To find new opportunities in 2003, developers will have to look beyond mainstream office, industrial, retail and hotel development to markets with longterm growth potential, a local expert said today.
"Developers will face intense competition and limited prospects in traditional markets," said Stan Ross, chairman of the board of the USC Lusk Center for Real Estatecolor>.
Ross said opportunities in 2003 will include:
-- public/private partnerships of developers and local, state and federal agencies in development and rehabilitation of civic centers, administrative buildings, libraries, airports, stadiums and arenas, convention centers, cultural centers, jails and prisons.
"Governments face large budget deficits, and developers who can help them to attract private investment capital for critically needed facilities will have an edge," Ross said. -- development, remodeling and expansion of educational institutions for growing student populations. "Schools and colleges are playing catch-up," Ross said.
-- development of retirement housing, vacation homes, senior living and healthcare facilities, condominiums and apartments for an increasing number of aging baby boomers.
-- development, renovation and expansion of hospitals and healthcare facilities.
-- joint ventures with railroads to develop unused or underutilized properties, as well as acquisitions of surplus railroad assets.
-- development and sales of office and other facilities for a growing number of immigrant-owned businesses; and
-- providing outsourcing services to corporations that are transferring real estate functions such as project management or facilities management to third-party providers.
"While there may not be much of a pickup in development in 2003, investment activity will remain strong," Ross said.
But investors will have to be selective, he said.
"Some metropolitan areas have started to recover, while others have a considerable amount of supply to digest," he said, noting that among product types, apartment demand is starting to stir again.
Ross said some of the best investment opportunities will be found in acquisitions of office buildings and other corporate assets.
"Companies have an estimated $60 billion in synthetic leases on their books," he said. "To avoid moving the underlying assets back on their balance sheets under new accounting rules, many companies will dispose of these assets through sales or sale/leasebacks."
Ross said developers should closely track demographic and population trends to anticipate future growth in commercial property markets.
"Developers will need better forecasting tools, new business models and creative strategies to keep growing in an increasingly competitive market," he said.