more development roles popping up?
Seeing a lot of roles in development popping up lately. Not sure if i am right or wrong on this, but i think with some of the market softening from interest rate hikes it's making other projects more viable and hopefully the slow down also further brings material costs down? Lumber costs have trended down in the last several months, and I'd expect materials costs to dip even more but really who knows?
Thoughts on what you guys are seeing? Interested in making a hop for more money just not sure if i'd shoot myself in the foot if the conditions were not set to improve.
MF we've seen rates trend down, most are indexed to the 10-year which has rallied for the flight to safe investment. In turn other areas think CRE/CLO products and Banks have pulled back and agency lending is strong now. MF has not slowed much for any larger deals with sophisticated borrowers. LifeCo still seems to be funding lost a couple deals to them. As properties are being re valued at far higher prices, cash out refi's are still happening. Acquisitions has not slowed. Large shops seem to be picking up 4-10 properties in portfolios as they pick the smaller guys clean. With this all happening rehabs and repairs are going up. Some full reno's as well.
Interesting niche is a large construction push on conversion of office space to condo. In the DC metro this is happening.
Now in the industrial and Retail it's interesting things are not moving. So could it be Resi and MF rentals need more devs while people transition from once silo to the other.
I work for a lender and sale side company and we have to shift employees from closing to underwriting and underwriting to production/development side.
Yep - take National Landing, for example. I drive by it every day on 395 when I head to work. People love to shit on HQ2 and Amazon, but my guess is that NL will become the next Rosslyn in 10-20 years. Absolute prime piece of real estate, occupied by an endless row of 1950s-esque drab office buildings. Amazon was just the first to get the ball rolling - Raytheon, Boeing, and more. Wouldn't be surprised if we get two more F500 companies announcing east coast ops or natty HQs before end of Q4.
With this obviously comes the need for supportive housing and infrastructure, so you're spot on about the office-to-condo push. I've got plenty of friends over at JBG who are working overtime to get the underwriting side of things finalized, and I don't think they'll be taking a break anytime soon. Fascinating project to watch go up, really.
I agree those drab buildings are office buildings and some have already been torn down for new glass office space. Closer to 395 aren't half those hotels. I barely see the tour buses out there anymore sitting on Route 1. I think those have to be turned into condos or MF.
That one is a crazy development, I know Bozzuto helped with the two towers' almost completed buildings financing when Amazon looked for local PM groups. Wait till Landmark mall and the build up at the old Coal power plant on the water in Alexandria. Then they just bought all that land across from the NAVY Yard in Anacostia on the water for like $600MM or the development is for $600MM and that was all warehouses and SFHs.
Are you seeing this only for condos or also on for rent multi-family?
Not OP, but I've seen it for both. While I don't know specifics, I assume it's just analysis driven by the demand market of what JBG or other developers expect consumers to want, whether that's buying or renting. They all look the same from the outside! Regardless, it's nice to see those terrible-looking government buildings come down, even if the alternative is the modern multifamily unit that looks like the other 9000 exact modern apartments you see
Condo only on the Apartment buildings, but now have seen three large, think >$300MM industrial reclamation projects for mix use. So Condo's, MF apartment buildings, mix of both rental and condo townhome, restaurants, local retail. One in DC, one in Alexandria VA, and one just north of Boston
Let me say Rates did trend up but have leveled off and then with recent rallies in the last two months trended slightly down.
adaptive reuse of office to apts is challenging but doable. Challenging to change the use in certain office floor plans as you can't have double loaded corridors and all the efficiences you get in modern ground up apartment projects. I say this is less common. Understand if the developer is fee or promote focused and then you will understand the motivation. To build podium in most markets today is $400 to 600K which means you have to exit at $550 to 800K. You better have a long term partner to hold if the market gets weird or hope you time the market to go merchant and GTFO.
Office conversions are our biggest focus rn. The challenging aspect is getting the right properties (floorplate, location, rent roll etc). We are promote focused FYI. We bought one in Q1 for $55/SF and are close to going hard on another for $100/SF. Literally the definition of buying below replacement cost. Building ground up right now doesn't really pencil anywhere, costs are out of control.
I can’t comment as to whether there’s more development roles or not, but I think the best performing companies are going to be the ones with the best dev people. As the potential returns from real estate investments compress due to the market becoming more efficient, the best way to create outsized returns (while minimizing risk) will be to have the best development arm.
Companies won’t have control over interest rates, hard costs, construction costs, or labor costs, but they can control the process, organization and execution of a development plan. Every month delayed on a dev proforma can have a pretty negative impact on IRR, so companies are going to be putting more focus on the outcomes they can control.
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