I used the Spanish spelling of “revolution” because it sounds especially revolutionary.
Commercial real estate, like so many other industries, is built on relationships: between professionals, between service and client, and especially between the industry and its community.
Last Tuesday, a Boulder, Colorado commissioners’ meeting on the county’s oil and gas regulations was stricken by protests, disruptions, and even so-called “bullying” by opponents of the energy sector’s hydraulic fracturing process (a/k/a “fracking“).
As I discussed a while back, fracking–despite the public outcry over environmental and health risks–has emerged as a major economic stimulus for communities that sit above America’s shale gas plays. With increased interest from large energy companies comes elevated demand for industrial and other CRE development, plus an overall boost for the local economy (say proponents).
But fracking has its share of opponents. Proposing natural gas drilling in a community like Boulder is a little bit like opening a vegan tapas restaurant in Dead Horse, Alaska. In the last few months, there have been many instances of commercial and real estate interests colliding with community concerns. Each situation, of course, comes with slightly different challenges, so there’s rarely a clear strategy for a prospective investor or developer. It’s worth looking at the role of community dissent when it comes to real estate investment and development, since commercial decisions that are “legally approved” or “profitable” aren’t always backed by popular opinion.
Whatever economic and real estate benefits the energy sector may bring to Boulder County, it’s probably not worth the fight. In Boulder, after all, it’s not uncommon to face public intimidation for failing to recycle. God forbid you light a cigarette. (Trust me, I used to live in Boulder. My cigarette-smoking didn’t go over too well, nor did my fracking.)
The complications of a locally unpopular project boil down to one thing: money. Whether community opposition results in litigation, hearings, a delicate public-relations situation, building or transaction delays, boycotts, or any other complication, the extra expenditure of time and professional resources amount to a greater financial investment. Sometimes it’s worth it, as in the Pestronk Brothers’ fight against Philadelphia unions, through which they’ll eventually have a well-positioned, high-end multifamily property.
In other cases, it may not be worth the fight:
In Georgia, the town of Doraville’s proposed annexation of adjacent land has led to a public outcry over one property that will be joining the community: a gentlemen’s club. The uproar over this new resident, and fears that its presence will bring other unsavory establishments, may influence the town’s ordinances and commerce in the future. Here’s the story from WSB-TV in Atlanta:
But one Doraville resident admits, “It doesn’t bring the right crowd, but at the same time, it does bring profit to the city.” However seedy, strip clubs pay taxes. Still, their presence affects the character of the neighborhood and its ability to attract residents and new businesses. A lot of cities have reached something of a compromise: pressure adult entertainment to leave CBDs and move to outlying industrial districts.
When it comes to public opposition, some companies are willing to fight. Consider Wal-Mart (NYSE: WMT).
Despite petitions and other actions by community members (concerned about traffic, economic impact, and harm to small businesses), the mega-retailer has been known to push through developments anyway, knowing its size and prices will nonetheless draw customers. Since Wal-Marts are massive, typically stable tenants, many in the retail real estate sector would be happy to accommodate them. But sometimes, even a giant like Wal-Mart must back down.
These days, community organizations go on the offensive before a development or tenant has even been announced, as in the public opposition to zoning variances in Louisiana and Georgia. In these two cases, it seems, neighbors are willing to fight simply because there’s a possibility that a Wal-Mart will move in.
I wonder what their feelings are toward fracking?