Published January 2001

Developers cautious about possible slowdown

By Kimberly Hilden
Herald Business Journal Assistant Editor

SEATTLE — National and regional leaders of the commercial real estate industry, visiting here in mid-December to share their views on the market, all agreed that cautious optimism would be the rule in 2001, while technology’s impact on the industry would continue to grow. “

The picture today is … a little bit muddy,” Thomas Carr, the Chairman, President and Chief Executive Officer of CarrAmerica, said during the “Commercial Real Estate Insights” meeting.

“The current vacancy rate pictured is spectacular (nationally and regionally). … At the same time, we do see a very uncertain economic environment” fueled by recent volatility on the stock market, economic indicators that point to slowing and the dot-com shakeout of the past months, Carr said.

“We think there are a lot of exciting opportunities out there because of all the changes (in the industry), but we also have to be fairly cautious,” said Carr, whose company owns, develops and operates office properties in 14 markets nationwide, including Seattle.

In the Puget Sound region, an economic slowdown could make financing tough to get for developers of downtown Seattle projects, said Greg Smith, President of Martin Smith Development Corp., a Puget Sound-based company that was involved with the Millennium Tower project.

“Projects that somebody was considering developing that were marginal are not going to be financed,” Smith said. “Even big projects are going to be harder to finance.”

“It’s a very difficult time, but I do think it will get better,” he said, adding that “despite the dot-com hype that’s happened, we’re going to continue to see rents rise” in downtown Seattle.

While possible slowing could result in muted space demand and fewer projects, technology continues to add opportunity and challenges to the commercial real estate industry, Carr said.

“Technology is having numerous impacts, the most obvious is on demand,” he said. “In terms of technical requirements for buildings, it is clear that the demands that tenants are requiring of buildings are going up each year in areas of power, HVAC, parking, flexibility, conductivity.”

As for opportunity, Carr said, just look at HQ Global Workplaces Inc., which his company is involved with.

HQ provides “just in time office space” for executives on the go, who rely on the mobility and portability technology offers, he said.

“It’s full service (with) flexible contracts,” Carr said. “People have really been taking to this product. Demand has exploded.”

Technology also is encouraging teamwork in the real estate industry, said Philip Cyburt, President of the Boeing Realty Corp., a wholly owned subsidiary of the Boeing Co.

“The more technology is integrated into the industry, the more you’re going to need to have leverage of your time and efforts throughout the industry,” said Cyburt, whose company is responsible for $9 billion of real estate assets in the Boeing portfolio.

Recently, Cyburt said, the Boeing Realty Corp. has been focused on reducing assets and looking at duration-matching strategies in which the company could lease back real estate for a period of time that matches production cycles.

The annual “Insights” event was coordinated by the Commercial Brokers Association and sponsored in part by The Seattle Times, Washington Mutual, Kirtley-Cole Associates Inc., Stewart Title Guaranty Co. and Short Cressman Burgess PLLC.

Speakers included Carr, Smith, Cyburt, Carl Panattoni of Panattoni Development Co. and Craig Vought of Spieker Properties.

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