Every cycle brings changes to development. Back in the go-go ’80s, corporations favored elegant, high-profile headquarters, and such trophy assets attracted foreign investors, as well. That changed in the mid-’90s, as the United States emerged from recession. While Japanese investors sold off a list of name-brand properties topped by Rockefeller Center, corporations, chastened by the downturn, switched gears and sought out simple, plain exteriors and smaller spaces.
The wheel turned yet again in the 2000s, when everything from office assets to shopping centers to mixed-use properties featured more creative exteriors, and interiors to match. With the notable exception of some luxury apartments, however, projects were marked by a less opulent scale than had characterized development in the ’80s.
What will the next development cycle be like? By all indications, developers have become more strategic and financiers remain extremely cautious. At this early stage, the priority seems to be operational accomplishments like cost savings, productivity and greater efficiencies. (Apartment dwellers now gravitate toward functional amenities and are concerned about nominal rent.)
Sustainability has shown staying power, but the reasons for pursuing it have changed. It is now much more than a watchword. While tenants’ willingness to ante up for official certifications varies, according to developers and designers, corporations and other space users are primarily looking for performance. “Tenant representatives and their clients are way too sophisticated to simply say, ‘What’s your certificate say?’” explains John Mooz, senior managing director for Hines in Houston. Instead, they ask about airflow, lighting and other technical issues, and they expect straight answers.
That kind of attention to environmental detail is necessary for a couple of reasons: Cost savings, of course, but another consideration is also at work. Although employment levels remain historically low, developing talent for the long term is still top of mind. With the new generation of workers making environmental concern a top priority, companies and properties that fail to show similar values will fall short in the competition for talent and tenants.
Behind the scenes, the project team is gaining ever more efficiency and new capabilities as developers, designers, managers and even tenants are forced to work together earlier in order to make better use of BIM and other cutting-edge tools. It also improves the team’s chance of earning incentives, notes John Gering, managing partner with HLW, and reduces the risk of reworking the project in midstream. “I have had meetings where the client mandated that everyone involved be part of the meeting,” he said. Closer collaboration also improves preparation for the financing meeting. A development team must have all its ducks in a row or else risk having its equity providers and lenders alter the plans.
What else can you expect from the next development cycle?
Suzann D. Silverman, Editorial Director