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Gen Y Goes Shopping

Across the Generations: Gen Y and the Baby Boomers

Micro-Size It

The Money Market

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Studley has opened its first office in China, at Central Plaza, 381 Huaihai Mid Road in Shanghai, the company announced Wednesday.

The new office, Studley president Michael Colacino said in a statement, “will serve as a gateway for businesses in Asia looking to open offices and make investments in the United States and for Studley clients interested in expanding into China.”

The New York City–based tenant-rep specialist stated that the Shanghai  office is the first of several it will open across Asia in the near future. Studley already does business in Singapore and Korea, Colacino told Commercial Property Executive.

The Shanghai office will be headed by Yin Li (pictured at left), managing director, head of China operations and Greater China chief representative. In addition to overseeing day-to-day operations of the new office and heading what the company describes as “an ambitious recruiting effort,” she will oversee Studley’s expansion into other major Asian cities.

Yin splits her time between Shanghai and New York City, and before joining Studley, she spent the majority of her career with AIG and Zurich Financial Services, where she worked on strategic planning for multinational corporations.

She earned a B.S. from Shanghai Normal University and an M.B.A. in finance from Long Island University.

There are currently two major types of opportunities in China, Colacino told CPE. “First, American and EU companies opening there and wishing to have ‘Western style’ tenant rep services (without conflict and with transparent processes). Second, real estate investment banking services to assist Chinese (and Asian) capital to find safe harbors in U.S. real estate assets in certain markets, for example, Los Angeles, San Francisco, Boston and especially New York.”

]]> http://www.cpexecutive.com/regions/international/studley-launches-shanghai-office-its-first-in-china/feed/ 0 http://www.cpexecutive.com/regions/northeast/waterman-completes-75-year-master-lease-at-nycs-400-park-ave/ http://www.cpexecutive.com/regions/northeast/waterman-completes-75-year-master-lease-at-nycs-400-park-ave/#comments Wed, 01 May 2013 15:14:36 +0000 Suzann Silverman http://www.cpexecutive.com/?p=1004071998 By Barbra Murray, Contributing Editor

Waterman Interests Inc.’s ownership of the leasehold interest on 400 Park Ave., an office and retail building in the Plaza district of Midtown Manhattan, is now secure — at least until the 21st Century nears its end. The real estate investment and operating company, which owns the asset in joint venture with institutional investors advised by J.P. Morgan Asset Management, just signed a new 75-year master lease with Benenson Capital Partners, the longtime owner of the land beneath the 250,000-square-foot property.

The closing of the lease transaction comes approximately three years after Waterman Interests purchased the leasehold interest at 400 Park from RFR Holdings L.L.C. Waterman Interests didn’t originate debt for the acquisition then, and the asset remains unencumbered today.

Extension of the master lease frees Waterman to expand upgrades at the 21-story tower without the constraints of the previous lease, which was scheduled to expire in 17 years.

“The asset has already attracted ‘best-in-class’ banks, private equity firms and hedge funds, which have leased over 100,000 square feet as we commenced, and completed, Phase I of our capital improvements,” Philip “Tod” Waterman III, founder & managing member of Waterman Interests, told Commercial Property Executive. Recent commitments have come from Malayan Banking Berhad, which leased the entire 11th floor of the building in December 2012. Additionally, City National Bank took the entire 15,000-square-foot retail space and some office space last June.

Currently, 400 Park is roughly 70 percent occupied, and Waterman Interests is confident that, with the freedom to move forward with Phase II of its improvement program, it will be able to reel in even more tenants. As it implements upgrades — including renovation of the entryway, improved exterior and interior lighting, installation of a redundant chiller and emergency generator, and replacement of high-rise windows to match those in Phase I  — and completes construction of the new City National Bank branch at the corner of the building, and “we expect momentum to continue and accelerate,” said Waterman.

Also working in the property’s favor is the fact that the Manhattan office market is faring relatively well. The national vacancy rate in the first quarter was 15.4 percent, according to a report by commercial real estate services firm Cassidy Turley, while Manhattan recorded a vacancy of 11.8 percent. “(Demand is being spurred by the) intellectual talent pool, cleanliness and safety of the city, compared to other large cities around the world, and the diversity of the New York economy, which is constantly evolving and demanding diverse office occupancy choices,” Waterman added.

Jack Cuneo

By Gail Kalinoski, Contributing Editor

Less than a month after telling shareholders it was exploring ways to provide a “liquidity event,” Chambers Street Properties, a self-managed Maryland REIT, made it official Tuesday, announcing it intends to list its common shares on the New York Stock Exchange. The REIT said it expected to be trading on the NYSE under the ticker CSG on or by May 21.

The REIT, which has its headquarters in Princeton, N.J., also said it was planning a modified “Dutch Auction” tender offer to purchase as much as $125 million of its common shares. Chambers Street would select the lowest price within a range of $10.10 and $10.60. The tender offer will be paid for with funds from its unsecured revolving credit facility.

In an April 2 letter to stockholders, Chambers Street president & CEO Jack Cuneo said the firm had hired Wells Fargo Securities L.L.C. and Citigroup Global Markets Inc. as its financial advisors. He noted listing its shares on a national exchange was a possible outcome as it positioned itself for a “future liquidity event.”

The firm’s board of trustees deemed listing on the NYSE to be “in the best interest of the company and its shareholders,” according to a news release from Chambers Street Tuesday.

“Chambers Street believes that a listing will enable it to continue to execute its asset management, portfolio growth, and capital strategies designed to maximize shareholder value,” the release stated. “Publicly traded real estate companies have enjoyed strong returns in recent years, and companies that own net lease properties, similar to Chambers Street, are trading at attractive valuations. In addition, Chambers Street believes that a listing on the NYSE will provide access to additional potential investors as well as to a broader range of potential sources of capital.”

Because of the pending listing, Chambers Street officials could not comment beyond the firm’s news release.

The plan for public listing comes as the REIT has had a particularly active year since changing its name from CB Richard Ellis Realty Trust last June and moving to self-management. The REIT has about $3.2 billion in real estate holdings in the United States and abroad. It currently owns or has majority interests in 129 properties, mostly industrial and office assets, in 22 U.S. states, Germany and the United Kingdom. As of Dec. 31, 2012, the portfolio was 98 percent leased to 272 tenants, with diversity in locations, industries and lease expirations.

Two weeks ago, Chambers Street said Big O Development Inc., a major tenant at its Summit Distribution Center property in Salt Lake City, had signed a five-year lease renewal. An automotive tire distributor, Big O leases more than 100,000 feet of the 275,000-square-foot center, acquired in 2010 as part of a seven-property industrial portfolio.

Celebration Office Center, Orlando

Chambers Street has made four big acquisitions so far this year, including acquiring the remaining interests in 17 properties it owned in joint venture with Duke Realty Corp. The portfolio, which sold for a reported $98.6 million, comprised 16 office properties and one industrial asset, an 820,000-square-foot warehouse/distribution facility in Phoenix. The office properties included three buildings with a total of 542,000 square feet in Cincinnati and two buildings with a total of 451,000 square feet in Columbus. Other properties were located in Dallas; Fort Lauderdale; Houston; Minneapolis; Raleigh, N.C.; and two in Orlando  – Celebration Office Center and Northpoint III, with a total of 209,000 square feet.

In February, Chambers Street made its first acquisitions in the Philadelphia area, closing on two office buildings totaling 300,000 square feet in Malvern, Pa. The two buildings were developed by Chambers Street, then still known as CB Richard Ellis Realty Trust, and Trammell Crow, a CBRE Group subsidiary, in joint venture and leased to Endo Health Solutions.

Toby Bozzuto, The Bozzuto Group

Daniel Broderick, Cassidy Turley – San Diego

Chad Buchanan, Tryko Partners L.L.C.

Andres del Corral, Blanca Commercial Real Estate

Lauren Crowley Corrinet, CBRE Consulting Group

Brian Eisendrath, CBRE Group Inc.

Scott Hartstein and Steve Milona, Case Real Estate Capital L.L.C.

Robert Hodge, Behringer Harvard

Joe Judge, Jones Lang LaSalle Inc.

Melissa Marcolini-Quinn, NorthMarq Capital

Malcolm Marshall, Cushman & Wakefield Inc.

John McDonald, Hudson Realty Capital L.L.C.

JoAnn McGuinness, Inland Real Estate Income Trust Inc.

Matt Mousavi, Faris Lee Investments

Gilda Perez-Alvarado, Jones Lang LaSalle Hotels

Larry Sajdak, Inland National Real Estate Services L.L.C.

David Schechtman, Eastern Consolidated

Featured are: Goldie B. Wolfe Miller, Millbrook Corporate Real Estate Services; Megan Riess, Fishman Haygood Law Firm; Allison E. Beall, Pacific Building Group; Irene L. Hosford, Brown McCarroll LLP; and Elizabeth E. Solender, Solender/Hall Inc.

By Paul Rosta, Senior Editor

These days, Matt Khourie is finally getting a breather from a task that has taken up a hefty portion of his three years as CEO of CBRE Global Investors: assembling a gigantic jigsaw puzzle. In this case, the pieces extended across three continents—components of one of the industry’s biggest recent mergers. In late 2010, CBRE Group Inc. agreed to pay $940 million for ING Real Estate Investment Management’s European and Asian operations, as well as ING Clarion Real Estate Securities. The acquisition added some $60 billion worth of assets to CBRE Investors’ management portfolio, thereby strengthening its elite position among real estate investment managers. By the end of last year, its assets under management totaled $92 billion. To emphasize its newly expanded geographic reach, the firm added “Global” to its corporate handle.

After the deal’s final phase closed in October 2011, Khourie spent much of the first half of 2012 overseeing the integration of the legacy ING REIM elements into his own shop. His initial assessment of the complex process: So far, so good. “You never know precisely how it’s going to work out, and I’m very pleased that it worked out so well,” he reported.

Executing the ING REIM deal has bolstered Khourie’s reputation for attending to both the big picture and the details. “He’s very professional, transparent; he listens; and most important, he follows up,” elaborated Eric Lang, managing director of real assets at the Teacher Retirement System of Texas, for which CBRE Global Investors manages a sizeable portfolio of real estate assets. The example set by Khourie filters down to the responsiveness and professionalism of his team, Lang said.

Looking back, Khourie speculates that the choice to pursue the merger at an unhurried pace has contributed to a smooth transition. “It was doable, because we felt our chances were good to buy ING REIM back in late 2010,” Khourie explained. “We had a lot of time to put the pieces together.” In July 2011, CB Richard Ellis wrapped up the purchase of ING Clarion Securities and renamed the company CBRE Clarion Securities. Next to close, on Oct. 3, was the deal for ING Real Estate Investment Management’s Asian region. The newly rebranded CBRE Group Inc. wrapped up the acquisition of the European segment on Oct. 31. A notable challenge of the acquisition was the time-consuming process of navigating Europe’s complex regulatory and approval structures.

Khourie said the merger is justifying his confidence in the cultural fit between the companies. “(The ING REIM professionals) were very eager to work for a real estate company,” he explained. “There’s a lot of investment managers in our business that are owned by non-real estate companies”—a category of buyers not preferred by the ING REIM team. Under the auspices of a real estate company, the ING alumni feel they can be nimbler and more customer-focused than ever before, he added.

The ING merger marked the latest milestone for a company that has evolved continually during its four-decade history. CBRE Global Investors’ roots extend back to 1972, when it was launched as the investment management arm of Coldwell, Banker & Co. It expanded in 1995 with CB Commercial’s acquisition of Westmark Realty Advisors. Following the CB Commercial-Richard Ellis International Ltd. merger three years later, the affiliate was renamed CB Richard Ellis Investors. In 2000, the firm launched the first in a series of value-added Strategic Partners investment funds. Those vehicles are still overseen by their founder, Vance Maddocks, who did double duty as CBRE Investors’ CEO from 2007 until he was succeeded by Khourie in 2010.
Today, the company offers more than 70 direct investment separate accounts and nearly 60 direct funds. Programs encompass all major property categories and range in focus from core and core-plus to value-add and opportunistic vehicles. The company’s real estate securities unit manages upwards of $23 billion in assets. Rounding out the portfolio, CBRE Global Investors’ global multi-manager team—acquired in 2006 as Oxford Property Consultants—handles investments valued at $12 billion.

As the latest in this series of major corporate moves, the ING REIM merger has had far-reaching implications. The acquisition added $29.5 billion worth of assets in Europe, $5.1 billion in Asia, $19.4 billion worth of listed securities and $5.8 billion in a global fund of funds. The acquisition has reshaped CBRE Global Investors’ portfolio on multiple fronts. “In Europe, our legacy business had very little exposure in shopping centers, but the ING REIM team is one of the leaders in this sector in Europe,” Khourie explained. “We are now able to offer our investor clients a product type in Europe that we weren’t able to offer effectively before.” By the end of 2012, the value of the firm’s European holdings stood at $35.5 billion, more than twice the size of its North American assets (at $16.7 billion).

In Europe, CBRE Global Investors is particularly bullish on London, Scandinavia, Germany and select markets in Central Europe. Last year, it ramped up its U.K. investments to 106 deals and 980 million pounds (nearly $1.5 billion) from 77 transactions valued at 332 million pounds in 2011. So far in 2013, its U.K. acquisitions include retail and mixed-use properties in Brighton and Brixton, and office and mixed-use properties in Central London. Elsewhere in Europe, Chambers Street Properties, a non-traded REIT sponsored by CBRE Global Investors, bought a new 1.1 million-square-foot distribution center in Koblenz, Germany, last September.
Another recent milestone was the December 2012 closing of the latest fund sponsored by CBRE Strategic Partners. Exceeding its initial target by about 25 percent, the fund raised almost $1.1 billion from 22 institutional investors in the United States and Europe. The fund’s managers expect to leverage that equity into $2.7 billion worth of buying power for acquiring institutional-caliber assets in major U.S. markets that offer healthy upside potential.

Winds of Change
As he surveys the landscape, Khourie detects a growing preference for separate accounts. “Most institutional investors are moving toward investment vehicles where they can exert more control,” he observed. Particular interest is coming from midsize players like pension funds and foreign life insurance companies. Their accounts typically range from $150 million to $500 million in equity.

After an up-and-down year for commercial real estate investment in 2012, Khourie is upbeat about the market’s prospects. One factor in his positive outlook is a more stable financial and economic climate in the company’s key markets. A strong comeback for securitization, coupled with a largely disciplined approach to debt, is promoting investor optimism. “In the U.S., there’s a lot of good opportunity this year. We believe it’s a great time to sell core assets,” he observed. “We’re actively selling the product that we were able to stabilize and can now bring to market.”

That trend is driven by a demand for assets in gateway cities that produce steady income. In February, CBRE Global Investors began testing the waters by putting several multi-market office portfolios on the block. One encompasses five buildings totaling 2.9 million square feet in Downtown Chicago and the metropolitan Dallas and Atlanta markets. The firm is also shopping a 2 million-square-foot group of six properties in submarkets of Los Angeles, Houston, Dallas and Washington, D.C., along with West Palm Beach, Fla.

On the buy side, CBRE Global Investors’ recent U.S. acquisitions include 400 S. Hope St., a 701,535-square-foot Downtown Los Angeles office tower that was acquired last July. In a bid to capitalize on Seattle’s burgeoning office market, the company is making a value-added play with a vintage office tower. Last year, CBRE Global Investors’ debt investment platform, CBRE Capital Partners, bought Smith Tower, a 42-story Downtown tower in Seattle’s Pioneer Square district. Completed in 1914, the property was the tallest building west of the Mississippi River until 1931. As part of the transaction, CBRE Capital Partners also acquired the adjacent Florence Building, a century-old, 7,700-square-foot mixed-use property. CBRE Capital Partners bought the buildings in a foreclosure sale after acquiring non-performing loans on the assets in the fall of 2011.
In the multi-family sector, last year’s highlights include the acquisition of two upscale apartment complexes totaling 430 units near Baltimore in Towson, Md., and a 350-unit property in the Denver suburb of Littleton, Colo. Recent major additions to CBRE Global Investors’ industrial assets included a 1.4 million-square-foot distribution center in the Chicago suburb of University Park, Ill., acquired last April. The buyer was CB Richard Ellis Realty Trust, a non-listed REIT sponsored by CBRE Global Investors and since renamed Chambers Street Properties.

While Europe’s economies have plenty of challenges ahead, the European Union’s steps to shore up weaker partners have calmed investors’ fears. As a result, Khourie said, Europe is increasingly commanding

attention on the other side of the Atlantic. “More U.S. capital is kicking the tires,” Khourie reported. “Now that the uncertainty has lifted a bit, you’ll see increased U.S. activity there.”

In Asia, CBRE Global Investors’ recent moves include its acquisition last October of the Hewlett Packard Korea Building, a 462,848-square-foot Class A property in Seoul. HP will lease back about half the space in the building, which is also known as HP Korea House, for the next five years. Regarding another closely watched Asian economy, Khourie said, “We are also optimistic about China and believe that it won’t be a hard landing.”
A lifelong real estate professional, Khourie made his first foray into the business in the 1970s as an undergraduate at the University of California, Davis. Between his junior and senior years, he teamed up with a classmate to open a small shop at the Cannery, part of the Fisherman’s Wharf retail complex in San Francisco. Khourie’s experience there helped fuel his interest in retail and in real estate; for the next seven years, he managed to balance store ownership with college, graduate school and other obligations.

After earning his MBA at Stanford in 1980, Khourie started his long run at Trammell Crow as a Houston-based retail leasing agent. He spent the next decade rising through the ranks, earning promotions to division partner for Houston retail in 1983 and to head of the Houston office the following year. When the development market began softening in the mid-1980s, he turned his focus to asset management.

In 1987, Khourie added the company’s retail practice in the Northeast to his responsibilities. Two years later, he was made area partner for Houston. Next came promotions to senior managing director in 1997 and to president of development and investment for the Central United States in 2004.

In 2008, two years after the merger with CB Richard Ellis, Khourie was appointed president of development and investment for Trammell Crow’s Southeast region. The following July, he completed 29 years of service with Trammell Crow and moved over to CBRE Investors. Taking the title of president, he supervised the company’s day-to-day operations. Then, in April 2010, Khourie stepped into the CEO’s chair as Maddocks shifted to full-time focus on the company’s Strategic Partners funds.

As he oversees an enterprise that extends across three continents, Khourie maintains his personal touch. Not long ago, he formed a mentoring bond with a young member of the Texas Teachers’ real estate investment team after discovering that she had taken the same management and leadership course at the University of Texas in which his own daughter was then enrolled. Khourie followed up their conversation with an email sharing some of the leadership principles that he considers most meaningful.

In so doing, Khourie showed his own drive to keep honing his leadership skills, Lang noted. Equally revealing were his generosity and mentoring instincts. “We deal with some of the most successful and powerful executives out there,” Lang noted. “It’s always nice when they try to go above and beyond and build a relationship with my team—and not just me.”

During his three decades in the business, it is fair to say, Matt Khourie has made the practice of going above and beyond a personal trademark.

Tom Paladino founded Paladino and Co. in 1994 as a consultant on green building and sustainability. He helped develop the U.S. Green Building Council’s LEED green building rating system, directed its pilot program and has been technical editor and author of the version 4 reference guides. The company has provided both design and technical advice to a wide range of clients globally, including some of the biggest developers of green buildings, at the single-building and portfolio/enterprise levels. Paladino spoke with CPE editorial director Suzann D. Silverman about the commercial real estate industry’s progress in achieving sustainable design and what still needs to be addressed

Q. How do you see approaches among U.S. commercial real estate developers and owners changing toward sustainable design?

A. The definition of sustainable design is expanding to include planning, operations and asset management. The green building and sustainable design conversation really came out of the service providers, in many ways—first, the engineers and architects, and to some extent a few owners. But why there’s a new building, where there’s a new building, who’s going to sit in the new building, who’s going to run it afterwards and how do we know how to manage it, especially if it has new design features, is really the expanded conversation that seems to be happening among the leading commercial real estate groups. And by leading I mean those that are busy.
Some of the ones that are busy, which surprised us a little bit—but maybe not if you think about it—are the industrial facilities that might be involved in food production or food service. Everyone continues to eat, so we have a lot of industrial facilities that are getting on the green bandwagon but have really different characteristics than, say, knowledge-based, workforce office. …

And then, the service providers—architects and engineers and green building consultants—are pretty interested in this idea of net-zero, which is a building that can stand on its own from an energy or water point of view. But the commercial real estate sector, particularly in this economic climate, is pretty lukewarm toward that because it just doesn’t have a strong business case right now. 

Q. Do you think that’s just a temporary situation because of the economic climate, and as the economy improves that will change again?

A.The thing we’ve observed around some of the net-zero projects—and we’ve worked on a couple—is that it requires such a fundamental translation on the basics, like a useable floor area-to-systems floor area, or area of window wall-to-floor area served. It really challenges the comparables that other buildings are budgeted and designed around in such a transformative way that until the business climate gets better, it’s too big a reach for most commercial real estate projects.

Q. What are developers focused on?

A. We are seeing a growing interest in portfolio programs … particularly in the retail environment. That’s the end result of design expanding to include planning, operations and asset management. It’s just a larger span inside commercial real estate that’s beginning to address sustainability.

What’s interesting about the portfolio programs is that there are two sub-trends. One is that we’re seeing increased executive sponsorship around those initiatives: The sustainability thrust is coming from a real estate executive, a director or VP. High in the food chain, not the grassroots uptick we saw in the previous five years, which was really about the building and how we make it and how it performs on its own. This is an executive thing: There’s some proof of concept around that idea with one building; let’s apply it to our many in a way that lines up to the second sub-trend, which is, how can it improve business results for the enterprise around real estate?

Certainly in the last six months, it’s been a noticeable change. So something is thawing out there. Either the (corporations) are realizing this is the new reality and we’ve got to keep moving with our expansion, which requires real estate activity, or they’re making a market move, which is, we’ve acquired our No. 3 (competitor), or we’ve merged with another company to gain size and now we’ve got two disparate real estate portfolios that we have to somehow put together. And sustainability is a driver for the enterprise, so how are we going to embed that in real estate, especially as we consolidate people and processes? …

If we think about the industry meeting objectives generally, it seems like commercial real estate is a little bit stalled on “what do we do next with sustainability?” … (But) there is a lot of, I think, innovation or experimentation or examination of “how does sustainability help our enterprise win? And how does real estate contribute to that?” … There was a great vocabulary established with LEED and a lot of green building professionals created through the USGBC’s continuing ed program, more than any other sector. There’s nothing like that for product design. There’s nothing like that for workforce innovation. And there’s not that much around supply chain that’s as big as green building and LEED within the commercial real estate industry. So in a way, real estate can lead (corporate America) toward “here’s what works.”

Q. Do you feel that the commercial real estate industry has the right objectives?

A. It seems like LEED’s been a great proxy, but it’s somewhat become table stakes for a lot of commercial real estate. And now the question being asked is, How beyond just certification does it create business results? An example of that would be, there have been hundreds of buildings created under the LEED program that have attempted to accomplish—or have accomplished—the daylight credit. You know, daylight the floor areas so you can turn the electric lights off. You get more productivity out of the workforce if you do that. But where is the data around it? Has it worked or not? And if it does work, shouldn’t we be hitting that out of the park? I mean, commercial real estate knows how to measure a leasable area. Everyone kind of agrees on the formula, so there’s some way to move forward on optimizing that. But there isn’t a lot of agreement around what’s the right shape and block-and-stack and floor-area ratios to create a daylit building that really responds to the productivity gain that we all think is happening but nobody’s really measuring yet.

Q. So there really hasn’t been much focus on achieving some basic standards for what works best?

A. Right. And any feedback on what is working best. I think that’s one of the crazy anomalies of the real estate industry: that it’s a huge industry that builds projects or products, if you think about it, with a revised process every time. Every building’s a custom build. I know the industry strives for standardization, but putting the parts together—the different site, the different owner needs, the different design team combinations—it’s highly customized. And there are industry standards on what’s the formula for optimization … (but) that’s about measuring what got put in place, not what happens after it’s there and how it performs. That’s less studied. When you make a car, when you design a new car—like a new hybrid, where you change the engine out and put in batteries—it’s a pretty big custom job. And then the auto industry knows how to innovate and then measure and refine and release and refine and release, whereas with commercial real estate, it’s like, “Well, that was an interesting project. We flipped it and made money. Let’s go do another one.” There’s not a lot of introspection or formal feedback.

Q. Where do you still see the biggest need for improvement? And what concerns you the most?
A. There is some missing capability in the field. There are 200,000 LEED APs out in the market right now, and they are the predominant green real estate experts because there aren’t any others, so they dominate. But they’re somewhat focused on LEED, which is an energy and environmental performance play—it’s not particularly lined up to business results, nor is it lined up to the way commercial real estate is developed, say, inside the Fortune 1000 space.

So a lot of experience around one-off buildings, but it’s not yet easily transferrable to the real estate pipeline, particularly one that’s growing year over year, one that’s dynamic. So you have a miss in terms of the professional service or the talent on commercial real estate in that we’ve got the environment and energy performance part figured out. There’s a new real estate executive on the job coming out of the C-suite, someone who’s trying to line up real estate to corporate social responsibility and global reporting and carbon. But there’s nobody who knows how to really link it all up; there is no professional that’s tasked with that.

The biggest need for improvement I see is that next generation of professionals really has to learn how to work closer than ever—design plus development, and that would include, under development, enterprise driving the program, facilities management driving the operations of the project, and construction building

it the way that is most flexible for the future.
There’s a lack of an overall strategy when sustainable real estate portfolio programs get out of the gate these days. Mostly what’s happening, or what we see, is a notion of, well, if it worked great on one or two or 10, let’s do it on all. And then the spend to do that gets significant and nobody’s really measuring, well, are we spending effectively from a business results point of view—beyond that we’re good guys and we’re building buildings in line with our core values around corporate social responsibility?

Q. Do you think that’s the next phase? Do you think people are starting to realize they need to do that?
A. What’s happening is that the enterprise and product development and market share initiatives that most Fortune 1000s have learned to do quite well around their core competency is showing up at the real estate executive team level in a way they haven’t seen before. I think that’s the significant change or the readiness question for commercial real estate execs: Can I line up to that process? Do I understand enough about sustainable design and how the building can affect enterprise and produce results well enough to put it into that business case format? …

There’s a higher hurdle for real estate to get over than in the past, when their view was, “Well, you know, we have a certain amount of dollars on our balance sheet in real estate and we’re kind of trending along and everybody’s fat and happy with business as usual.” I think that’s the change we’re seeing.

Q. And with a multi-tenant building you’d have to find ways to measure performance that can apply to all the different types of tenants, as well as the property owner.
A. We could look at that a couple of ways. One is, what is the purpose of the owner? For a real estate investment trust or a developer of build and hold, it’s probably something around, “How do I maximize my building performance with a disparate set of users that are all over the map in terms of energy use or hours of occupancy or modes of transportation to and from the building—where I have an old-school company where maybe everyone needs to drive and then I have a young upstart company where everyone wants to ride their bike.”

How do you handle cars and bikes, because parking spaces are really expensive to build and bike racks are not, but then you need showers, which are also expensive to build.

How does the product change to accommodate the dynamic and the shifting workforce would be the question that the developer would need to answer. … What if growth was not about the old world model, where growth equals more square footage? You’d have a small tenant you’d hope to move from suite A to A plus B, and then A plus B plus C. What if it was, “Well, I really need to accommodate their growth in terms of can we densify rather than get more square footage?” Is there a way to provide amenities that will have more workstations that are touchdown points that maybe are in a common area rather than the leased area? Is there a way for me to allow them to grow one per seat versus doubling up on desks until it’s completely unworkable and then they finally take some more space? Or what often happens is they change buildings.

As a developer with office space, do I need to become more versatile around IT, because if I can locate them in buildings I already own and you add expansion space through an IT connection, is that another way to grow a tenant? As a tenant, do I let people work from home but beef up the amenities at the office so I attract them to the office, where the collaboration happens, and yet not have to pay for the real estate that I typically would in the old model?

Q. Where has the commercial real estate industry made the greatest progress?

A. You can’t go to any commercial real estate conference where there isn’t either a sustainability track or it’s actually the theme of the entire conference. It seems to be very well established as a core element, not a fad or a trend. I think most people think it’s here to stay. And I think that’s true because the drivers for sustainability at the meta level, at the industry or even at the societal level, are real.

Climate change, regardless of the source, seems to be here. It’s not predictable the way it used to be. The introduction of technology in the workplace and the changing age shift in the mean worker are creating demand for a lot more mobility. Employees view themselves as self branded, and they move their talent around to where the best opportunity is. It’s not like you go and work for someone for a long time and retire out of there. That model’s gone. And energy and water demand issues are acute, and our population continues to grow, and we continue to put demand on energy use for information technology, which takes it away from other sectors. So that pressure’s not going away. That’s why we’re seeing so many renewable energy projects around the country: is the growing awareness that we need new energy sources.