Be sure to check out our podcast examining the development trends of 2014.
Business is Booming
By Mike Ratliff and Jack Kern
We are happy to report in this year’s MHN-CPE Development Firms ranking that new construction has continued to make a big statement in 2013. This is impressive because breaking ground is not an easy feat. Labor and material costs continue to rise. In spite of the persistence of low interest rates, lenders have become more selective as deal terms for construction and permanent loans tighten. But ultimately, money talks, and these projects have demonstrated that the location and delivery of space will bring solid returns in a time of worldwide financial volatility.
An expanding tech sector is fueling a need for trophy-quality build-to-suit office space. The shift towards overnight and same-day Internet retail delivery is putting pressure on the industrial sector to deliver distribution space adjacent to core cities. Urban areas are tight in regards to the supply of quality units as both Gen Y and the Baby Boomers seek space in dense, walkable communities.
Developers are traditionally an optimistic lot, and this group is no different. More than 18 percent of these firms (and some of the bigger players, at that), project a significant increase in their development activity over the next six quarters. More than 20 percent predict a modest increase, while 50 percent plan to deliver at a pace consistent with quarters past. We expect that, increasingly, this new activity will move from the trophy markets into the secondary investment markets as the economy continues to improve.
Our development survey asked a series of questions relating to current and future plans, levels of investment in each asset class and preferences in location. The rankings demonstrate that these are all great companies. The strongest firms in our results showed a large national presence, variability in investment sectors and geography, and aggressive plans for the future. Our rankings reflect our belief in each firm’s capacity to perform as we enter a new year.