(Save the date: RealShare Apartments comes to the Westin Bonaventure, Los Angeles, October 24, and RealShare Industrial 2012 comes to The Banker's Club, Miami, December 5 – 6.)
PLEASANTON, CA-A new development cycle could be on the horizon, since the fundamentals are pointing to economic recovery in several markets, but the recovery is on a market-by-market basis, Don Little, SVP of Bay Area operations and development for Harsch Investment Properties here, tells GlobeSt.com. “You have to look at each market differently, rather than across-the-board trends. New development may be just around the corner, since property values are improving as rents improve. By this time next year, I expect there will be new projects commencing in our portfolio.”
Little recently joined Harsch, a 60-year-old firm privately owned and led by president and CEO Jordan Schnitzer in Portland, OR, to oversee the region’s real estate portfolio and the Pleasanton office’s 14 employees in all aspects of leasing, operations and management. He also drives development efforts and is responsible for new acquisitions. Little, with more than 30 years of real estate experience, has developed more than 7 million square feet of industrial, office, retail and multifamily properties, and was SVP of the Northwest region for Catellus Development Co. prior to his nine-year stint at Opus West.
“Development volume has been way down for the law few years due to the recession,” Little continues. “Lower property values and low rents shut off spec development, and to some extent, access to real estate debt has slowed down new development. It has been an uneven recovery. Many markets are recovering slowly, while some are seeing amazing activity in corporate activities and apartment development.”
Little adds that many development deals being done today are for corporate-owned and –occupied facilities vs. speculative development, although the Bay Area is in the early stages of spec development because it’s so red-hot with technology. He sees signs of improvement in the market, “However, until employment growth increases significantly and is sustainable, I don’t think we’ll see widespread development among all areas, even though we are seeing early signs of rent growth and absorption is up.”
One reason for the lag in new development has been that current rental rates don’t justify replacement costs, so it doesn’t make sense for developers to build yet. Still, Little says he and Schnitzer “both see tremendous opportunity as the economy continues to recover to capitalize on our unique operating platform. We see the improving economy, and we intend to drive growth through acquisitions and development, with a focus on the major metro markets in the Western US, which is a great place to do business.”
He adds that when the economy grows in a tangible way, the market will pick up. “It’s just around the corner, rather than a few years ago when everyone wondered when it might be.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
