Seismic Waves

On the eve of this year’s Mortgage Bankers Association Commercial Real Estate Finance conference, mortgage bankers and others involved in real estate finance are grappling with significant challenges. Yet they remain largely optimistic both that the end of the tunnel will appear around midyear—along with a return of the CMBS market—and that the industry is undergoing some necessary adjustments in the meantime.While these expectations for recovery may indeed be optimistic—other prognostications postpone the market’s return until 2009—at least bankers are taking a more cautious stance now with their lending criteria, as we discuss in our mortgage banking feature, “Aftershocks” (see page 42).Meanwhile, a city-by-city look at the commercial real estate industry’s performance shows some real variation in impact, in part due to the level of development taking place, especially condominium construction. According to reporting for our annual “Top Deals” feature, which begins on page 53, Austin, Phoenix and Atlanta, for instance, all saw a slowdown toward the end of the year, with Miami’s condo market likewise impacted and even steadfast Washington, D.C., enduring some tremors. While at least some of those markets anticipate stepped-up activity in 2008, other cities see rocky times still to come.Whether this year will bring more deals the size of last year’s, though, remains to be seen. In part because of a busy first half, last year featured quite a few large sales and leases. The sales were dominated in many markets by The Blackstone Group L.P.’s re-sales of chunks of the Equity Office Properties Trust portfolio—the likes of which are not expected again anytime soon—but other large properties also changed hands for high prices. And owing to those prices and the cost of land and construction, rental rates have largely stayed high.On the development front, significant mixed-use projects continue to dominate the scene, suggesting that, contrary to some predictions from a few years ago, there is still plenty of physical space and demand for these multimillion-square-foot projects. And some of them sport interesting themes, too.As bankers, developers, investors and others move forward, though, they continue to face hurdles, and this issue offers some tips to better ride out the seismic movement, including suggestions for strategy adjustments (see “Roll with the Punches” on page 28), better use of technology (see “Lost Connection” on page 30) and, for landlord representatives, ideas geared toward helping them improve performance of their clients’ properties (see “Trusted Advisors” on page 36).But because the industry continues to pursue some important new initiatives, even in the face of the current economic uncertainty, we also examine other trends in this issue. For instance, corporations continue to emphasize the importance of including green elements in their properties. Yet, as speakers discussed last year at the first annual Green + Design Conference and Expo, which we co-sponsored with several of our sister Nielsen Business Media Inc. publications, choosing the right construction products is not necessarily obvious. So we decided to delve deeper into this issue to help you better make these decisions (see page 32). After all, what appears to be green may in fact prove to be a horse of a different color by the end of a long trip or manufacturing process.