In a city more often characterized by hardship than success, Campus Martius Park in Detroit has received national recognition as the first winner of the ULI Amanda Burden Urban Open Space Award, which recognizes an outstanding example of a public open space that has catalyzed the transformation of the surrounding community.
Two weeks after the last U.S. presidential election, Obama’s chief of staff, Rahm Emanuel, told a group of business executives, “You never want a serious crisis to go to waste.” He later clarified this comment with the following: “It’s an opportunity to do things you could not do before.” Thus far, in a perusal of the real estate industry after the current economic crisis, it appears that we are letting a good crisis go to waste. So far, except for the enormous downsizing that has taken place, it seems all too much like “business as usual.”
A developer friend of mine asks, “Where do you go if you have no money and no credit?” He responds with the surprising answer that a lot of folks—the fund guys—have lots of money if you have deals in Boston, California, or Washington, D.C. He initially thought this would be like 1991, but the big difference is this: there are no good deals. “There are no bargains out there, at least in those areas favored by the funds,” says Ted Raymond, president of Raymond Property Company in Boston. But there is plenty of money for experienced developers, even those with lots of scars—as long as one can deliver a 20 percent internal rate of return (IRR).
What will be the changing role of retail in the current economy? Six leaders in the area of U.S. commercial and retail real estate development discuss the retail market in the wake of the current recession— including what kinds of retail are likely to succeed, how cities and suburbs are faring, and how demographic shifts affect retail business— and offer insights into how retailers can adapt in the new economy, especially given the rise of online shopping.
Contributing their expertise are James Bieri, president and CEO of the Bieri Company in Detroit; Anthony Buono, executive managing director of CB Richard Ellis in San Diego; Brad Hutensky, president and principal of the Hutensky Group in Hartford, Connecticut, and past chair of ULI’s Commercial and Retail Development Council (Blue Flight); Carol Schillne, first vice president of CB Richard Ellis in Anaheim, California; Ellen Sinreich, president and CEO of Green Edge LLC in New York City and current chair of the Commercial and Retail Development Council (Gold Flight); and Peter Thomas, founding principal and CFO of Vestar in Phoenix and past chair of the Commercial and Retail Development Council (Green Flight).
With global trade down by over 20 percent in 2009—although there has been some rebound in 2010—containers stacked high at seaports are still a common sight. Correspondingly, the industrial sector of real estate is experiencing record vacancy. Even if economic recovery begins anew this year, most estimates show a full recovery in 2011 or later.
Amid the morass, business may not be brisk—but deals are still occurring. “Companies are focused on retooling or repositioning for the turnaround,” says Rich Thompson, executive vice president at the Chicago office of Jones Lang LaSalle’s port, airport, and global infrastructure group. Thompson terms it “network optimization,” in that companies are streamlining their operations. For example, perhaps they are consolidating from three smaller warehouses to one large distribution center, which could allow the new facility to take advantage of locations near multimodal transportation options such as any combination of truck, rail, sea, or air.
Sheridan “Schecky” Schechner is a managing director and U.S. head of real estate investment banking at Barclays Capital, based in New York. Schechner is a trustee of the Urban Land Institute and a member of the Real Estate Roundtable.
Decades in the making, high-speed rail is finally coming to California. In 2008, the state passed a $10 billion bond initiative to build the first leg of its ambitious state-spanning high-speed rail network.
These nation-leading plans were rewarded in January with a $2.25 billion federal infusion, part of an $8 billion high-speed rail grant program made possible by the 2009 stimulus bill. When the California network is completed in 2025—with a projected overall tab of $45 billion—the state will have more than 700 miles (1,100 km) of track that will take passengers from San Francisco to Los Angeles in less than three hours, with trains achieving top speeds of 220 miles per hour (354 kmph). What will it mean for land use?
Though vacancy rates at shopping centers in the United States are not expected to peak until 2011 at around 12.2 percent, the going consensus is that for the most part, the worst of the retail crisis has passed. Too much supply has been part of the problem. Between 1999 and 2008, 25 million to 30 million square feet (2.3 million to 2.8 million sq m) of new shopping center space was added to the market annually, says Ryan Severino, an economist with Reis. This year, the volume of new center completions will likely be around 2.5 million square feet (232,000 sq m), according to CBRE Econometric Advisors. Absorption is expected to turn positive in the fourth quarter, but rents will likely continue to decline through 2012, dropping 2.9 percent this year and 0.4 percent in 2011.
For much of the past decade, buoyed by a vibrant real estate market, readily available credit, and acquisitive consumers, international retail investors and developers enjoyed healthy growth, in both developed and developing economies. Now, in the aftermath of the global market downturn, developers—faced with an oversupply of retail square footage (especially at the high end), failing projects, and a cautious buying public—have been forced to reconsider their geographic strategies and retail models.
The inaugural Robert C. Larson Leadership Summit was held as part of the ULI 2010 Real Estate Summit at the Spring Council Forum in Boston. In accordance with Larson’s vision of infusing leadership DNA in ULI members, the Leadership Summit was designed to bring together 50 full members to focus on how enhanced personal and organizational leadership skills can benefit their businesses, their communities, and the industry. The invitation-only event included a diverse group of public, nonprofit, and private sector executives who have demonstrated leadership capacity, and provided them with an opportunity to share experiences and best practices.
The session, hosted by longtime ULI member John Griffin and held at the offices of his firm Edwards Angell Palmer & Dodge, was opened by ULI Chairman Jeremy Newsum, who welcomed those attending, outlined the program for the morning, and introduced Eric Larson, Bob’s son and president/CEO of the Larson Realty Group. Eric spoke passionately about Bob’s desire to “create a leadership legacy in the responsible use of land” at ULI and announced the kickoff of the Larson Leadership Initiative Fund to provide resources for the ULI Robert C. Larson Leadership Initiative.
The prevailing mood at ULI’s recent Real Estate Summit at the Spring Council Forum in Boston ranged from cautiously optimistic to outright optimistic. The overriding message was that despite some persistently weak spots, the economy in general and the real estate industry in particular have weathered the worst of the recession and are poised for a gradual recovery.
The event, open for the first time to all ULI members, drew more than 3,100 people and featured keynote presentations by Gus Faucher, economist with Moody’s Economy.com; Sam Zell, chairman of Equity Group Investments; and Peter Linneman, professor of real estate, finance, and public policy at the University of Pennsylvania.