The Florida land market, for instance,
has matured significantly, which has led to a
scarcity of prime real estate—and more
sophistication in overall legal structures,
says Ira Teicher, partner, Stroock & Stroock
& Lavan LLP. “I’m seeing an evolution
from, say, a straightforward condo structure
to one that involves air rights for mixed-use
development,” he observes.
In such deals, a developer creates different air parcels and puts together various uses
to create a mixed-use vertical development,
he explains. The building looks the same
from the outside, but the various uses typically have their own entrances. In essence,
the building could have two lobbies—one
for the 10 stories of multifamily or condos
and another for a hotel.
Ground leases are another structure
developers turn to in order to mitigate land
costs, or when an owner doesn’t want to sell,
says David Eyzenberg, president of invest-ment bank Eyzenberg & Co. The tenant is
usually the developer who builds a property
on the land through a ground lease.
“Ownership is effectively split
between the landowner and the
leasehold owner, which owns the
improvements” he relates.
“What the leasehold owner has
done is effectively converted that
upfront land cost into an ongo-
ing rental payment.”
In some sectors, though,
demand cannot wait for supply
to catch up—even when the
supply has problems with rising
costs. Such is the case in the
industrial sector, which is
stretched to capacity due to
e-commerce and changing sup-
ply chain patterns. “Companies simply will
not wait 18 to 24 months to occupy a build-
ing,” says Robert K. Mericle, president and
CEO of Mericle Commercial Real Estate
Services. As such, developers are seeking
sites that have been fully cleared, graded
and made ready for footers and founda-
tions. “Developers don’t have the liberty of
taking a raw site, obtaining all the permits
and approvals, installing utilities and pre-
paring the building pad.”
This is especially true in places like
northeastern Pennsylvania, where the
mountainous terrain and uneven eleva-
tions are obstacles to large-scale develop-
ment. “In order to compete, developers
have no choice but to fully prepare sites far
in advance of future company inquiries.”
But that’s a developer’s game, after all—
estimating where demand will be in advance
of it actually emerging. Costs are simply part
of that game. “Developers have to be vigilant
to stay ahead of the innovation and evolu-
tion of our industry,” Skanska’s Ward says.
As an example, he cites one of its current
projects, Capital Tower. Being called a
game-changer for Houston’s downtown,
the approximate 780,000-square-foot build-
ing sits on a full block and will be con-
nected to five underground pedestrian
tunnels. “I don’t think there are any other
buildings with connections to that many
tunnels, so we’re seeing it as a type of Grand
Central Station for Houston,” Ward says.
The project’s retail component is based
around the traffic flows from inside and
outside of the tunnels—a design conceived
years ago that fits well with the current
trend of transit-oriented live-work space.
Likewise, at Related Cos.’ Hudson Yards,
its mammoth project in New York. At the
start of the planning process, “we thought
about what our residents, employees and
visitors would need, and expect, from a true
21st Century neighborhood,” says Jay Cross,
president of Hudson Yards. That meant
chewing over everything from cell phone
service and waste management, to pedestrian traffic, noise and temperature.
For example, they knew they needed a
plan for the next superstorm, Cross says.
“We are already far above the flood plain,
but we needed to ensure that building ser-
vices, residences and restaurant refrigera-
tors could keep operating, no matter the
disruption,” he relates. “So we built a first-
of-its-kind micro-grid and two co-genera-
tion plants on site that can generate elec-
tricity and water, with over twice the
efficiency of conventional sources.”
The development’s first building to
open, 10 Hudson Yards, recently received
LEED Platinum certification—the first
New York City office building to receive
such a rating since the LEED 2009 system
went into effect. ◆
MASS TIMBER CONSTRUCTION GAINS TRACTION ON GLOBAL LEVEL
The month of February saw two notable projects unveil in which timber is to be the main construction material, as opposed to concrete and steel. Is this a trend in the making? One expert says yes.
In Tokyo, Sumitomo Forestry announced plans to build a 70-story wooden skyscraper. Scheduled for delivery in 2041 at an estimated cost about $5.6 billion, the
project is meant to mark the company’s 350th anniversary. The building will be a
hybrid of wood and steel, though 90% of it will consist of wooden materials.
Also this month: Lotus Equity Group announced plans to develop the United
States’ largest mass timber office building as part of Riverfront Square, the ambitious redevelopment project in Newark, NJ.
These two buildings are part of a larger trend that has been gaining momentum
for several years as the industry has become more aware of the advantages mass
timber holds for sustainability and ROI. There are nearly 40 tall timber buildings that
are either complete, under construction or in the planning stages.
Comparativey, a decade ago there was just one mass timber building over eight
stories tall, according to the Council on Tall Buildings and Urban Habitat. “In the past
few years, the tall building industry has become increasingly interested in the use
of timber as a major structural element in skyscrapers. This has resulted in a now-
worldwide wave of research, built projects and ever-more daring speculative pro-
posals using ‘mass timber’—engineered wood products that are just as robust as
their concrete and steel counterparts,” it wrote in a report that came out last year.
The use of mass timber for buildings over six stories “is definitely a new, a global
movement toward renewable, sustainable high-density buildings,” says Steve
Conboy, a consultant who works with developers of mass timber buildings to pro-
tect them from fire, mold and termites.
The materials are not only sustainable, but are also safe in a fire—studies have
shown that steel fails in heat faster than laminated wood, according to Conboy. The
ROI is better, too, because easier-to-construct buildings mean less labor and shorter
time to market. “They go up in half of the time of concrete and steel,” he says.
Other projects under way include a 265-foot tower in Norway and a 275-foot
tower in Vienna, Austria. They won’t top the tower in Tokyo, which at 1,148 feet will
be the tallest wooden skyscraper in the world. So far, at least.
10 Hudson Yards
in New York.