If you didn't attend NAIOP's annual conference and marketplace in San Francisco, read ahead to find out just what an opportunity you missed.
Wow, what an opportunity to meet, greet and learn from some of commercial real estate's biggest and brightest! And although the theme of the National Association of Industrial and Office Properties' annual conference and marketplace, held on Oct. 15 - Oct. 18 and co-sponsored by National Real Estate Investor, was "reach the peak," this year's conference reached well beyond that peak and provided the industry with a conference from which everyone could benefit.
Some of the topics covered in the educational sessions included issues such as leasing in a strong market, growing in a global market and how the development side of the business is doing in the latest cycle, among others.
One of the first sessions offered at the conference was "Bust to Boom: Development Activity from Coast to Coast," with Gregory Specht of Specht Development Inc. moderating a panel consisting of Keith Bednarowski of Opus U.S. Corp. and Thomas Carr of CarrAmerica. This allowed attendees a view of how the latest boom cycle in real estate development has came about and where it's going from both the public and private sides of the business.
In both companies, size had a lot to do with surviving the recession. According to Bednarowski, Opus stayed afloat because if its market reach. "Some markets like Phoenix were down, while others like Minneapolis were doing well," says Bednarowski, who added that to survive the next cycle, Opus came up with a system in which spec space was considered inventory. "You compare the empty space to the amount of space you can have out there to avoid overbuilding."
And according to Carr, the most important factor in doing this is good market research. This is not only how CarrAmerica survived the recession, but it is also how it plans to avoid any other downturn in the market.
"Run your business like a business," says Carr. "Watch the market, and know what you are good at."
In another well-attended session, Jim Shapiro of the Peter Lawrence Co. moderated the discussion called "Leasing in a Strong Market: If It's Too Easy, You're Missing the Gravy!"
In his introduction of the session Shapiro explained: "We know there's nothing like a vigorous leasing market to perk up our spirits. Yes, they're perked, but what we're about to hear is that we can be complacent when things are going well and we can be in a situation where you are not making the most of today's market strengths."
The panelists included Jack McKinney of J.F. McKinney Associates, Gary Beban of CB Commercial and Julien J. Studley of Julien J. Studley Inc. And between the three, they discussed what needs to be done to the get the best returns, what has led to the recovery of the markets and what to do to continue your success.
"The key to success in any market is how to capitalize on what you have for a product in the market you're in," McKinney says. "In other words, you have to create both real and perceived product differentiation."
He advised attendees to enhance inventory by removing encumbrances, flush out and repair leasehold blemishes and prune product and manicure inventory, as well as define target markets, offer additional services such as HVAC, parking, telecommunications, and amenities like fitness centers with fees. He also said that you push the rates, because "you never know what you can do until you bloody your nose a little."
Beban then began his discussion of how the market got to be as strong as it is today by describing an event back in 1987 where he and Steve Segal were asked to do a similar panel discussion. "We were given 40 minutes to talk about the condition of the country," Beban says. "I had the rest of the country, Steve had New York City. He took 45 minutes of our 40 minutes to talk about the 22 buildings that were going up on the west side only of Manhattan. I got up and said, 'I don't think we should build another building' and sat down, and everyone went hush and we all walked out."
He then explained that after that he would never let another opportunity pass to prevent a recurrence of 1989 to 1995. So with that in mind, he said that although vacancies are low in most markets and everyone in leasing will say that they are doing a great job, he adds: "Nothing we do today has anything to do with what is happening in this marketplace. We can take advantage of it as Jack has explained, but I would like to convey the two factors that I think are dramatically impacting us and to make sure that all of us leaving this conference sensitive to it." The factors are that job growth over the last decade and a half was good growth and this alone decides the space needed, and commercial real estate professionals only control the supply.
And to round out the session, Studley forewarned people to "remember the past." He told attendees that he wasn't in full agreement with McKinney because he believes that you shouldn't look at squeezing every last cent out of product but to leave some money on the table and improve the product. He said, "If you remember, in the worst of the cycle, people tried to improve their product," because improving product improves your reputation as an owner. "Don't look at the last dollar you can get, look at long-term strategies. Look at goals," Studley said, adding that improved product also allows for increased rents.
Now, you may have noticed that in both sessions someone looked back to the beginning of the recession and how things have changed. One sign of this change is a the topic of a third session, which probably would not have existed nine or 10 years ago: "International Intrigue: Growing in a Global Market."
This session was moderated by Michael Pittana of V&A Properties Ltd., and panelists included Bradley Olsen of Atlantic Partners, Simon Milde of The Greenwich Group and William Rothe of CB Commercial.
In a general overview of the world markets, Milde explained that "the world has become a much much smaller place for a number of investors recently and a much larger place for other investors." He added that "it has become a much larger place for U.S. investors, in particular, who up until about three years ago were really concentrating their investment policies on just investing in the States."
The first market to be discussed was the United Kingdom. A market which Milde says has an economy that is growing in strength, a rebounding real estate market, an ample supply of cheap money, and available yields for investment properties which vary from about 8% to 14%. "The UK in my opinion -- and this is not just because I have an English accent -- happens to be the best buyer's market in the world at the moment," says Milde. "It has a combination of fundamentals that make it a very very exciting market."
Olsen then pointed out that German investors, who represent the largest group of foreign investors, are very interested in the U.K. as well. "What's fascinating is if you ask the Germans about the U.K. market right now they'd say, 'I'd love to buy there, but we can't find any product,'" Olsen says. "What's interesting, listen to Simon talk, it highlights one of the realities in the U.S. market as well as in Europe is that there are always two ways of looking at these markets. The problem for the typical or large German investor is that they've been focusing on shiny towers in central London, and they've bought so many that they have driven the vacancy down to 5%, and they haven't been prepared to go outside the city of London."
Other markets that are considered as doing well include France, Germany, Italy, Sweden, Brazil and Mexico.
Now if you missed the opportunity to get all this information firsthand, don't fret. The next NAIOP conference is a little less than a year away, and this time it will be in Atlanta.