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Changing with Development Cycles
The widespread decline in residential condominium sales, with no promise of an early revival, is once again a stark reminder that to cope with shifting markets, cycles and tastes, the developer needs to be well versed in a variety of property types.
That is the strategy that Alex B. (Andy) Andrews, IV, president, Dominion Partners, Raleigh, North Carolina, employs at his firm. Over the past 10 years, Andrews has been responsible for over $2 billion in development, acquisitions and leasing of commercial office, multi-family communities, high-rise condominium projects and mixed-use developments.
“A key to staying alive during different market cycles is an ability to change with those cycles,” he explained. “In our experience, when one market is down, another one will be up.”
An example he cited is the condominium market vs. apartment rental market. “When residential sales were strong, rentals were not. Now residential sales are tapering off and rentals are becoming stronger.” This might be a good time to develop rental apartments, although he warned that every market is different and needs to be looked at individually.
Andrews was asked why some office and industrial developers shy away from developing an expertise in condominiums altogether. “It is very time consuming and it is much more complicated. In office and industrial development, you are building your standard footprint of your office or your warehouse. You know what works in the marketplace. With condominiums, you do not know what the market will accept until you deliver it. Condos are a lot of work but also a lot of fun.”
For more information
Dominion Partners:
www.dominionpartnersllc.com
Can a Green Spec Office Building Give You the Competitive Advantage?
Developers have complained that green does not blend well with spec office because tenants will not pay the extra cost required. Liberty Property Trust, however, fully expects to grab the market advantage with its new 80,000-square-foot Class A spec office building in Jacksonville, Florida, for which it will pursue Leadership in Energy and Environmental Design (LEED) certification.
According to Mike Heise, vice president and George Ledwith, vice president of development, Liberty Property Trust, rents in the new building will be fully competitive with other Class A space in the market. What gives the Malvern, Pennsylvania-based company the advantage is that operating costs and other costs will be lower for tenants.
“All of the benefits go to the tenants,” said Ledwith. “We are not asking more rent than the competition. The LEED aspect helps us in marketing the product over the competition because tenants do gain the benefits of lower operating expenses as well as many other benefits of the building. The big issue with LEED for tenants is getting them educated on the benefits.”
The two benefits most apparent to space users are lower energy and water costs. In the Liberty building, for example, it features waterless urinals, low-flow shower heads and sensor faucets, high energy-efficient HVAC equipment with special filters and carbon dioxide monitors, a highly reflective TPO roof membrane, as well as low emission paints, carpet and adhesives.
According to Heise and Ledwith, rent payments and building operating costs are substantial for companies but there is a far larger expense — employees. Employees are the biggest cost and they derive the biggest benefit of a green building. The carbon dioxide monitors in the Liberty building, for example, will detect higher levels of the gas and allow fresh air from outside to be pumped in as needed. Fresh air and natural daylight — another feature of the building — help people stay alert and working at their most efficient.
For more information
Liberty Property Trust:
www.libertyproperty.com
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How to Extend the Life of an Old Building — Try ‘Relifing’ It
When you want to squeeze five more years out of an old building before you sell it, rehab it or pull it down and start all over, do you really need to add marble floor tiles to the lobby or would replacement carpet do the job?
According to Julian Anderson, president, Rider Levett Bucknall headquartered in Scottsdale, Arizona, you want to spend just enough money to extend the building’s life. His firm offers a solution called “relifing,” which extends the life of a building a set number of years but keeps costs under control.
Rider Levett Bucknall will do an extensive study of a building in question, first determining the life span of the building if it were new. Then it looks at the life remaining in various components of the building, such as concrete frame, roof, exterior walls, carpet, drywall, paint, mechanical and electrical systems. The study will then tell the developer/owner how much usable life the building has left. It will also advise the developer what components need work to extend the life for a set number of years.
If the intention is to hold the building for another 25 or 30 years, the relifing study can help determine the cost of extending its life for that long — or determine that it may be cheaper simply to replace the structure.
“Once the study is done, the owner can direct his architects and engineers to spend their efforts on the particular areas of the building that need money spent just to extend its life,” he said. “It takes the guesswork out of where to spend money.” “Relifing” 80 state-owned buildings in Arizona has resulted in a savings of $26 million over a six month period, according to Rider Levett Bucknall.
By Ron Derven, contributing editor, Development magazine
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