                         |
 | |||||||
Ten Planning Successes It has become popular in recent years to highlight the failures of planning. Using the following definition of success—a local and public initiative focusing on the built or natural environment that results in a net private and social benefit, and which can serve as model for similar efforts—this article identifies ten planning initiatives that succeeded. They include, in rough chronological order: the California Coastal Act and the Chesapeake Bay Program; planning consistency laws, the Northeast Corridor (Rail) Improvement Project; New York City's Times Square and Battery Park City; Portland's urban growth boundary; the low-income housing tax credit and the historic preservation tax credit; downtown ballparks; and land trusts. This article demonstrates how major public planning efforts can succeed, by avoiding over-reaching, framing favorable and image-able outcomes, adhering to clear goals within an adaptable approach, and investing in institutional and implementation capacity.
Realizing the Value of Corporate Real Estate Management This study examines how corporate real estate management (CREM) departments are viewed within the larger corporate culture. It draws particular attention to the European and U.S. markets, focusing on four specific sectors: banking, energy, telecommunication, and transport and logistics. The study reveals that although corporate real estate remains an important asset on corporate balance sheets, it is currently "under-managed" in both the United States and Europe, and CREM departments lack prominence in most companies. As a result, companies are not realizing the full value of their real estate assets, and are turning attention to them only in difficult times when property valuations are generally depressed.
International Financial Reporting Standards in Real Estate Real estate has for many years been a global business with a steady, international flow of capital despite the bumps and friction caused by different currencies, languages and accounting from one country to the next. However, one of those friction points may soon be removed as the world moves rapidly toward a single set of accounting and financial reporting standards, known as the International Financial Reporting Standards, or IFRS, today used in more than 100 countries and expanding rapidly. The SEC recently issued its "roadmap" outlining milestones that, if achieved, could lead to mandatory transition to IFRS by U.S. issuers starting in 2014. This article describes the expected impact of the adoption of IFRS on real estate companies. IFRS provides enhanced comparability to global competitors and perhaps greater opportunity to raise capital globally, but the adoption of IFRS will have implications beyond financial reporting, including impacts on a company's processes, information systems, and human resources. Real estate companies should start their planning now and lay out a roadmap that provides for an appropriately integrated and sustainable conversion to IFRS.
Development Regulations and Housing Affordability The most effective way to reduce the cost of all housing is to reduce the cost of development. In recent years development costs have skyrocketed due in no small part to the proliferation of new regulations. Unfortunately, in far too many cases the perceived benefits of these regulations do not justify their impact on housing affordability. This article examines this issue by describing the effect of land-use regulations, Urban Street Design Guidelines (USDG) and the Post Construction Controls Ordinance (PCCO) in Charlotte, North Carolina. Such regulations can increase the cost of developing a single-family lot by 35 percent and thereby increase the selling price of a single-family home from $120,000 to $170,000. The effect on rental housing is also discussed. The author also concludes that the effects of land-use regulations have an inordinately large impact on low-income homeowners and renters.
Is This the Worst Ever Yet? In this publication's last issue, John Williams and the author determined that the 2008 recession was the "least worst" of the recessions of the past forty years. Now, the author says, we are in the second-worst recessionary period of the last forty years, and it is worsening fast. But do not bet against the U.S. economy, he cautions. Entrepreneurs are still out there, and with a modicum of political leadership and stable economic policy, we will get through this stronger than ever. Realistically, we cannot save everyone, but in the Chapter 11 limbo, companies can try to reconstitute themselves; "special" bailouts do nothing but redistribute income according to political clout. Losers must lose if winners are to prosper. If one or more of the "Hopeless Three" (U.S. auto manufacturers) goes bankrupt, their competitors' sales will rise; their operating margins will improve, allowing them to avoid financial distress and expand output and employment domestically. As with wildebeest in the Masai Mara, death is essential to life. People knew that leverage could be risky. Debt is wonderful on the upside, but remorseless on the downside. This lesson will hopefully be remembered for a new generation.
The Global Financial Crisis and International Property Performance Commercial real estate did not cause the global financial crisis, but is caught up in the same vicious cycle of value destruction as virtually every other asset class. Securitized real estate has already gone through several rounds of re-pricing; private equity real estate will also experience significant but more drawn-out re-pricing. Although price discovery, re-pricing, and eventual recovery differ by country, the global crisis also reveals some surprising similarities across markets. These are worth understanding, since debt and equity now move with relative ease across political borders. Academic research shows that during a financial crisis all asset classes become highly correlated, and the risk-reducing power of diversification is temporarily lost. But research also shows that banking crises have happened repeatedly and don't last forever. In 2009, real estate investors must rely on rational analysis to guide their investment decisions. This advice is especially relevant (and difficult to execute) when markets are in turmoil. "Keep your head, when those around you are losing theirs," wrote Rudyard Kipling. In the years ahead, many real estate investors will be losing their heads: expect to see assets fall into the hands of financial institutions that are unprepared to operate them effectively over the long haul. And expect panic selling by those who need to raise liquidity in a hurry. Countries like Australia, Korea, and Germany are likely to move through the re-pricing process faster than the United States. While the price correction process is painful, it is also a necessary pre-condition to a capital market recovery by laying the foundation for stronger performance in the years ahead.
Black Swans in Blue Suits In his bestseller, The Black Swan, Nassim Nicholas Taleb recounts that, based on tens of thousands of observations in the Northern Hemisphere, it was always assumed that swans could be only white. Then a black swan was sighted in Australia, and the whole theory collapsed. Every assumption that we have about our world and its future is vulnerable to the black swan phenomenon—the unexpected event. "The world we live in is vastly different from the world we think we live in," he writes.Taleb, who is amathematical trader, applies this insight to the world of finance, which he characterizes as consisting of over-compensated men in blue suits living in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk management systems. People underestimate these extreme future events because they are unimaginable until after they occur. Statistical modeling deals with "known unknowns;" black swans are "unknown unknowns."We are asymmetric in our perception of random events, attributing our successes to skill and our failures to external events beyond our control—that is, to random chance.
Economic Downturns and the Architectural Profession In November 2008, the Architectural Billings Index, which measures firms' commercial building activity, dropped a massive 30 percent compared to a year earlier, registering the lowest score in its thirteen-year history.The construction industry is famously cyclical, and architectural firms regularly deal with slow-downs by down-sizing, reducing operating costs, tightening their belts, and holding their collective breaths until the inevitable recovery. Longer downturns have a major impact on the nature of architectural practice, and this article presents historical examples from the Great Depression: the disruption of architectural apprenticeship; a change in the types of buildings commissioned; and a change in architectural style when building starts up again.
|
