Midwest Real Estate News August 2010 : Page 1

midwest WWW.REJOURNALS.COM by Dan Rafter, Editor Many cities across the Midwest are hubs of green building techniques. From Min-neapolis to Columbus to Chicago, green buildings are sprouting. You can add Des Moines to that list, too. The Iowa city doesn’t have to take a backseat to any of its fellow Midwestern municipalities when it comes to environ-mentally friendly commercial construction. Des Moines is in the middle of a green building boom. Just ask Larry James, chair of the sus-tainability committee for the Greater Des Moines Partnership. “Some of the clients that we work with have been pushed toward green con-struction during the permitting phase by the city,” James said. “Some of the de-mand for environmentally friendly con-struction is coming from the tenant side, too. Thatmight not be as pronounced, but it is there. The trend is definitely moving in the direction of green building. Tenants are seeking buildings that are more en-ergy efficient.” Des Moines is far from alone in pushing green building. But it serves as a good ex-ample of how a medium-sized Midwest city can strive for energy efficient and sus-tainable commercial buildings. The hope is that green building tech-niques will soon become standard for all commercial construction. The days of de-velopers issuing press releases touting their greenmeasures will end not because companies have abandoned green build-ing but because all developers will be ex-pected to build in this way. “We are hoping that sustainable design becomes completely infused in every de-cision that we are making,” said Philip continued on page 29 Transwestern:We are all dependent on each other by Dan Rafter, Editor Commercial real estate company Transwestern has become a strong presence in theMidwest. The company today boasts Midwest offices in Chicago,Milwaukee,Minneapolis/St. Paul and Detroit, and is still in a growth pattern despite the challenging economy.Midwest Real Estate News recently spoke with several important of-ficials at the company – Rob Bagguley, presi-dent of Transwestern’s Midwest region; Gary Nusbaum,managing director of the company; Juan DeAngulo, also amanaging director; Tony Karmin, executive vice president; and Mark Robbins, also an executive vice president – about the challenges that commercial real es-tate pros face in the coming months, and about how Transwestern plans to overcome them. Midwest Real Estate News: Has Tran-swestern taken any different steps to make it through the commercial real estate market of today? Rob Bagguley: The company has been around for 32 years. We don’t refer to our-selves as a privately held company. We call ourselves an employee-owned company. We continued on page 15 Staying Busy Fighting the slump in Kansas City. Page 4 R E A L E S T A T E N E W S® THE DAKOTAS | ILLINOIS | INDIANA | IOWA | KANSAS | KENTUCKY | MICHIGAN | MINNESOTA | MISSOURI | NEBRASKA | OHIO | TENNESSEE | WISCONSIN AUGUST 2010 Green building efforts sprouting in DesMoines Business/Industrial Parks Guide Economic Developers Real Estate Law Page 31 **DIRECTORIES INSIDE COMPANY PROFILE VOLUME 26, ISSUE 4

Green Building Efforts Sprouting In Des Moines

Dan Rafter

Many cities across the Midwest are hubs of green building techniques. From Minneapolis to Columbus to Chicago, green buildings are sprouting.<br /> <br /> You can add Des Moines to that list, too.<br /> <br /> The Iowa city doesn’t have to take a backseat to any of its fellow Midwestern municipalities when it comes to environmentally friendly commercial construction. Des Moines is in the middle of a green building boom.<br /> <br /> Just ask Larry James, chair of the sustainability committee for the Greater Des Moines Partnership.<br /> <br /> “Some of the clients that we work with have been pushed toward green construction during the permitting phase by the city,” James said. “Some of the demand for environmentally friendly construction is coming from the tenant side, too. That might not be as pronounced, but it is there. The trend is definitely moving in the direction of green building. Tenants are seeking buildings that are more energy efficient.” <br /> <br /> Des Moines is far from alone in pushing green building. But it serves as a good example of how a medium-sized Midwest city can strive for energy efficient and sustainable commercial buildings.<br /> <br /> The hope is that green building techniques will soon become standard for all commercial construction. The days of developers issuing press releases touting their green measures will end not because companies have abandoned green building but because all developers will be expected to build in this way. <br /> <br /> “We are hoping that sustainable design becomes completely infused in every decision that we are making,” said Philip Hodgin, principal of Des Moines’ RDG Planning & Design, a company that boasts 30 percent of the LEED Platinum design projects on college campuses across the nation. “We hope that in five to 10 years no one talks about sustainable design. We want it to be like the Americans with Disabilities Act. Years ago, developers would run around touting their compliance with the ADA. In today’s world, that’s the standard. That’s where we hope green building eventually gets.” <br /> <br /> Green building benefits<br /> <br /> A Harris poll recently found that 33 percent of U.S. workers would rather work for a company that promoted socially and environmentally friendly practices than one that does not.<br /> <br /> At the same time, by building green, commercial developers can set themselves apart when marketing their buildings. They can heavily promote the environmentally friendly features of their buildings in an effort to attract tenants who are concerned about the footprint they leave on the environment. They can try to lure in tenants with the promise of lower utility bills. They can play up the good public relations that businesses will enjoy when they move into a building that was constructed using sustainable construction methods.<br /> <br /> These are obvious commercial benefits of green building. The environmental benefits, of course, are even more obvious. But when cities are trying to encourage developers to build green, they can’t rely on the feel-good nature that comes with being a good steward for the environment. Municipalities have to explain to commercial developers just how they’re going to save money in the long run by building green.<br /> <br /> “The issue at this point is the same as it’s long been: Are developers willing to pay more to incorporate green building techniques into their developments?” James said. “In this market, we think that green building is a way for landlords and developers to distinguish their buildings.” <br /> <br /> James pointed to studies showing that LEED-rated buildings are worth more per square foot than are other buildings.<br /> <br /> This is one of the reasons, James said, that LEED buildings will become more popular in the coming years.<br /> <br /> “Once we come full out of this recession, we are going to get into a situation in which most of the new buildings will be built to a high degree of energy efficiency, if not LEED,” James said.<br /> <br /> Still a disconnect?<br /> <br /> The e300 building opened in downtown Des Moines in August of 2009. The building, which features 12,000 square feet of commercial space on its ground level and 79 residential apartments above this, is already operating at a 68 percent higher level of energy efficiency than would a traditionally constructed building.<br /> <br /> Jake Christensen, owner of Christensen Development, which developed the e300 building, said that he’s happy with the energy efficiency of his company’s project. He wishes, though, that green building was more of a priority for tenants.<br /> <br /> Christensen Development ran a survey asking consumers about their feelings regarding green building. Consumers said that environmentally friendly construction techniques were important, but not as important as price and location.<br /> <br /> “I was hoping that people would have scored green building higher,” Christensen said. “But even with that, I think that it’s important for property owners and developers to proceed with green building regardless of whether it’s a driving market force or not. It’s still the best way to construct new buildings.” <br /> <br /> For Christensen, there are two green building techniques that are more important than the rest: geothermal heating and cooling, which saves greatly on energy costs, and repurposing existing buildings.<br /> <br /> Repurposing is especially important in dense urban areas such as Des Moines. Rather than erect a new building in the middle of a cornfield and call it green, developers should be concentrating on reusing existing buildings in urban areas. In the long run, this is a far greener strategy, Christensen said.<br /> <br /> The e300 building is a good example. People living or doing business from this building can walk to a wide range of locations in downtown Des Moines. And when they can’t walk, they can hop on public transportation. This is friendly to the environment. When people get in their cars each morning and drive 60 miles to work? That’s not really green.<br /> <br /> “I think people will find that green living can be more rewarding,” Christensen said. “They will have more time in their day. They won’t be sitting in traffic all day.” <br /> <br /> Bringing green to campus living <br /> <br /> Des Moines’ RDG has already earned a reputation for green building thanks to the work it’s done on college campuses across the nation. It is also one of the first Iowa-based firms to complete a LEED Gold project.<br /> <br /> Hodgin, the firm’s principal, said that college campuses are in many ways leading the green-building revolution.<br /> <br /> “Colleges and universities are early thought leaders on this,” he said. “Colleges and universities are leaders in the nation in their expectations for sustainable construction.” <br /> <br /> Michael Andresen, an intern architect with RDG, agreed. He added that many colleges use their commitment to green building to attract students.<br /> <br /> “Colleges are looking at green not only because they recognize that sustainable construction is beneficial, but for recruitment purposes,” Andresen said. “The Princeton Review did a recent survey that indicated how important sustainability is for students and their families when they are selecting schools.” <br /> <br /> “Look at the economic aspects of building green for colleges during our current economic situation in this country,” Andresen continued. “Everyone wants to save money. Everyone is looking for efficiencies. Sustainable building helps them reach these goals. Schools are looking to reduce their carbon footprint. They want to save water and save energy. They want to build and design healthy spaces. They want their students to have better test scores. There is research that suggests that green building can help colleges reach these goals.” <br /> <br /> Healthcare facilities such as hospitals and outpatient medical centers are also leading the demand for green building, Hodgin said. Behind this group comes the corporate sector, which is gradually increasing its demands, too, for green-built buildings.<br /> <br /> “There is good corporate leadership in this city,” Hodgin said. “This is a relatively small community. Corporate leaders are seeing some of their peers at the universities and colleges having success right away with the payback on green construction. They are sitting at the same community boards with corporate leaders and sharing their stories with them. I think that is encouraging the corporate community to increase its commitment to green building.” <br /> <br /> The good news is that green building techniques are coming down in price every year. Andresen said that the cost to build a green building isn’t nearly as high as it was just two to three years ago. This, too, should encourage commercial industry developers to more thoroughly explore their green options.

Company Profile: Transwestern

Dan Rafter

Transwestern: We are all dependent on each other<br /> <br /> Commercial real estate company Transwestern has become a strong presence in the Midwest. The company today boasts Midwest offices in Chicago, Milwaukee, Minneapolis/St. Paul and Detroit, and is still in a growth pattern despite the challenging economy. Midwest Real Estate News recently spoke with several important officials at the company – Rob Bagguley, president of Transwestern’s Midwest region; Gary Nusbaum, managing director of the company; Juan DeAngulo, also a managing director; Tony Karmin, executive vice president; and Mark Robbins, also an executive vice president – about the challenges that commercial real estate pros face in the coming months, and about how Transwestern plans to overcome them.<br /> <br /> Midwest Real Estate News: Has Transwestern taken any different steps to make it through the commercial real estate market of today?<br /> <br /> Rob Bagguley: The company has been around for 32 years. We don’t refer to ourselves as a privately held company. We call ourselves an employee-owned company. We have been very judicious as we’ve grown over the years to make sure that our growth serves the needs of our client base. We focused on building our offices over the last 10 years, but we also focused on making sure that this growth improved the service we were able to give our clients. I think that’s helped us during these challenging times.<br /> <br /> Tony Karmin: It’s a collaborative effort. I think what we have found is that 30 heads is better than one or two heads. In this environment, we work as one team. The traditional firm is made up of silos and profit centers. Traditionally, they don’t really speak to each other. In a challenging environment like this, we are much stronger as one unit than as individuals. When dealing with challenges, we have a greater wealth of knowledge when work on a collaborative basis.<br /> <br /> MWREN: Can you give me an example of this collaborative approach?<br /> <br /> Karmin: One of our clients who we do office leases for came to me and said that it had a data center in Denver, a 250,000- square-foot data center. The company put out a request for proposal to the world saying that it wanted to lease this building for data center co-location arrangement. I brought it up at our standard weekly prospecting meeting. I told everyone that I had this RFP that was not in my specialty. I don’t market data centers. I put that out on the table. One of the individuals, I had no idea, had a huge amount of experience doing this. All of a sudden, we created this team locally. We were hired.<br /> <br /> MWREN: Gary, you returned to Transwestern recently after leaving the company. What brought you back to it?<br /> <br /> Gary Nusbaum: I first came here in February of 1999. That was four months after the Transwestern Midwest office opened. I helped put that office together. During that time the culture here was absolutely amazing. It was collaborative and creative. Everybody supported each other. The reason I came back was that this is a culture that I am fond of.<br /> <br /> MWREN: From what I’ve heard, a lot of people want to work at Transwestern. Why is that?<br /> <br /> Karmin: I’ve been in the real estate business for 25 years. I’ve been with a couple of companies during that time. Most recently I came from a large full-service real estate firm that did everything and had a lot of layers, a lot of management structure. That was good. It worked for them. For me, as a tenant advisor, I was looking for an environment that was conflict-free. Our industry is full of conflict. It’s hard to keep yourself completely away form conflict. But as a fullservice real estate firm, Transwestern has allowed me to represent my clients with the least amount of conflict possible. Secondly, there is not a lot of layers of management structure here. It’s a lot easier to get things done. When you need to be creative in this industry, you don’t want to face a lot of road blocks. With some of the biggest companies, the roadblocks sometimes get in the way of us moving forward and representing clients in the best way possible.<br /> <br /> Mark Robbins: There is an atmosphere here that encourages working together. It’s an open shop. Most commercial real estate brokerages tend to operate in clusters of teams, and whatever knowledge they have they keep it with the team. That approach doesn’t really benefit the overall group. What we encourage is that every assignment is different. If you need to put different people on your team for each different assignment, in our culture that is easy to do.<br /> <br /> MWREN: The company also has an active international division, too, right? That’s what Juan runs.<br /> <br /> Juan DeAngulo: That’s right. Our group is focused right now on representing international buyers coming into the United States who are interested in buying commercial property. We focus on four areas: Latin America, Asia, Europe and the Middle East. Our primary focus is on bringing in those buyers. It’s not so much a transactional focus. It’s more of an asset management focus. We want to stay with our clients for the life of their investments. When you are across the ocean from your asset, that local management becomes that much more critical.<br /> <br /> MWREN: How important is Transwestern’s international group to the company’s success?<br /> <br /> DeAngulo: The company has done a tremendous job in the last 30-plus years of growing in the United States. It was time to expand the borders with more of an international focus. Historically, any time there has been a down cycle, international private equity money has a lot to do with spurring the recovery period.<br /> <br /> MWREN: How important has recruiting new talent been to the success at Transwestern?<br /> <br /> Bagguley: We have identified people we would like to recruit to Transwestern from other companies. At the same time, we’ve built our practice by attracting young people who are completing finance or real estate degrees at Midwestern colleges and are interested in having a real estate career. We’ve done an intern program for the last eight years. Juniors from college have spent time during their summer recess at Transwestern. It’s an opportunity for themto look at the industry. Those who have excelled during this internship we have followed through their senior year and then recruited them. Our staff, then, is balanced between young people who are under 30 years of age and veterans of the industry. We are a multigenerational company. The younger workers learn from the ones who have been in the industry several years. Meanwhile, we can build our team around some of these younger employees. Each party gains from the other.<br /> <br /> MWREN: Are you surprised at some of the good press that Transwestern receives?<br /> <br /> Robbins: You have to be surprised when you are acknowledged by Crain’s as one of the best places to work. But our company is on a national basis well run. When I joined the company there might have been six cities and 500 or 600 people working here. Today we are at 26 cities or so and we are 1,600 and 1700 people. This is just a wonderful company to work for. The people here have high character and integrity. They are focused on taking care of the client and on providing best-of-class service. When you walk it, and not just talk it, good things happen.<br /> <br /> MWREN: How is the Midwest faring these days when it comes to commercial real estate?<br /> <br /> Bagguley: In all real estate, success is predicated on job growth. If you look historically in Chicago, we’ve had great cycles of growth. Growth fosters development, creates a vibrant real estate marketplace. The Midwest right now represents the doldrums of the country. Without having new jobs, development tends to be curtailed. When we start to see new job creation, we will see companies coming into the Midwest with a need formore space. That generates a need for new development. I feel that in 2013 or 2014 in Chicago that you are going to start to see a scarcity of quality space. That will change the market from a tenant market to a landlord market. From an investor’s standpoint, I think we’ve found that a good core asset is still attractive to tenants and investors. You will continue to see that. The newer product in Chicago will attract the highest prices. Tenants love to go to a new building.<br /> <br /> MWREN: You’ve seen a lot of ups and downs in commercial real estate. How does this cycle compare with others that you’ve seen?<br /> <br /> Bagguley: I see some similarities to the early ‘90s when we had a long protracted down cycle. Once the bottom had been reached in 1994, then we saw a good bounce in 1995. It was a great opportunity for investment over the next four to five years. The difference in this cycle, though, is that there was toomuch development in the ‘90s. It took longer to recover. There’s another big difference this time: We have become more reliant on the global economy. In this recession, there have been no real bright spots as you look around the world. This one seems to have impacted everyone on a global basis. We are all dependant on each other these days.

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