Economic Update - Developers Plan for Eventual Rebound

Economic Update - Developers Plan for Eventual Rebound
May 6, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

In light of the current doldrums for both commercial and residential real estate, what's a developer to do? Be ready for the eventual turnaround, if possible. Development is typically a multi-year activity, after all.

It also helps to plan your project in an area that's more economically resilient than many others, due to relatively high household income. This week the village council of Winnetka, Ill., an affluent northern suburb of Chicago, granted approval of a 167,800-square-foot mixed-use development downtown. Construction won't begin for at least a year on the project's 31 condos and 35,300 square feet of retail or other commercial space, however.

"It's already been a lengthy process, and we certainly hope that when we're ready to begin, the demand will be there to support the property," Robert Goldstein, managing partner at developer New Trier Partners L.L.C., told CPN. "We believe it will, since Winnetka has one of the best suburban demographics in the nation."

The project will also dovetail with another trend in development, one stalled because of the recession, but which will eventually come back with considerable force: building sustainability. The Winnetka development will be the first structure in that suburb to obtain LEED certification.

The jury's still out on that broader economic turnaround, though there were a few more glimmers of it on Tuesday. The Institute for Supply Management's non-manufacturing index inched upward from 40.8 percent in March to 43.7 percent in April, meaning that a majority of firms surveyed still said business was getting worse, but not nearly as large a majority as in November 2008, when the index stood at an anemic 37.4 percent.

Federal Reserve Chairman Ben Bernanke also made some optimistic noises on Tuesday when he told the congressional Joint Economic Committee that he expects economic activity to "bottom out, then turn up later this year. Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters.”

Then again, the results of the bank stress tests are due later this week. That could be something of a "risk event" to the economy, to use analyst terminology.

After Monday's vigorous upward spike, Wall Street cooled its jets on Tuesday. The Dow Jones Industrial Average dropped a slight 16.09 points, or 0.19 percent, while the S&P 500 lost 0.38 percent and the Nasdaq lost 0.54 percent.