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Haha developer expectations often dont work out-they frequently get it wrong. DC is not the first city to have this much building in anticipation of future growth. So to say that everything will work out is really not accurate because we don't know.
They make money from leasing it or selling it - ultimately rents pay it
If you know someone in the industry, ask them. The money is in the construction of rental properties. Why do you think many buildings are sold before a tenant even rents?
They're doing a crane count over on the Downtown LA development forum on SkyscraperPage. So far the count for downtown is 10:
Wilshire Grand Tower x3
Avant
Onni
Olympic and Hill
Good Samaritan x2
Da Vinci
Sares-Regis Little Tokyo
With a few more that will be erected in the coming weeks.
As for the rest of LA, I have no idea. Maybe 20 more cranes? 30? Seriously, no clue. This is the poster child of polycentric cities and I spend most of my time in and around DTLA.
If you know someone in the industry, ask them. The money is in the construction of rental properties. Why do you think many buildings are sold before a tenant even rents?
no there are builders and maitenance companies - if they are not rentable then the sale value is diminished. Building a property that is not valuable is not good
Value of properties is based on the Net Present Value of the future cash flows - this is all very simple actually
Real estate sales and leasing is driven by a variety of factors but it's strange that DCs leasing activity isnt as robust as some would have us believe. Meanwhile in SF:
Quote:
The frothiness is being whipped up by a
combination of the robust tech economy,
low interest rates and a supply of new
condos that is at an all-time low. San
Francisco has fewer than 100 new units
on the market, compared with the average
of 1,000 units on the market at any given time between 1999 and 2009.
Demand for DC's rentals is very very strong. Every city, even SF, has had recent articles questioning the sustainability of either the economic growth that is occurring or the subsequent construction.
MDAllStar, I don't personally know much about R&D space, per se. I know the very basics about the drivers, and I do know that most R&D space is in low-rise buildings (for a reason). So doing "urban in the burbs" sounds very plausible. However, a lot of R&D is quite top secret. Most R&D space in the Bay Area is a little off the beaten path (a lot in Hayward in the East Bay or near SFO, for instance). You'll find industrial looking or low-rise office looking buildings, and those are likely R&D with very peculiar buildouts. Then next to them you might find actual office buildings, mid-rise or even high-rise.
I don't see too much mix of uses with R&D space. UCSF has R&D space in the city of SF closer to residential and retail than anybody else, generally speaking, but UCSF is a little different than say Genentech or Gilead Sciences. Those guys operate under a veil of secrecy, LoL, and you won't find apartments or general office (for say law firms and financial services firms) right next to where they operate. Tech is a bit like this, to a degree, as well. Most of the blue chip tech firms keep their R&D safe and secure on campus and in relative isolation down in the Valley.
Cambridge is the best market to study for Life Sciences and R&D. It's about half R&D and half office, but is basically entirely Life Sciences with a smattering of tech (Microsoft, I think Akamai as well). Like companies in the Bay Area want convenience to UCSF and Stanford research, to a much greater degree even, the companies in Cambridge thrive by being close to MIT and Harvard. But this is all relatively new. Route 128 in suburban Boston used to be the epicenter of Life Sciences as recently as 5-10 years ago. Only now has it basically all pushed into the city, which explains well more than half the cranes in the skyline. SF is seeing somewhat of a parallel with Mission Bay, but Life Sciences firms here are still mostly keen on their suburban locations, it seems.
PS: None 'a ya'll know what you're talking about when you describe how developers make money. "Making money" is also not so cut and dry in the world of RE finance
No, the DC market isnt doing nearly as great as some are claiming. From a simple supply and demand stand point, they are essentially adding thousands of units to what appears to be a glut of inventory as it is.
Quote:
A sizable upturn in apartment completions
that will hit at a time when job production
has cooled somewhat should position
Washington, DC among the nation’s revenue
growth laggards during 2014. MPF
Research anticipates that the U.S. capital in
fact will be the worst performer for revenue
change across the country’s really big
metros, with declines in both occupancy
and rent achievement combining for a total
loss near 2%.
Demand for DC's rentals is very very strong. Every city, even SF, has had recent articles questioning the sustainability of either the economic growth that is occurring or the subsequent construction.
MDAllStar, I don't personally know much about R&D space, per se. I know the very basics about the drivers, and I do know that most R&D space is in low-rise buildings (for a reason). So doing "urban in the burbs" sounds very plausible. However, a lot of R&D is quite top secret. Most R&D space in the Bay Area is a little off the beaten path (a lot in Hayward in the East Bay or near SFO, for instance). You'll find industrial looking or low-rise office looking buildings, and those are likely R&D with very peculiar buildouts. Then next to them you might find actual office buildings, mid-rise or even high-rise.
I don't see too much mix of uses with R&D space. UCSF has R&D space in the city of SF closer to residential and retail than anybody else, generally speaking, but UCSF is a little different than say Genentech or Gilead Sciences. Those guys operate under a veil of secrecy, LoL, and you won't find apartments or general office (for say law firms and financial services firms) right next to where they operate. Tech is a bit like this, to a degree, as well. Most of the blue chip tech firms keep their R&D safe and secure on campus and in relative isolation down in the Valley.
Cambridge is the best market to study for Life Sciences and R&D. It's about half R&D and half office, but is basically entirely Life Sciences with a smattering of tech (Microsoft, I think Akamai as well). Like companies in the Bay Area want convenience to UCSF and Stanford research, to a much greater degree even, the companies in Cambridge thrive by being close to MIT and Harvard. But this is all relatively new. Route 128 in suburban Boston used to be the epicenter of Life Sciences as recently as 5-10 years ago. Only now has it basically all pushed into the city, which explains well more than half the cranes in the skyline. SF is seeing somewhat of a parallel with Mission Bay, but Life Sciences firms here are still mostly keen on their suburban locations, it seems.
PS: None 'a ya'll know what you're talking about when you describe how developers make money. "Making money" is also not so cut and dry in the world of RE finance
I can tell you know what you're talking about. I like that. I will admit that I was speaking more so about DC's RE finance with our tenant purchase laws. I know people at JBG and they are the ones who said the money is in the construction of buildings. That may pertain to DC because of our laws. Once a building is built here, it takes forever to sell it because the tenants get first rite to purchase (TOPA). Many developers sell buildings before they are done here because of that.
Also, they infuse that cash into other projects.
Last edited by JMT; 04-02-2014 at 03:31 PM..
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