More than 500 of the region's top real estate industry executives gathered at the Philadelphia conference to hear the less-than-rosy news. RealShare Philadelphia, along with other RealShare events nationwide, is produced by Real Estate Media, publishers of GlobeSt.com, GlobeSt.RETAIL, Real Estate Forum magazine and other print and online publications devoted to commercial real estate.
Arguing that we are in a cycle, not a new economy or new paradigm, speaker Dean Adler, CEO and founder of Lubert-Adler, kicked off the conference at the Doubletree Hotel by saying, "There's too much money. Lenders will finance anyone. There's a lot of short-term thinking for long-term investments." He called for a "reality check."
Adler cited the Center City condo market as a prime example. "Where's the demand?" he asked, predicting the "huge excess will get very ugly in 18 months. It will burn off to a half-way decent market, and quality will sell over time," he added, specifically citing the Rittenhouse and Washington Square markets. The experience, however, "shows why we should stick to the fundamentals" of supply and demand.
During a Town Hall meeting, Bill Hankowsky, CEO of Liberty Property Trust, said, "There's still a wall of capital trying to invest in real estate," and he expressed concern that the money might cause over development. He, too, urged discipline. John Derham, senior managing director of Cushman & Wakefield, noted that while vacancy rates are falling, rental rates have risen little over the past seven years. Bill Glazer, president of Keystone Property Group, added that office and industrial rates need to rise to cover increased construction costs.
The upcoming mayor's race also came into the discussion. The election is seen as critical. With a field of five Democratic candidates, Hankowsky noted that the new mayor will win by 8,000 votes. Glazer added that the winning candidate must capitalize on the many opportunities that exist here. Hankowsky agreed: "We need an activist mayor."
In a session on the outlook for Center City, David Fahey, president of Binswanger's commercial division, said, "Pay to play has hindered this city. We need political leadership." He also urged for a plan on "how to grow a city in a smart way."
"We've had a good run," said Wayne Fisher, SVP and director of Grubb & Ellis, of the office market. "Philadelphia has been whacked twice by mergers and acquisitions and corporate downsizing. Is there another tidal wave heading our way?" He said some "storm clouds are starting to brew," and wondered if banks might head for a major consolidation. He remains optimistic for 2007, but, in 2008 and 2009, "the wheels are going to come off a little bit."
"Retail is more optimistic," said Steve Gartner, president of Metro Commercial Real Estate. "Retail sets the tone for what goes on upstairs [in office buildings]. In Center City now there's unbridled demand. Our prospects' question is should we expand in Philadelphia or Scottsdale?"
Michael Desiato, group publisher and editorial director of Real Estate Media, went inside the real estate mind of Don Pulver, president of Oliver Tyrone Pulver Corp., who made the case for beautiful buildings. "There are pretty few beautiful buildings being constructed," he said.
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