This article is a continuation of an interview with CrowdStreet executives Tore Steen, Darren Powderly, and Ian Formigle, about their roles on the Urban Land Institute (ULI), the world’s largest and oldest network of real estate and land use professionals. Read the first article now.
Let’s talk about some of the major topics you’re discussing on your Product Councils. Ian, you mentioned Opportunity Zones—what other trends and concepts are on ULI members’ minds?
IAN: One major discussion topic this year is retail as a redevelopment catalyst. In Atlanta, for example, there’s a corridor that sits by an up-and-coming neighborhood near Georgia State Stadium, which used to be Turner Field, where the Braves used to play. It’s all brick and timber and corrugated metal. The adjacent neighborhood has a great deal of momentum. One sponsor in our Marketplace actually owns about 80 acres there. Right now, there’s an obvious need for community. If you can take that old industrial corridor sitting away from the homes being remodeled, reprogram that with local retailers—barbecue joints, bars, cafes—you can create an anchor for the neighborhood.
It’s about making every building unique. You can’t manufacture experience very well. When you go through and redevelop these old, unique buildings and pair that with local retailers, there’s the catalyst for a cool neighborhood. Maybe you throw in some maker spaces and create an even more vibrant environment. We’re all looking for a cool experience. We have so much mediocre retail experience in the United States. We’re all in on cool neighborhoods.
TORE: On my Product Council, we recently toured a residential building that felt like WeWork meets Airbnb. The year before, we toured the new office buildings in the Seaport District, along the waterfront in South Boston. These were smart buildings, completely networked buildings. It’s like having the ability to see into the future.
DARREN: Look at Hudson Yards in New York. It’s state-of-the-art, Internet of Things everywhere, millions of sensors—an interactive city within a city. This is happening in every ground-up development project. By now, people in real estate are sick and tired of hearing about WeWork, but one of the good things they’ve done—the reason they’re so highly valued, and perhaps overvalued—is they’ve opened landlords and tenants’ eyes to experiential real estate. Everyone is trying to update their space with gyms, cafes, better lobbies.
It’s a breath of fresh air for us as users and employees of these firms. Who doesn’t want a healthy, hip-built environment? This is well on its way and continues to advance. The CB Richards Ellises and JLLs of the world are starting to have their own WeWorks and design departments. It’s how they’re attracting tenants. It’s completely different than it was five years ago, and it’s still changing fast.
Are there barriers to creating experiential real estate?
TORE: There are a number of uncertainties, but whether they’re barriers or opportunities is a matter of perspective. Think about the impact of homesharing and ridesharing on residential models. Now add in autonomous vehicles. Self-driving cars could transform the idea of a city as we know it. If your car is your office, you don’t have to come into the urban core to work, right?
At the same time, autonomous vehicles could have the opposite impact in terms of altering the urban landscape. For example, right now developers are building parking garages so that the ceiling can be refactored into an office. If you don’t need to park your car near where you work, you have more space for human activity.
And then there’s climate action. Real estate professionals are learning to anticipate and plan for the effects of climate change—hurricanes, floods, fires, and so on.
IAN: The RRC Product Council is focused heavily on sustainability. One topic we’re seeing come up more recently—and something most people don’t think about when they think of sustainable buildings—is embedding sustainability in real estate transactions. We’re starting to think through the downstream benefits.
Let’s rewind to a few years ago. There was a growing need and want for more sustainable buildings, but a lack of visibility into deals made and therefore skepticism for monetizing that on the sale. People want to do good, but they also want to do well. That said, if sustainability is a purely sunk cost, no one has the money. Creating a building that’s more energy-efficient, on the other hand—we can monetize that. We can do well while doing good. The old-school way of taking a property and driving to an absolute return, with no contemplation for sustainability, doesn’t cut it anymore. Sustainability has to be part of the business plan. If you do sustainability and do it well, you will get paid.
Other sustainability elements are becoming mainstream in terms of capitalization. Take PACE loans. In PACE financing, if you can take a building and prove how the redevelopment of the building can meet efficiency standards, you can carve those out. Say $20 million of this building will generate sustainability. You carve that out, get a PACE loan that offers a low-interest rate—around 5 or 6%—and your municipality will allow that to sit in the deal. It’s basically free money. Municipalities don’t want buildings to spew carbon, so they’re incenting developers.
