The Leader - January/February 2009 - (Page 63)

Ca PIta l C Or ner and a wide range of high quality space available on the market. Such features will not present themselves to the same degree in the current downturn. Plotting out the trends in effective rents for the current downturn vs. that seen prior to and following the Internet Bust, Figure 2 highlights the fact that TWR does not expect the severe discounting during this downturn. Part of the issue is the somewhat artificial nature of demand for space during the Internet Boom in which firms with no profits but flush with venture capital paid top dollar for space. As this situation unwound, rents fell dramatically. The robust pace of growth in home lending activity and some hedge funds did drive some elements of the Financial Services sector to lease aggressively prior to the current downturn, but the detritus of this excess leasing is not as great as that seen in the Internet Bust. The Financial Services sector itself though is also partly to blame for the severe decline in rents seen following the Internet Bust. In that time of reduced tenant demand and increasing vacancy rates, property owners struggled to maintain and attract tenants. A key tool used to land tenants was a healthy TI allowance. These were easy to offer given the attractive financing rates available to commercial property owners at the time and as these increased, effective rents dropped precipitously. In the current environment where commercial property owners are severely credit constrained, this opportunity is just not present. FI G U R E 2 O FFI c E E FFE ct I v E R En t I n Fl at I O n , % ch an G E PER Y E a R 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 Internet Bust Current Downturn Corporate real estate managers should not assume that the opportunities presented in previous downturns will be the same or as pronounced in the current recession. Corporate real estate managers should not assume that the opportunities presented in previous downturns will be the same or as pronounced in the current recession. Given a broad retrenchment in employment across the Financial Services sector, many corporate real estate managers will need to deal with difficult issues of portfolio management and consolidation of locations. These difficult and often costly decisions are going to be made in an environment that is not as cost friendly as that seen during previous downturns given the severe constraints faced in the credit markets today. Any corporate real estate manager who assumes that the big-game of the economic downturn is purely an opportunity may instead find that they are the one on the menu. 2 0 0 9 th e le ade r 63 january / february

Table of Contents Feed for the Digital Edition of The Leader - January/February 2009

The Leader - January/February 2009 Contents Leadership Message from the CEO Real Estate in the News Mergers and Aquisitions Assessing Green Building Performance Measuring Space You Actually Use Global Trends in Sustainable Real Estate Whirlpool’s Lee Utke Northmarq’s Kevin Farrell Plastics: Hoping for Resiliency in Resins Regional Profile: Heartland Holding Strong Industry Profile: Ascendas Brings New Age Business Space to Asia-Pac Industry Tracker From the Applied Research Center Discovery Forum Findings Capital Corner Career Development Young Leader Economic Development in the News Learning Spotlight Connect With CoreNet Global Index of Advertisers A Look Ahead In our Next Issue Calendar of Seminars

The Leader - January/February 2009

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.