plans will call for borrowing trillions more dollars over the next decade or so. And come January, Republicans will be in charge and thus responsible. Trump said in various interviews today he would like to see the debt limit done away with once and for all. That is interesting because regular listeners to this program will know that the debt limit and the accompanying threat of default is used regularly by congressional Republicans as a political weapon. John Buckley, John Gordon, Noya Carr, Nayantha Parker, Amanda Petra and Stephanie Sieck are the Marketplace editing staff. Amir Babawe is the Managing editor and I'm Kyle Rysdal. We will see you tomorrow, everybody. This is apm. You turn to Marketplace for up to the minute news for stories that show you the connections between global events and your personal economy. And you're not alone. Marketplace is the most widely consumed business and economic news program in the country. We're proud to make fact based journalism freely accessible and Marketplace investors make it all possible. Your year end donation today will make a real difference in our nonprofit newsroom and in the lives of millions of Marketplace listeners every single day. So please contribute what you can [e-mail] donate.