Commercial Real Estate Finance

Posts Tagged ‘sustainability’

A new year means the results of last year’s real estate competitions are beginning to trickle in. Of course, the finals for MIT’s annual case competition aren’t until April, and the Philadelphia Real Estate Council’s Student White Paper Competition just wrapped up its submission period. But a high-profile competition on the urban planning side has already announced its winners.

The Philadelphia Center for Architecture recently announced the results of its 2013 Ed Bacon Student Design Competition. This year’s winner is a team from Cornell University (which has a pesky habit of winning these things), with additional jury prizes going to the University of Maryland, University of Nottingham (UK), University of Tennessee, and National University of Singapore. Congratulations to Cornell’s team: Logan Axelson, Caleb Cheng, Katherine Li, Jesse Nicholson, and Travis North!

Since the competition is run by the Philadelphia Center for Architecture, each year’s challenge is, of course, focused on one of Philadelphia’s complex planning opportunities. Previous contests have focused on the I-95 corridor on the east of the city and brownfield reclamation in the city’s Gray’s Ferry area. The 2013 challenge focuses on the transportation infrastructure and neighborhood to the west of the Schuylkill river (between Spring Garden and South Street). Here’s a brief excerpt from the competition’s overview: Read the rest of this entry »

Week in Review for May 19 -25:

- A complex set of international conditions creates greater dividends for REITs. As DailyFinance reports, fears over Greece‘s possible departure from the euro zone are driving demand for U.S. Treasury securities, which helps keep U.S. interest rates low and decreases the cost of borrowing for REITs.

- However, SNL Financial reports that concerns over an imminent euro zone crisis may have contributed to a decline in prices among publically traded REITs.

- Data from the first quarter of 2012 shows strong performance and potential growth for such niche markets as cellular towers, data centers, and high-end shopping malls. Multifamily, likewise, continues to display strong fundamentals.

- ICSC holds its RECon in Las Vegas, drawing in over 32,000 retail real estate professionals. However, despite strong interest, attendees report few strong opportunities for retail property investment.

- Monday Properties selects CBRE (CBG) to oversee the leasing of its under-construction, 35-story office building in Rosslyn, Virginia. Once completed, 1812 N. Moore St. will be the tallest building in the region. 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.

Read the rest of this entry »

Commercial Real Estate Week in Review for the week of March 26th to April 1st

- NAREIT Holds Event Focused on Sustainability’s Place in the Real Estate Market.

- Will the “Aerotropolis” be the Next Real Estate Goldmine?

- Homburg REIT Acquires  50% of Scotia Centre in Calgary Canada.

- Felcor Lodging Trust Purchases Morgans and Royalton Hotels in Downtown NYC. Read the rest of this entry »

Recently in Institutional Investor Online, Ernst & Young contributed a research report listing the top ten business risks for commercial real estate. In a suspenseful twist, we will provide them in descending order, a la David Letterman, and provide our thoughts and commentary thereafter. Without further ado, they are (drum roll please):

10. Volatile Energy Costs (O)

9. Economic Vulnerability and Regulatory Risks in Developing Markets (F)

8. Green Revolution, Sustainability & Climate Change (D)

7. Pricing Uncertainty (F)

6. Inability to Find and Exploit Global and Non-Traditional Opportunities (D)

5. Changing Demographics (O)

4. Global War for Talent (O)

3. Impact of Aging or Inadequate Infrastructure (D)

2. Global Economic and Market Fluctuations (F)

1. Continued Uncertainty and Impact of the Credit Crunch (F)

If we assign these concerns into one of the following three categories: Finance, Development, and Operations, as indicated with (O, D or F), we find that while the top ten issues are somewhat diverse in nature, the top two remain financial concerns.

The issues we chose to tag “Operational,” while important, we do not feel are vital to the health of the commercial real estate market. Changing demographics are sure to affect particular markets, especially in the southwest, but will take a while to reach corridors like the northeast. The Global War for Talent is an issue of the future, as anybody who is actually hiring in this market essentially has the pick of the litter from the copious amount of unemployed, likely overqualified candidates. When this does become an issue at some point in the future, it will likely mean the unemployment rate will dwindle from double digits back into the 5-6% comfort zone of a few years ago.

Energy costs are a necessary evil of the business. Lease type will dictate whether landlord or tenant will be paying for the rise in energy costs, and the government is attempting to implement a wide range of programs aimed at stemming energy costs from crippling the economy. These programs will take a long time to bear fruit, but they are being addressed.

The Development (D) issues are of greater immediate importance in our opinion. However, most are questions of project feasibility as they pertain to financing. If green buildings are not cost effective for landlords or tenants, you simply won’t see very many being built, or converted. Likewise, while aging infrastructure is a serious problem, developers will examine the cost basis of various opportunities before building or renovating. Until construction costs drop replacement costs closer to price per square foot figures being paid for existing product, new ground up developments will be fewer and farther between, especially if market demand is sluggish. Which leads us to the last (D) on the list…finding new global and non-traditional opportunities. This issue is probably the most abstract on this list, and so it will take time to figure out exactly what the issues are. More than likely, it was included on this list as a result of so many of the other issues being, well, issues. People fear the unknown.

This of course leaves us with Financial (F) concerns. Pricing uncertainty, regulatory risk, market fluctuations and the credit crisis blow the rest of the aforementioned issues out of the water, in our humble opinion, in terms of what people SHOULD be worried about. Frankly, these four issues would be 1-4 on our list. Of course, unlike David Letterman’s Top Ten Lists, which are supposed to make you laugh, ours, like E&Y’s, would be more likely to make you cry….