Industry in ’07: Green, Going Global, Getting Younger

Thomas Bisacquino, president of NAIOP, and Mike Mullen, 2007 NAIOP Chairman, welcome Al Beaudette, incoming chairman for 2008 at development ’07.

Even with lingering uncertainties about economics and a transitional period in financing and investment sale pricing in the next several months, the prevailing mood at NAIOP’s development ’07, the annual meeting for commercial real estate, held at the Omni Hotel in Atlanta, was remarkably chipper. The industry, as represented at the conference, seemed energized by a growing focus on issues of sustainability and infrastructure; global engagement; and the cultivation of young professionals.

Al Beaudette, Senior Vice President, Harsch Investment Properties, LLC and incoming chairman of NAIOP for 2008, set the association’s agenda for the coming year, which includes education, transportation/infrastructure and sustainable development.

If the tone for the conference was set by NAIOP’s Green Development Awards and Jonathan Fenton-Jones’ keynote address at the beginning (see Under Development column for details), it was solidified by Beaudette’s entreaty to the industry during the closing breakfast.Commenting on sustainable development, he said “I assure you it’s not a flavor of the month. We need to be in the forefront and have a voice in decisions made at local, state and national levels.”

Industry pros expressed content that real estate fundamentals are strong, though some acknowledged a change in the winds. Christopher Lee, president and CEO, CEL & Associates, said that the real estate cycle in the U.S. was about to change. “Real estate is a cyclical business that does not begin on January 1st of a year and end on December 31,” he said. “It roughly falls into 10-year cycles. The current cycle is growing from what we call customer connectivity. For every one of our clients across North America, it is customer share, not market share. The battle is who can get the most customers and hold on to them.”

Meeting attendees representing the diverse face of the development industry exchange ideas and experiences between programs.

And real estate is not the only realm undergoing change. According to political consultant Dick Morris, there is a climate change afoot in Washington, namely, “It’s going Democrat. It’s one of the major cyclical changes that happen.” He predicted that the presidential election would witness an increase from 60 to 70 percent voter turnout from 45 to 50 percent in the last election.

“You’ve more or less maxed out on conservative voters,” he said. “There is a sea change in American politics. Hillary will increase the number of single women voting from 28 to 35+ million voters.” He also predicted that 2008 will be as significant politically as 1974, 1964 and 1936; that it would usher in 58 Democratic senators, with four Republicans losing and four open seats going Democratic.

And the chances of Hillary Rodham Clinton becoming president? 100 percent, he said. Calling her “basically the George W. Bush of the left,” he remarked, “It’s horrific. 2009 and 2010 will see the biggest avalanche of liberal legislation.” On the positive side, he expected that she would be “strong on infrastructure investment.” He also expected that in 2010, the U.S. would turn back to a Republican Congress and that Clinton would be a one-term president.

Jeffrey Rosensweig, director of the Global Perspectives Program of Emory University, gave a mostly sunny forecast in his keynote address on “Domestic and Global Economic and Demographic Trends and Their Impact on Commercial Real Estate.” Among the positives, Rosensweig noted:

• The U.S. job market has been showing sustained growth for 49 months in a row. Service jobs are hot, though manufacturing is not.
• Global growth is decelerating but likely to be solid. Vietnam is a hot new emerging market.
• The forecast calls for two percent GDP growth in ’07, two percent in ’08 and 2.5 percent in ’09.

Development ’07 attendees take advantage of the numerous networking opportunities and informative discussions including this industrial green panel.

“I’m bullish, once we get past the short term,” he said. Among his concerns, though, is the exploding U.S. federal government debt. He also believes that “we will continue to see interest rate cuts.”

Advice from Pros on Being a Developer
An important educational focus at the conference was on attracting a diverse and younger workforce, reflected in growing attendance by under-35 and minority professionals. For young men and women entering the commercial real estate business, there is no “best route” into the business, according to a panel discussion at development ’07 with developers Dennis Cruzan, CEO, Cruzan Monroe; Douglas Howe, CEO, Touchstone Corporation; and S. A. Klatskin, partner, Forsgate Industrial Partners.

“The architect’s skill set is very valuable to the development company, however, I think those skills can be best utilized elsewhere in a company rather than designing buildings,” said Klatskin. “The skills learned at an architecture school are great. Not only do you learn liberal arts, which make you an interesting person, but you also learn how these buildings actually stand up.”

The panelists were asked if they would hire the college-age version of themselves today. One responded that he might hire a young version of himself in a brokerage capacity if he needed a broker but not in a development capacity because he would have had nothing to offer. This business takes a long time to learn. “It takes 10 years to become a good real estate developer,” said one panelist. “You need actual experience regardless of your educational attainment. If you are looking to get rich in development, you will get rich real slow.”

The panelists suggested that a young person out of school join a large company with good training capabilities and work there for five years. After that, if the person is hungry, he or she should go to a smaller development company. The panelists warned young professionals not to get too hung up on the salary levels at first. Good performance will engender great compensation. “You have to earn your way into this business,” said one. “The real need in the business today is for people who can go out and create opportunity; people who understand markets.”

Educational sessions provide opportunities to interact with speakers and fellow attendees on a variety of topics such as medical office design trends, capital markets and goods movement.

Attracting a Diverse Workforce
The message from the development ‘07 panel on “Mentorship and Diversity as a Competitive Strategy in Commercial Real Estate” was that attracting and nurturing a diverse workforce is not only the right thing to do, it is the smart business decision to make to remain competitive in the marketplace in the future. The panel included Ada Healey, vice president real estate Vulcan Inc.; Mary Hurley, CCIM, real estate and leasing manager, Pineloch Management Corporation; Eileen H. Circo, senior vice president-development, Lowe Enterprises Real Estate Group - East Inc., and Dwight S. Taylor, vice president Corporate Office Properties Trust.

The panel agreed that in today’s employment climate, finding and retaining the best talent tops every CEO’s list of issues. One speaker pointed out that women comprise about 10 percent of the senior level in real estate companies, while women represent almost 60 percent of college graduates. Therefore, if companies want the best talent, they have to get serious about hiring a more diverse group of people.

Other points made by the panel:
It’s about inclusion, not just compensation. Women and minorities in the workforce want to be respected. Pay is not the only critical element; women and minorities want to be included in the inner circle of decision-making.

Bring a different point of view to decision making. A diverse workforce brings a unique point of view to decision-making, which is critical in today’s complex world. Don’t do things the way you always have. At least one panel member felt that the continuing lack of diversity in real estate is more about old hiring habits than discrimination and prejudice. Typically in the past when a new person needed to be hired, the boss would turn to his old network. Expand beyond the old group to reach new, talented employees, panelists advised.

A diverse workforce gives you a competitive advantage. In reaching out to deal with community groups or to negotiate with your counterparts in public-private partnerships, having a woman or minority heading the team (not just on the team!) will give you a competitive advantage.

The workforce needs to reflect your marketplace. The panel warned that if you do not recognize the diversity of your marketplace by having a diverse workforce, your market will not recognize you.