||© Nathan Mandell
estate sizzles, may fizzle, Conference Keynote says
by Ed Finkel
real estate market will peak in 2006 and begin a downward
slide within two to four years, predicted Mark Rose, CEO of
Grubb and Ellis, and a keynote speaker at the 10th Kellogg
Estate Conference, held Oct. 19 at the James L. Allen
With a strong economy
and low interest rates and inflation, the market continues
humming with the exception of some softness in the office
sector and in apartment rentals, Rose said. The hotel market
is particularly "white hot" now because few new hotels have
been constructed since Sept. 11, 2001, but business travel
is finally rebounding, he said.
"If you are currently
in the real estate market and you are not making money, do
something else," Rose added.
Those in the market
for the long-term should brace themselves for the down cycle
later in the decade, Rose said.
Panelists who covered
trends in retail and restaurant development agreed that the
upward cycle of recent years has led to a boom in publicly
subsidized, mixed-use retail and entertainment development
in downtown areas.
"Retail is entertainment,"
said panel moderator Richard Tucker, CEO of Tucker Development
Corp. "They have to go hand-in-hand to make it a successful
projects contain a "mess" of requirements such as tenant commitments,
environmental impact studies and traffic studies, but they
pay well and are ultimately worthwhile, said Ross Glickman,
CEO of Urban Retail Properties.
"It's not for the
faint of heart," he said. "It is arduous. It is time-consuming.
And it is not inexpensive."
that center around a movie theater need subsidies because
a theater costs about $1 million per screen and only returns
$600,000 to $700,000, said panelist Barry Schain, principal
with Nextrealty LLC.
But theaters are
often the engine that drives foot traffic into such projects,
"You try to rationalize,
'Is it worthwhile to put in the theater space?'" Glickman
said. "For the most part, you win. But it's pretty dicey,"
depending heavily upon how significant movie revenues are.
of the market, including challenges related to negotiating
co-tenancy clauses in leases, require professional fortitude,
frustrating, but it's the world we live in," he said.