BD&C: What is happening with your corporate portfolio? Are there any strong commercial markets right now?
Samuel S. Unger: Most U.S. markets are still soft. There is some perceived bottoming in some very local submarkets in San Francisco, San Jose, and certain New York City submarkets. Downtown Seattle is tightening. Other markets have limited inventory in given classes of buildings, so there is better control over those segments. I am also surprised by how tight some of the smaller Canadian cities are. Researching the brokerage house reports looking for consensus is still helpful, as are ongoing discussions with trusted brokers. We always try to stay ahead of the requirement by trying to understand forward momentum in given markets. It’s also important to note that markets can be quite local, varying by view and size of requirement, so generalities need to be closely tempered by the requirement you are presenting to the market.
BD+C: Where is the best place to invest in real estate right now?
SU: There has been competition for trophy assets in commercial real estate, and a fair amount of money chasing discounted retail assets, according to what I hear. Unfortunately, real estate assets are very difficult to dispose of in weak markets, as too many have discovered to their chagrin. Diversification still rules.
‘Try to understand forward momentum in given markets’
BD+C: When is the commercial real estate market going to rebound?
SU: When you see three or four quarters of positive white collar job growth, you might be tempted to get out of your foxhole. But a critical caution is the fact that all markets and submarkets are local, and impacted by the movement of major companies or particular industry segments.
BD+C: In regard to commercial properties, are owners upgrading or reconstructing these properties? How long does it take for an owner to see a return on their investment after upgrading or reconstructing a property? How is this impacting their portfolio?
SU: This is a thesis question. It all depends on an owner’s portfolio, competitive pressure, leverage, and access to capital. We’ve seen a number of owners of Class A property begin to do reasonable upgrades to comply with the lower tiers of LEED certification because they believe they need this to remain competitive in the market, and we welcome that.
BD+C: Is it more advantageous to construct a new building, or upgrade an existing structure?
SU: I stress that we as an organization are not owners of buildings for reasons specific to the Ernst & Young partnership. We have a very competent advisory services business that assists owners with questions like this. As with any complex question, it all depends on the specific market and the arbitrage available in making a conversion.
BD+C: Are there particular mistakes or errors that you see BD+C readers making in regard to commercial real estate?
SU: If you are talking ownership, the first law is that real estate is volatile and illiquid, and keeps absorbing capital. The second law is to remember the first.
BD+C: How can BD+C readers—architects, MEP engineers, and contractors—work more effectively with a firm like Ernst & Young and other CoreNet members?
SU: We encourage contact with design professionals and contractors. We mandate that members of our real estate group get involved with national and local organizations, and we’re not shy about it. I encourage professionals to get involved with CoreNet. It’s important to realize that the organization encourages mutual long-term benefit—no quick sells, no heavy marketing, but a great opportunity to let people understand both the type of individual you are and something of your business over time. The people of CoreNet are also a tremendous resource, with literally hundreds of years of collective experience in the allied professions.
BD+C: What do architecture, engineering, and construction firms continually do wrong in their dealings with organizations that are CoreNet members? What mistakes do you see them making? What advice would you have for AEC firms to work more effectively?
SU: Great question, and another thesis topic. Approach CoreNet members as a long-term investment. Share experiences and understand the pressures and questions of your potential clients. Don’t talk consultant speak—if asked, talk solutions. Otherwise, grab a beer and share war stories.
BD+C: What is the most important thing you can take away from your involvement with CoreNet on both a personal and professional level?
SU: CoreNet has been a tremendously valuable resource for me. I have established friendships and had the opportunity to go beyond professional relationships with a number of our members. I have also realized that many of the issues I faced, both personally and professionally, are shared problems, with shared solutions. On a professional level, deeper discussion of the issues we face as an organization, and the similarities to the issues faced by my colleagues in CoreNet, help generate more thoughtful solutions. The opportunity to review strategies and tactics for these issues is valuable, as is the review of resources available through service providers, contractors, and suppliers. BD+C
Related Stories
Architects | Dec 10, 2018
The art and science of drawing: Humanizing the design process with a bit of controlled mayhem
Hand drawing reveals a dimension beyond those available in a CAD drawing or digital rendering.
Architects | Dec 7, 2018
2019 AIA Gold Medal awarded to Lord Richard Rogers, Hon. FAIA
The Gold Medal honors an individual whose significant body of work has had a lasting influence on the theory and practice of architecture.
3D Printing | Dec 7, 2018
Additive manufacturing heads to the jobsite
Prototype mobile 3D printing shop aims to identify additive manufacturing applications for construction jobsites.
Architects | Dec 6, 2018
Payette honored with 2019 AIA Architecture Firm Award
The award recognizes a firm that has consistently produced distinguished architecture for at least 10 years.
Biophilic Design | Nov 19, 2018
Biophilic design: What is it? Why it matters? And how do we use it?
As we continue to move toward the city and spend more time indoors, our day-to-day interaction with quality nature is shrinking. One contemporary concept to reverse this effect is biophilic design, a strategic approach to tap into—and harness—nature in the built environment.
Architects | Nov 6, 2018
Kohn Pedersen Fox opens three new offices
Following exciting current work, new commissions, and upcoming opportunities, global architecture firm embraces the future with new outposts.
Architects | Oct 2, 2018
Gensler, in latest report, highlights where resilient design could make the greatest impact on the built environment
The firm showcases its own recent projects as demonstrations for what can work in six areas.
Architects | Sep 24, 2018
Assembly (and rigorous planning) required: Managing the pros and cons of modular construction
While offering efficiency and flexibility, modular construction requires extensive planning and collaboration to avoid potential challenges.
Architects | Sep 19, 2018
Back it up: Parking lot trends
There are two shifts that we are seeing in parking lot planning and design – and these shifts are rooted in parking’s place at the intersection of environment, transportation, and market behavior.
Architects | Sep 14, 2018
We’ve entered the golden age of brain science. What does it mean for AEC firms?
New research from the SMPS Foundation explores the known principles and most recent research surrounding the human brain and behavioral science. The goal: to discover connections between the science and the AEC business.