In Urban Land magazine, Jim Heid of Urban Green sums up the larger conversation that this blog is trying to be part of: "The still looming waterfall of maturing commercial mortgage – backed securities, the slowly thawing capital markets, and the ongoing uncertainty about where the next market will come from have left real estate professionals searching for solid ground. But is the industry retooling?
"After World War II, real estate development changed from an industry of locally focused entrepreneurs who took great pride and responsibility in their communities, to one of a global nature that delivered a range of 'products.' As companies sought to make these products conform to a formula or easily replicated template — be they garden apartments, grocery-anchored shopping centers, subdivisions, or suburban office parks — they provided diminishing returns in terms of their contribution to the natural environment and society.
"Recently, industry leaders are shifting the discussion from the topic of real estate to the built environment. Changing how the industry thinks about what it does as less 'immovable land and improvements' and more 'providing the setting for human activity' is anything but subtle. While similar predictions for change have been heard at the end of previous downturns, there are reasons why this time can be different:
- The changing calculus of value. Buyers and tenants in the next cycle will be calculating costs and value in a more multidimensional way than ever before. Quality of life, walkability, access to cultural facilities and events, a smaller environmental footprint, and even being part of the 'urban vibe' are among a more complicated set of variables that will help users determine perceived value. Cost of place — housing cost plus transportation burden — has become more evident in an era pushing toward $4-a-gallon gasoline. The WalkScore phenomenon and its increasing role in real estate listings is evidence of this new calculus of value.
- A movement from niche to portfolio. Today, responsible real estate investment is rapidly moving into the mainstream, fueled by institutional investors who see green as a proxy for increased long-term value—an insurance policy against future obsolescence, a sign of higher-quality construction, and a more holistic definition of their fiduciary responsibility.
"The next 24 months provide the industry with a strategic opportunity to build on what it does well, while adding the additional skills needed to emerge from the downturn as a powerful force for solving many of today’s most challenging problems. This moment presents a wonderful opportunity to retool the profession, reteach company teams, and expand the definition of value." Full article here (must be ULI member), and six practical suggestions from the author here.