Commercial Real Estate Finance

Posts Tagged ‘developers’

Once again, we’re excited to feature a guest post from our friends at Integra Realty Resources! From their own commercial real estate blog, IRR on Real Estate, here is IRR Senior Analyst Robin Brady to discuss strategies to navigate the complex, post-recession real estate market. Many thanks to IRR and Robin Brady for the contribution!

Risky Business: 3 Pain Points for Commercial Real Estate Developers

Over the last couple years, the development market has returned to fundamentals. The wounds of the downturn are still fresh, and investors, developers, and banks are more cautious, putting their money behind only what looks like a sure thing. As a result, we’re seeing more tenant-driven development and less speculative development. For example, in the Boise area, we have seen two significant projects break ground in the last year: Eighth and Main (a high-rise office building) and Village at Meridian (a retail lifestyle center). Both projects were over 75 percent pre-leased prior to going vertical. We’re also seeing a lot of owner-user product being developed, such as automotive dealerships.

Speculative, capital-driven projects that don’t fit an existing market need are just one risk that developers should avoid. As more developers return to fundamentals, here are three ways projects can go wrong and how to avoid them.

1. Misreading the market. Never assume that there’s more demand for your proposal than there actually is or act as if the trends from the last couple years will last indefinitely. Pursue projects driven by a market need rather than one pushed forward by capital in search of a return. Before starting a project, know exactly what you’re going to build based on your target market. Know who the users (buyers or tenants) will be, what rent or price level they can pay, and what design features they want. Know your competition, not just vacancy rates but also how much new product is coming to market. And, while this might sound self-serving, do a market study to get a critical, objective look at your project’s potential absorption rates and rent levels to get a clear sense of the project’s feasibility. Read the rest of this entry »

I don’t know about you, but I voted for the Deloreans…

See our previous polls here.

Today we have videos touching on a variety of asset types, including hospitality, office, retail, and medical office properties.

Let’s start with hospitality. Here, a somewhat subdued Jim Cramer discusses investment in lodging companies and speaks to Monty Bennett, chairman and CEO of Ashford Hospitality Trust (NYSE: AHT):
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Allen Smith (Prudential Real Estate Investors), Neil Bluhm (Walton Street Capital), and Steve LeBlanc (Teacher Retirement System of Texas) discuss the challenges and opportunities in the current commercial real estate market:

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This week, we asked you, Are casino developers risking over-saturation in the Mid-Atlantic region?

Here’s what you said…

As always, thanks for taking our poll. You can see all of our previous polls here!

As I’ve discussed from time to time, culture is a major factor when investing in, developing, or operating commercial properties. The ways in which people congregate, work and live are shaped by their buildings and dwellings. But these properties are impacted equally by social tendencies, as the New York Times discusses in a recent article about our ever-changing workplace culture. Nowhere is the impact of social trends more evident than in the office sector.

In recent years, many companies have adopted the “open office” model of working environment, hoping to increase collaboration and productivity by removing office and cubicle walls. This model has been around for decades in certain businesses (trading floors, newsrooms, laboratories, etc.) but has gained wider popularity in the 90′s and 00′s, especially among high-tech or entrepreneurial companies. Naturally, operators and developers have been forced to keep pace, ensuring their tenants’ commitment by building or renovating suites according to these trends.

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Property investments in parts of China are struggling, with a delay in government subsidies hurting stock prices:

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A smart man once told me: “Never underestimate the chutzpah factor…if deals were only a result of the statistics and numbers on paper, then you’d know who was going to win every football game on Sunday.”  There IS a lot more to a commercial real estate deal than the numbers on paper: more than interest rates, more than net present values, more than ROIs and certainly more than the question of who is the biggest player with the most money.

I was reminded of this wisdom as I read an article by Natalie Kostelni in the Philadelphia Business Journal. Kostelni reported the news of Brian O’Neill’s out-of-court settlement with Citizen’s Bank. This legal battle has been a major hurdle in O’Neill’s work to develop a glaring retail “bald spot” on the Main Line. Read the rest of this entry »

Now that winter has truly arrived–reminding me once again what 20 degrees with a wind chill feels like–I’ve started thinking about energy efficiency and what it would take to avoid massive heating bills for my apartment from now until April. My monetary concerns are in many ways aligned with the environmental concerns expressed in the guidelines for LEED certification.

The Leadership in Energy and Environmental Design certification, created by the U.S. Green Building Council, has for many years presented a significant challenge to commercial real estate developers. While energy efficiency and sustainable building practices are certainly appealing, developers and the investors they report to also have to consider building/renovation costs and the operating income their project will generate. Many have found that LEED credits don’t necessarily contribute to the almighty Bottom Line.

LEED certification also comes with significant building complications and mountains of paperwork.

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With population studies and commercial real estate professionals seeing continued growth in urban areas, major cities are once again benefiting from the investment and development that was previously focused on suburban areas. With this return to central business districts, however, come the headaches of big-city zoning and property rules.

One such complication that is snagging many development ventures is the often-restrictive landmark regulations in such cities as New York. As the New York times reported last week, “New York City’s landmarks law [...] stands out among major cities because it seems tougher.” This is particularly true because of a 1973 amendment to the law stating that building’s interiors could also be protected from renovation.

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