The multi-panel event brought together some of the biggest names in D.C. real estate to discuss the current state of the market, key industry trends and predictions for the near future.
Among the all-star speakers were professionals from Arent Fox, Brookfiled Office Properties, Jamestown Properties, Cassidy Turley, Vornado, Genlser, Rappaport Companies, Penzance, JLL and CohenReznick.
The event kicked off with a conversation about entrepreneurship between former US Senator (and current Arent Fox advisor) Bob Bennett and billionaire BET founder Bob Johnson. Johnson noted:
• You need to be a risk taker in order to be an entrepreneur; being too cautious or too aggressive can lead to failure.
• When starting out your ideas may be rejected -you need to believe in yourself and your ideas.
• Entrepreneurs need to consider what hasn't been done before.
• Johnson doesn't see risk, rather opportunity. Notes that if he doesn't do it somebody else may.
• It was a long uphill battle to start BET as the majority of black households at the time didn’t have cable television. Getting the product to the target audience was a real challenge.
• If you find passion lagging, that's when you may not succeed. This is why he decided to sell the Charlotte Bobcats to Michael Jordan.
In their interview, Jamestown CEO Matt Bronfman and Brookfield Office US CEO Mitch Rudin discussed the urbanization of America's cities.
• Mitch -Brookfield owns 3x more buildings in DC than other markets.
• Matt -is most optimistic about NYC, sees upside in supply & demand constraints, zoning issues, etc. DC is 2nd.
• Mitch -sees downtown Manhattan turning into an extraordinary mixed use neighborhood.
• Matt -believes in urbanization trend and that folks don't want to be in their father's building. Mentions Industry City in Brooklyn and Sear's conversion building in Atlanta. Aside from trophy assets, Matt also likes to chase assets that are in some way unique.
• Mitch -says the trend is evident in that new driver's licenses among 18- to 25-year-olds have gone down 30% over the past 30 years, indicating a flight to cities -young people want to live-work-play all in one convenient location.
• Also notes that Houston has been the hottest market over the past couple of months for Brookfield. Points to dearth of zoning regulations in the market and the presence of many fortune 500 companies.
• Matt -worries about job growth, still slow.
• Mitch -regrets not getting into San Francisco sooner, worries about markets that aren't diversified with industries.
• Matt -raises a lot of capital from Germany. Worries about US and German relations. Obama has been positive for European investors.
• Matt –Jamestown has a lot of capital they’re sitting on and wants to pull the trigger on another iconic asset in DC.
Steve Fuller, Director of the Center for Regional Analysis at George Mason University, notes:
• DC is under performing the national economy.
• Looking at the top 15 national real estate markets, DC has consistently had some of the lowest, if not the lowest, growth levels over the past 5 years.
• Growth will come but will not be as large as hoped in the short term.
• Sequestration and decreased federal spending has slowed growth.
• The federal work force is also decreasing.
• DC lost 12,000 office workers, vacancy is 14.5%, two points higher than the rest of the country.
• Need to replace dependence on government in order to fill the void.
• Suggests for DC to become a global business center. Uses London as an example of a diverse global capital city that does a good job of balancing the public and private sectors.
• Doesn't believe tech is the only answer; the focus can also be on healthcare, education, and other sectors.
Here is what we heard from the Panel Discussions:
First Panel
• First Potomac Realty Trust Chairman & CEO Doug Donatelli -amount of equity out there chasing deals is more than ever, except fundamentals aren’t great in DC.
• MetLife Director of Equity & Investments Anthony Balestrieri -sees deal volumes down in DC. Isn't sure current investors are expecting to make money downtown but rather looking for a safe place to park their money.
• Rappaport Companies CEO and former ICSC Chairman Gary Rappaport -they just focus on NOI growth, this is what they can control.
• Bank of Georgetown President Chairman & CEO Mike Fitzgerald -expects interest rates to rise the first half of 2015 -- his sweet spot for loans is metro DC -- likes to see projects that can be built / sold in 18 months.
• Balestrieri -needs to find assets that will mature over 30 years.
• Donatelli -sees it tough to get younger generation to abandon public transport. Sees future in urbanization. Will be difficult for owners of office parks.
• Fundrise Co-founder Ben Miller -sees gap in cap stack where institutional players aren't playing.
Second Panel
• Easterly Partners principal and former US Buildings Commissioner Joe Moravec -the government is in a period of confusion. At least now there's a budget.
• Gensler Principal and Former US Building Commissioner Bob Peck -government has roughly 50m SF under management.
• Easterly Partners principal and former US Buildings Commissioner Joe Moravec -sees lack of resources on government side to get leases done. Plus there is no lobby group to make the GSA more efficient.
• Cassidy Turley Vice Chairman, Principal Darian LeBlanc -there will be losers with government downsizing.
• Bob-need to take a look to see how your building will meet new government requirements.
Third Panel
• Toby Bozzuto of Bozzuto Group -views the Monroe Street Market as a multi-faceted environment that creates an experience.
• Johnny Moseley of Moseley Construction Group -sees a lot of owners spending money on amenities. This is being done to keep up with the new developments coming online.
• Norman Jemal of Douglas Development -likes to build to the top of the market, can move down but not up.
• Joe Margolis of Penzance views his project's location in Clarendon (near transit) key to success.
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