Welcome to Cocktail Napkin Talk! This feature is intended to be a playful look at serious topics. Several of my most successful projects got their start on the back of a napkin, so it is one of my favorite mediums.
The topic today is real estate recovery. There are many blogs devoted to this topic, and all seem to be tea leafy - what are the signs that real estatate is coming back? While a valid question, I think it's also useful to look at the stages of "comeback." It's especially useful for local governments to know the stages, because there is room for both opportunity and mischief.
I have noticed that the past couple of years have been the "entitlement jockeying stage." Landowners and developers are coming in to get zoning and agreements locked in, so when demand and credit markets perk up, the projects are ready to go. This is opportunity. But there is also mischief, where developers are coming in to renegotiate smart growth provisions or get entitlements they would never get under normal circumstances. The main argument tends to run along the lines of "Times have changed!" In some cases this may be true, but in others, times will return to exactly WHERE THEY WERE when the provisions on parking, affordable housing, use mix or whatever were put in place. Local officials need to carefully evaluate each one, and look at requests with the long view lens.
The next stage is where cautious or smart capital starts to creep back in. I think this is where we are now, at least in SW Florida. Risk still hangs heavy; as such, these projects tend to compensate in other ways. Lower risk projects include things like building remodels, or status quo type proposals that need as little time possible at the permit desks. For smart growthers like me, this can be a frustrating time, where risk averse money goes to building suburbs instead of key redevelopment projects.
The most exciting is the first, big, great project in. This is the smartest, biggest money going, seeking to take advantage of low rates or piles of cash, pent up demand, and (wishful thinking alert) the realities of disruptive gas prices. These developers will seek out local governments' desperation as well as market potential in the site selection and incentive-maximization process. Not that this is horrible (I'd do the same thing), but get ready for developers threatening to walk from the get-go because they can go to "City B" that is offering a better deal. For smart growth-y people like me, it's worth seeking ways to help position cautious capital into "great project" territory.
Once the marquis project comes in, the signals start. The response to signals is not likely to be the same as during the boom, but land use plans better be in place. Localities need to articulate priorities now for infrastructure and development/redevelopment.