Development Doldrums: U.S. Land Developers Look Up from the Great Recession

Developers, investors and constructors gathered at the annual meeting of the Urban Land Institute to measure the health of the U.S. construction industry.

by Lawrence J. Fabian

The annual meeting of the Urban Land Institute (ULI) on October 13-15, 2010, was an excellent place to measure the health of the U.S. construction industry. Gathered were developers, investors and constructors who have survived the economic hardships of the past two years. The mood was grim, sober and cautious. Delegates heard of “continuing ­uncertainty” and “still-deep malaise.” There may be some opportunities in new apartment projects, but forget office and retail construction as a place to invest.

Delegates arriving at the Walter E. Washington Convention Center were greeted by a series of escalator pairs in a long, oblique lobby designed to allow them multistory opportunities to easily spot friends and allies, or scan for potential contacts. The facility is located in Washington, D.C., a mile or so from the White House.

Construction Prospects for 2011

ULI conference organizers and speakers made no attempt to hide the pain of the last few years. Most are squinting to see signs of hope, praying that no outside event – unforeseen expansion of our warfronts, terror strikes, oil spikes, ­environmental catastrophes, etc., as we approach 2012 and its mystical dimensions – might unsettle our pre­carious “recovery.”

“The problems are obvious, but the solutions oblique,” rings one ­article in ULI’s impressive and meaty annual publication 2011: Emerging Trends in Real Estate. In U.S. markets, the demand for office, retail and most housing is expected to be saturated for the next several years. Why invest in buildings when vacancy rates are high? Only rental apartments are drawing investment, but even this is cautious. They would best be located in one of approximately 10 big, obvious “Gateway 24-hour” cities – large, metropolitan, coastal areas that are well served by a major airport or two. The top 10 U.S. gateway cities are: Washington, D.C., New York City, San Francisco, Boston, Seattle, Houston, Los Angeles, San Diego, Denver and Dallas.

Re-Urbanization Trends

In this bleak economic landscape, there is something new and noteworthy. According to ULI number crunchers and prognosticators, the overall U.S. residential tide is drifting from fringe suburban locations inward toward “urbanizing suburban nodes” and 24-hour downtown districts. In other words, suburbs are passé. This is quite new, following two or three generations of flight from U.S. cities that were overwhelmingly perceived as unsafe, polluted, congested, parking head­aches, and often just plain ugly. In international circles, American cities and towns are more noted for their freeways than vibrant community life.

This means that most new construction in the U.S. over the next few years will be more urban. This includes downtown sites. Certainly, there will be less one-story spread and more nodes of intensity, especially infill ­projects in mobility-managed districts. Buildings will be taller, requiring elevators. They will be more clustered in dense pedestrian-friendly districts. Growing communities of seniors will demand mobility assistance. Enter the ­professional district mobility manager.

It is easy to see that large districts, ­especially those with complicated topog­raphies, will need escalators, moving walks, paths for bikers and other electric ­mobility devices. This requires a district management structure – an expansion of facility management with its technical staff and resources, these days increasingly coordinated with public safety and homeland security.

Private-property owners will continue to be the primary market for elevators. However, they are not the only type of customer. As frequently noted in ELEVATOR WORLD news, public-transit authorities also buy and ­operate elevators, escalators and moving walks, and so do airports, large convention centers and stadiums. ULI’s forecasts imply that over the next few years, district management authorities (professionally managed groupings of private owners) will ­increasingly buy and manage ­mobility infrastructure.

ULI Priorities

ULI’s chair, Jeremy Newsum of ­London, spoke of stewardship to the 6,000 people in attendance at the meeting. Newsum called for more developer attention to the city around their buildings as correction for letting short-term project ­financing drive the whole development process. This was pretty progressive talk for real-­estate developers in the capital of a nation where voters screamed, “Downsize government!” the next month. ­Developers, more than most, tend to love private markets. The overall tone of the conference and the lively exhibits were quite green – Leadership in Energy and ­Environmental Design-certified with low carbon footprints.

No one shied away from being green. Numerous ­exhibitors showed off stunning designs and plans, and bragged of low-carbon construction techniques. There is clearly growing demand for efficiencies in buildings. ­Architects and building equipment suppliers happily showed their projects and products. Planners and engineers displayed compact, walkable urban centers and communities. There is much to be said for high professional standards, and they were in abundance at ULI.

Developers need skills and insights to create prosperous density without increasing congestion. To achieve that, parking supply must be professionally managed in the broad context of a district-wide strategy. This requires staffed and funded district (or campus) management. It can be accomplished through the public or private sector – preferably, with both working together. Whatever the structure, some kind of organization needs to take on the responsibility to manage mobility. This can extend to public eleva­tors, escalators and other mobility infrastructure.

One ULI session highlighted “One Planet Communities.” These are projects deliberately designed to get folks out of the expensive addictions of owning cars and driving them everywhere. If we all lived like Americans, we would need five planets, explained Greg Searle of Ottawa. Speakers described the popular parking-free One Brighton development in the U.K., the rustic urban oasis Petite ­Riviere in Montreal (built with 0.8 parking spaces per ­residential unit instead of the suburban norm of 2.4), the zero-carbon “5-minute lifestyle” “Sonoma Mountain ­Village” with 1,900 units in California and the nature-­loving “Preserve in Stockton,” also in the Golden State.

If prospects for growth lie in large cities and densifying suburbs, how are further congestion and air pollution avoided? What roles will public elevators and escalators play in nodal transit-oriented complexes? ULI pays a lot of attention to this and related “best practices.” There was probably more buzz about those lucky enough to have work in China or other parts of Asia.

BIM Breakthrough Coming

A cultural shift in the world of architecture and engineering is happening with software advances in digital documentation. Building information modeling (BIM) will replace current computer-aided design and drafting, ­asserted Allan Zreet, AIA of Jacobs Engineering. This means that more technical effort will go into a project earlier in the implementation process, requiring key design decisions, such as on electromechanical equipment, to be made sooner. Attributes of building and infrastructure ­designs will be incorporated into easily editable construction documents, and these will filter down to schedules, specifications and quantities. This can include elevators, escalators and auto­­mated people movers (APMs).

BIM is not just better visualization. It enables good, ­upfront design coordination that promises to reduce risk and down-the-road need for expensive change orders during construction. The American Institute of Architects (AIA) has published BIM guidelines. Once BIM software is in common use and mastered by all the members of a project team, a right-click of the mouse from anyone in a web-connected design team will bring up digital details of, for example, horizontal and vertical circulation systems, making familiar two-dimensional construction documentation obsolete.

We will all brim with BIM in five years, predicted Zreet.