‘Gimme Shelter’ with Daniel Gehman: Halftime
- Apr 20, 2010
OK, so it’s like we’re all in the locker room, right, and, say, the other team has a lead of at least one, and maybe two touchdowns. We’ve just received some combination of dress down and build up by our fearless leader and mentor/coach, and we’re all chomping to get back on the field to see if we can’t rally to pull this one off.
Our industry is such a mutually dependent thing. Though each of us on a development team may carry the ball for a different stretch of the field, no individual would really have a salient function without the rest of the huddle. So we all keep scratching, digging, looking, waiting, and imagining how great it will be when we get to play again.
This week I heard a bit of news from one of my clients, a large national apartment REIT, that they had recently “green-lighted” a number of projects that had been slumbering. Hooray! (I hope it’s one or two of mine!) Together with a perceivable increase of the number of calls from both new and existing clients about possible deals, it certainly seems like the fog may be starting to lift, one pixel at a time.
It’s got to be a tough patch for the decision makers. Think of the revenue stream I could generate with a crystal ball at this moment! The conventional wisdom, at least in rental apartment circles, is that nobody wants to wait too long to bring new product to market lest they miss a couple of years of hefty run-ups in rent. Naturally, this sentiment sounds absurd at the moment, but when you consider a typical high-density, podium-style project with around 200 units is going to take conservatively two years to build—even if the permits are in hand—the time frame starts to feel a bit more relevant. So we’re stalled or still moving slightly in reverse at the moment, how long does that really take to turn around?
Everyone knows it’s cheaper at the moment to buy an existing, performing asset than to build new from the ground up. And yet, at best, these established properties changing hand can be fluffed and buffed, which is appropriate for the market, but they are not now, and can never be, the new thing on the block, for which there will always be an interest. What are the right signs that will encourage the decision makers to pull the trigger and start the next new things?
Perhaps rent stabilization would be an element. But what’s the delay, I wonder, between a leveling off of rents and the beginning of a new acceleration cycle? Again, I wish I knew.
What nobody wants in the dreaded ‘double-dip’ recession, where, just as things seem to be moving in the right direction, they stall in mid-air and begin a sloppy second sludge into backward movement. May it never be!
Watch the consumers. My financial advisor told me once that the reason recessions end is because folks grow tired of being super thrifty, and just go out and start spending again. So, basically, the downturns end due to boredom. Would only that were the case we see being played out in front of us.
I don’t know. The Dow’s over 11K today; last month the economy added jobs, oh—and did anybody mention it’s an election year?
Put me in coach, I’m ready to play.
(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)