The slumbering real estate giant has awakened in Seattle, says Bert Gregory, chairman and CEO of Mithun Inc., a local architecture, design, and planning firm. “The economic resurgence is getting underway, and at Mithun we are adding and seeking highly talented staff to fulfill significant project demands,” he says. “We anticipate moderate but accelerating demand in 2011. It is a time of transition to full recovery with a ‘differential’ economy underway right now. Some project types and organizations are under heavy duress, but others are moving quickly to post-recession activity.”

Three thousand miles away, the nation’s capital is attracting renewed investor interest from around the globe, spurring increased real estate sales in the region, says John Germano, executive managing director, CBRE Washington-Baltimore region. “People can invest anywhere in the world. Now they want to come to Washington, D.C.,” he says. “Investor interest is not only strong in D.C.’s central business district, but also along the Beltway, and even outside the Beltway.”

Farther north, New York City is experiencing recovering and improving markets in both the residential and retail sectors, says Brian L.P. Fallon, partner at O’Connor Capital Partners of New York City. “Clearly, there has been considerable stabilization and recovery in the financial services sector, which is particularly good for the New York City market,” says Fallon. “It’s been a difficult three years throughout the markets. We are optimistic and organized around strategic investments around the country.”

Real estate entrepreneurs, developers, architects, and financial executives from around the country say they are seeing increasing signs of a thaw in the real estate sector. Real estate activity is increasing in New York City, Seattle, Boston, Washington, D.C., San Francisco, and Denver, all of which rank among the top ten U.S. markets to watch, according to Emerging Trends in Real Estate® 2011, a survey of more than 1,000 leading real estate experts published by ­PricewaterhouseCoopers and ULI.

New York City

Commercial and residential development in New York City is beginning to recover, albeit slowly, says Steven M. Davis, a partner at New York City–based architecture firm Davis Brody Bond Aedas. “Banking and law are some of the bright spots,” he adds. “We have seen some promising signs by way of planning and feasibility studies. We think there will be a strengthening of corporate interiors in support of deferred capital improvements and investment and continued corporate consolidation. Most stimulus-based projects have been awarded, although those that were in design during 2010 should begin construction in 2011.”

Davis Brody Bond Aedas is involved with two of the city’s largest development projects. It is working with Renzo Piano on the Manhattanville expansion for Columbia University on 17 acres (7 ha) in northern Manhattan; is the lead architect for the 120,000-square-foot (11,000-sq-m) National September 11 Memorial Museum at the World Trade Center (WTC) site; and is associate architect for the National September 11 Memorial, located on six acres (2.4 ha) at the WTC site in lower Manhattan, Davis says.

O’Connor Capital Partners has a significant investment in prime property in the Long Island City neighborhood of New York, Fallon notes. “The plan is to develop both market rental housing and student housing for graduate students and faculty in addition to undergraduate students,” he says. “Demand and rent growth on the rental market side will result in a variety of projects securing financing and breaking ground in 2011.”

sheridan_3_250 sheridan_4_250Seattle

Seattle is benefiting from a strong generation Y population and a quality of life that attracts new-economy employers in its software, retail, financial, nonprofit, life sciences, and technology sectors, says Gregory. “Although some challenging workouts still exist, anticipated growth in these sectors is providing demand for design and permitting to get under way in the office and commercial areas, which are preparing for construction on short notice. This growth is urban, green, hip, mixed use, and linked to transit. Sites contiguous to the Link Light Rail or Seattle Streetcar lines are in very heavy demand. The stability and growth of the region’s major employers such as Microsoft, Amazon, and Boeing provide a foundation for expectations of a good turnaround in 2011 and strong growth returning by 2012.”

sheridan_5_351Though some project types and organizations are stressed, adds Gregory, others are moving quickly toward ­recovery. “There is also an attitude of optimism in the air,” he says. “Many Mithun projects, dormant for years, are coming back to life, and many new projects are now emerging in preparation for a strong demand a few years out. There is an exciting buzz not seen in several years. Seattle’s clean technology sector is gaining strength, with the green building and energy efficiency sector rated highest in growth potential by the governor’s Clean Energy Leadership Council. In addition, Seattle’s tourism industry is strong, and with the soon-to-be-reborn Seattle waterfront, tourism should continue to be an important part of the region’s economy.”

One of the bright spots in the Seattle area is multifamily housing, points out Dana Behar, president of HAL Real Estate Investments Inc., which owns, operates, and develops properties in the Greater Seattle area. “Demographic trends and lifestyle preferences are increasing demand and, therefore, rent and occupancy levels,” Behar notes. “This is driving development of multifamily, which is in turn increasing land values.”

In late 2010, HAL Real Estate bought the Seventh and Madison Building, a newly constructed 205,000-square-foot (19,000-sq-m) downtown Seattle office building that was built for an estimated $79.5 million but never occupied. “We are currently working with a local medical clinic to occupy the entire building on a long-term basis,” he says. “HAL has also acquired a large multifamily development site in Seattle’s desirable Ballard neighborhood.”

Behar believes it is too early to tell whether Seattle is truly in a recovery phase and how long it might take for markets to return to equilibrium. “At this point, I remain pessimistic about the outlook for a timely recovery,” he says.


Boston has remained one of the healthier metropolitan economies in the United States and is starting to see signs of a recovery, says Mark B. Potter, cofounding partner of Boston-based Alcion Ventures. “However, I think a real issue is employment growth, as it is fundamental to the real estate industry,” he says. “Only with job creation can real estate truly prosper. For instance, the Boston economy did generate jobs in 2010, which compares favorably to the job losses that occurred in the prior two years. We project that the growth picture for jobs will remain sluggish in the near term. Slow employment growth will mean a slow and lumpy recovery for the office and retail sectors. Currently, there is not enough job growth to significantly move the vacancy needle. By way of example, with the job growth level we saw in Boston last year, vacancy rates decreased or remained relatively flat.”

In the residential sector, Boston’s for-sale market has reached a trough, Potter says, and there are signs of strengthening within the sector. “Supply is relatively low, and we are beginning to see increases in pricing,” he says. “The rental market is faring better with concessions starting to burn off.”

Still, the city’s healthier real estate outlook is translating into increased opportunities for design companies, says Robert Brown, principal at CBT Architects, a New England–based planning and design firm. “There appears to be more work than last year in a number of markets, though it is no avalanche,” he says. “The rental housing market shows a lot of depth. Academic institutions are getting busier with rehab and new projects occurring. The tenant fit-out market remains good, as companies are taking advantage of lower rental rates and are either moving or staying and renovating in place.”

Business appears to be improving at Boston’s financial firms, as well as at related consulting, legal, and other service providers. “The academic market seems to have stabilized, with students returning and needing new buildings to handle the increased millennial generation,” says Brown. “CBT has just finished the city’s latest office tower at Atlantic Wharf and is doing the next office building for Liberty Mutual’s corporate headquarters. We all hope that the recent flurry of activity indicates a balanced market.”

Washington, D.C.

sheridan_8_250The outlook for the nation’s capital is definitely improving, says Eric Liebmann, managing principal and director of design at Washington–based WDG Architecture. “2011 will be a better year for architects because our clients will want to have the designs completed so that they can put the shovel in the ground in 2012,” he says. “We have seen a rush toward entitlements predicated on new zoning laws, such as Tysons Corner in Virginia and White Flint in Maryland,” he explains. “These areas are transit-oriented-­development focused, with Metro being the hub of the development. The projects are moving incrementally, predominately in multifamily, but also with office.”

Washington is also experiencing an improved outlook for multifamily rental housing and, to a lesser extent, condominiums, says Rick Hammann, managing principal and director of multifamily housing at WDG. “We have several projects that have been on hold for several years that have started up again, such as Camden Living near the Washington Nationals baseball stadium,” Hammann notes. “WDG currently is responsible for the master planning of 15 million square feet [1.4 million sq m] at Tysons Corner at four different locations for four different developers. All of our new projects are inside or at the Washington Beltway and are urban, except for the international work.”

At the same time, the number of investors seeking opportunities in Washington has increased significantly, says CBRE’s Germano. “If you look at investor appetite for D.C. real estate, we had a very good sales run-up from 2002 to 2007,” he says. “But then it went down literally overnight. Investors are back. Sales increased nearly 175 percent in 2010 compared to the previous year. Metro D.C. is ranked as one of the top world cities, along with Tokyo and London.”

sheridan_9_250The recent sale of half the AOL campus to CB Richard Ellis Realty Trust Investors was one of the most notable 2010 transactions in northern Virginia, Germano noted. It involved over 700,000 square feet [65,000 sq m] of office space and more than 22 acres [9 ha] of land. CB Richard Ellis represented AOL in the sale to CB Richard Ellis Realty Trust, an independent subsidiary of CB Richard Ellis.

By nearly every metric—sales, absorption, leasing—the Washington-area real estate sector recovered significantly last year, Germano points out. “It didn’t go through the roof, but it turned the corner,” he says. “Economically, the worst is behind us and we’re heading up in 2011. We expect to see an even better 2012, when activity should really ramp up. It all hinges on job growth, which fuels everything else.”

San Francisco

Richard C. Mallory, partner in the San Francisco office of law firm Allen Matkins Leck Gamble Mallory & Natsis LLP, expects to see an increase in building sales in the San Francisco area because five or six transactions in 2010 established a base market price that buyers and sellers can get comfortable with. “The leasing market should be relatively flat until employment kicks upward, although water-view, high-rise office space rents and high-quality South of Market office space rents should see modest growth,” he says. “From a real estate perspective, San Francisco’s limited geographic area and strict controlled-growth policies affect the supply side of the real property development equation, which is a bright spot for those who own entitled land. Tourism, along with the local populace, will continue to support retail in the city, particularly in Union Square, the marina, and the Fisherman’s Wharf areas, from what I read and hear.”

Mallory notes that San Francisco leads the way with strict sustainable new con­­struction building codes: no new ­construction will be permitted that does not include major green elements. “State building codes are not far behind, and many other Bay Area cities are following San Francisco’s lead,” says Mallory. “Existing office buildings will be getting greener and greener. With governmental entities and more and more major and minor private businesses demanding it, I foresee a wave of sustainable retrofits to meet the demand. Owners realize that the value of a property will increase due to the larger number of prospective tenants that will consider their building when space turns over, because government tenants and green-leaning businesses will put a high priority on locating in a green building, allowing space to lease faster.”


sheridan_1_250While the real estate sector is improving on both coasts, it is also showing strength in thriving cities such as Denver. Led by a strong, diversified economy, the Mile-High City continues to attract new companies and residents.

Multifamily properties remain strong, particularly downtown, and major projects such as the redevelopment of Union Station and the surrounding property are expected to contribute significantly to the city economy in the years ahead.

“In the past three years, we have seen investment in the public realm that creates a good framework for future real estate development and economic sustainability,” says Rebecca Zimmermann, president of Design Workshop of Denver. “Cherry Creek North, the premier outdoor retail mixed-use district in central Denver, just completed $18.5 million of streetscape improvements. The city of Denver is currently working on utility and streetscape renovation for 14th Street and $5 million of first-phase improvements to South Broadway. Denver has so many attributes that make it a desirable place to live and [for] employers to locate. These attributes don’t go away in a down economy. Recreation, arts, culture, sports, etc., create a solid foundation from which Denver will thrive.”

Not only that, but business confidence has returned to the Queen City of the Plains, creating an optimistic outlook. “Companies created positive absorption by taking more space and going forward with some vacant space that they intend to fill in the future,” says Mike Cantwell, managing partner at Denver-based Johnson Capital of Colorado, one of the top real estate capital advisers in the country. “This is occurring in a market where little new job growth is happening. Retail spending is measurably up, which suggests a local return of consumer confidence. Additionally, retail vacancies are falling, which indicates that the worst is hopefully behind us. In addition, Colorado continues to be a leader with respect to alternative energy research and development.”

Kelly Davis, managing principal of Colorado’s OZ Architecture, which has 20 active projects in the Denver area, adds that the city is blossoming with a growing sense of sophisticated style and an almost universal commitment to environmental stewardship. “Denver will continue to gain respect nationally and internationally for the balance of our natural and built environments and the lifestyles they enable,” he says. “We will continue to see smarter land use, more compact urban development, and more sophisticated design solutions.”

sheridan_12_250Renewed optimism in the real estate market—Denver was one of the first cities to recover from the recession—is translating into new activity, adds Susan Powers, president of Denver-based Urban Ventures Inc., who notes the strong multifamily market in Denver. “Vacancy rates are under 5 percent and rental rates continue to climb,” she says. “In the downtown area, the sector is particularly strong, and the race is on to see which developers can respond with new higher-density rental projects as soon as possible. I would expect that several large multifamily projects will be under construction this year.”

Andy White, OZ Architecture principal, who has worked on multifamily projects for the past 15 years, agrees. “In the last six months, we have seen an increasing number of projects that have been on the boards for a long time coming back to life. These projects are both urban infill and garden projects, ranging from 40 to 400 units. Many are financed through HUD [U.S. Department of Housing and Urban Development] guaranteed loans. The projects cover a broad range of the demographics, from entry-level to higher-end apartments, as we see homeownership lifestyle shifting toward multifamily living. In many ways this multifamily density and urban amenities go hand in hand with apartment living.”

The Denver metro area is benefiting from the construction of the Fastracks Light Rail system, says Powers. “This will only grow as the additional lines are completed,” she says. “Even in more suburban settings, there are high-density residential developments that have opened in the last five years, and this trend will continue.”

Compared with the situation just a few years ago, real estate has certainly rebounded. “The economic Grand Canyon has been wide and deep in the last few years, but we think we are on the other side,” says Gregory. “Clearly, not all sectors are on that side, but the design industry gives an indicator of real estate development activity ahead. It looks urban, hip, and deep green. The next wave of development appears to be very smart and among the most exciting in our history.”