Real Estate Forum - October 2011

NEWS FRONT
Industry Hiring Mirrors Slow-Growth Economy

LOS ANGELES—The news is filled daily with reports of deteriorating consumer confidence, Wall Street chaos and layoffs across the board. Earlier this year, the nation’s labor markets showed a slow and spotty recovery, and Christopher Thornberg, a locally based economist, pointed out that the post-recession job growth left much to be desired. So has anything really changed in the past seven months? The answer is definitely yes in terms of economic concerns. But how will those concerns translate for commercial real estate specifically?

According to Plano, TX-based Sayres Dudley, a founding partner of executive search firm Dudley & Associates, there is some hiring from REITs, though it’s no frenzy by any measure, and mortgage banking is also expanding somewhat.

Dudley points out that uncertainty is the bane of expansion, especially in hiring. While the typical real estate employer may not grasp all the ramifications of the European debt crisis, “that person does understand that it’s not good news, and thus it creates just one more level of angst,” he says.

The picture is somewhat brighter to
Anthony LoPinto, global sector leader of
real estate and managing director of
Korn/Ferry International’s New York
regional office. LoPinto says that instead
of slow and spotty, job growth is now slow
and steady. “There has been increased
activity,” he says. “I expect hiring will get
stronger over time, but it will be a slow-
growth situation.”
LoPinto points out that the increased
activity—especially in New York City and
London—has been relatively steady on
the investment side. He cites platform
investors, global life insurance companies,
private equity firms and investment man-
agers as the most active.

On the brokerage side, Los Angeles-based Chris Cooper, chief executive officer of Charles Dunn Co., says his firm is growing its service capability and aggressively expanding its entrepreneurial brokerage operations. “We are in the midst of a trend as companies realize there is a new economy and new dynamic in the real estate industry,” he says.

Rich Chichester, chief operating officer
of Irvine, CA-based Faris Lee Investments,
sees opportunities “if one is ambitious, cre-
ative, innovative and willing to view the
market today as different from the past.

Within the real estate service sector, the opportunities transcend geography and focus on skills, discipline and accountability.”—Natalie Dolce

S.1000 Creates Useful Energy Code

Commercial real estate scored a victory with a bill recently passed by the Senate Energy and Natural Resources Committee that calls on the US Department of Energy to set efficiency targets through a formal rulemaking process. In a departure from previous bills that would force states to update their building codes to reach arbitrary efficiency targets, S.1000, The Energy Savings and Industrial Competitiveness Act of 2011, creates new standards and efficiency targets for new construction of residential and commercial buildings. Most importantly, it allows affected parties, including the development community, to comment on the proposed changes before they are enacted.

NAIOP led an industry coalition to negotiate several changes to the original proposal
before it received committee action. These provisions considerably modified the direc-
tion of the bill—a joint victory for real estate developers who are
seeking to develop energy-efficient properties, and also for the com-
munities that the industry serves. Significant changes included:
Zero-Net-Energy. Creating ZNE build-
ings by 2030 was the original under-
lying goal of the bill and the basis
for setting efficiency targets for all new codes. Because this standard
is not attainable in the foreseeable future, especially without defin-
ing the role of on-site power generation, commercial real estate
successfully lobbied to have the goal omitted from the legislation.

Separation of commercial and residential targets. DOE can now recognize the significant differences in commercial and residential buildings and establish specific targets for each, instead of setting one goal that applies to all property types. This acknowledges that certain efficiencies may be practical for residences but not for commercial, and vice versa.

Economic considerations. DOE must consider the economic feasibility of achieving new targets for building codes, including costs and savings for consumers and building owners and a return on investment analysis.

Rulemaking to determine targets. DOE will establish a formal rulemaking policy that allows for comment by interested and infected parties in lieu of enshrining specific code targets in legislation.

Inclusion of retrofit loan guarantees. DOE will be authorized to create a loan-guarantee program for existing building retrofits, where it is assumed that the majority of energy is consumed and the most energy efficiency gains can be achieved.

Consideration of plug loads and other strategies. Plug loads account for a significant amount of the energy used and attributed to buildings, are typically not controllable by a developer and fall outside the scope of building codes. Not all efficiencies can be achieved during the development process and plug loads must be considered before code targets are developed.

The bill, co-sponsored by Sens. Jeanne Shaheen (D-NH) and Rob Portman (R-OH), is now cleared for a full Senate vote, though further action has not yet been scheduled. NAIOP and its real estate peers are committed to helping develop practical energy policies and building codes and will continue to work closely with the Senate and the House of Representatives to achieve these goals.

By Thomas J. Bisacquino

Thomas J. Bisacquino is president and CEO of NAIOP in Herndon, VA. He may be contacted at bisacquino@naiop.org. The views expressed here are the author’s own.