COVER STORY, JUNE 2010
DESIGN'S NEW NORMAL
Timing, creativity essential in finding that next wave.
When will things return to normal? I can’t count how many times I have heard that question the last couple of years. Whether talking to clients, other architects like myself or anyone involved in real estate, this question inevitably comes up. Yes, we all want things to return to “normal,” but we should realize is that the new normal will be significantly different than what we have grown accustomed to in the past decade or so.
Anyone in the real estate business or a business that services the real estate sector knows what a challenging time late 2007 through the present has been. As an architect, business has declined dramatically as clients have seen both demand and financing for their projects disappear. However, we are starting to see some good news. Corporate profits are on the rise, the stock market is improving and banks are making money again.
Despite these new trends, real estate activity is nowhere near where it was a few years ago. Retail remains overbuilt, and the same goes for office. Most markets have seen overbuilding in condos and the health of the single-family market is highly variable from city to city. Residential foreclosures have apparently subsided, but many predict significant commercial foreclosures to be the next shoe to fall. In short, it is hard to declare that there is any significant recovery in the real estate industry, at least for the moment.
The challenges currently experienced in this environment will of course bring opportunity to those with a knack for creativity and timing. Interest rates remain low, real estate prices are flat or declining and construction prices have softened. In addition, reports continue to state that there is a lot of cash on the sidelines looking for a place to be invested. These factors could combine to create the momentum to lead the real estate industry out of its slump.
So where will we go from here? What will be the new normal? Predicting the future is a very dangerous endeavor, but looking into the future is a lot more exciting than analyzing the present. So here is one architect’s look into the future based on where we are today.
During the next few years, managing and minimizing risk will be essential in every facet of the real estate business. Banks and other lenders will be requiring a greater percentage of equity in their deals. Creative joint ventures and partnerships will be a common way to reduce risk. Public/private partnerships could be a vehicle to reduce risk but these opportunities could be due to the fact that so many state and local governments are overextended financially. Smaller rather than larger projects will be the norm and will be part of the new, low-risk environment. More restrictive lending practices, uncertainty about the strength of demand and concern about a fragile economic recovery will all lead to projects smaller in scale or with multiple phases.
Because many project types are overbuilt, renovation of existing structures will make much more sense than building new square footage. Competitive forces will cause owners to renovate to keep their existing tenants or lure new tenants. In addition, flat or declining asset prices will create great opportunities to buy existing properties at the right price, renovate them and reap the rewards.
Energy efficiency is at the intersection of two significant trends. The first is the increased interest in environmental stewardship and more specifically the green building movement. The second is the need to reduce the operating costs of buildings. Combine these two trends and there will be an increasing amount of energy retrofits in existing buildings as well as more sophisticated energy-saving features in new construction.
More Conservative Design
The past decade of design was characterized by bold forms, extravagant uses of materials and very unique and iconic structures. These design trends were in part a response to the incredible prosperity and optimism of the period. Despite the extraordinary tragedy of Sept. 11th and the global war on terror, most of the 1990s and the 2000s were a time of unprecedented wealth and expansion. Just like any period in history, the design of the period was an expression of the culture for which it was created.
As we go forward into the second decade of this century, the world has changed. Increasing uncertainty about both the global and the domestic economy, as well as concerns about safety and security will produce more conservative and restrained design. A new emphasis will be placed on practicality, functionality and durability. Design won’t necessarily be boring, but the creative pendulum will swing back to less unusual icon buildings and more tried-and-true solutions.
A Different Kind of Innovation
Innovation will continue to be an important part of the future but it will look different than the recent past. In the past decade, innovation meant crazy building forms, radical structural concepts and bold, look-at-me designs. In the next decade, owners will opt for innovative systems and materials designed to lower energy use or to be more durable. Quiet, restrained buildings will be popular once again. There will be renewed emphasis on designing buildings that show a concern for the environment or in fitting in with their surrounding community. Owners and developers will look to build projects that demonstrate good stewardship of limited resources, both physical and financial.
Tipton Housewright is a principal architect at Dallas-based Omniplan Inc.
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