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January 11, 2010 

To our new subscribers: Bisnow brings something you've never seen to real estate news: brevity, and even a dash of (attempted) humor. We're informative, but easy to read, and we hope you enjoy.

Glad to see ’09 go? Don’t start celebrating yet; speakers at CBRE’s quarterly press luncheon say 2010 isn’t likely to be much better.
Texas A&M’s Mark Dotzour (here with CB’s Mark Taylor and Sanford Criner)

Texas A&M’s Mark Dotzour (here with CB’s Mark Taylor and Sanford Criner) said the local market peaked in ‘06/’07, bombed in ‘08/’09, and is now ready to improve. He says based on FASB 157, banks can value assets according to their own models as long as comps or appraisals don’t prove their numbers wrong, and to avoid foreclosures, some are saying buildings are still worth ’07 values. He says banks are avoiding foreclosures, but that without a big hit, there can be no healing. (That belongs in a fortune cookie.)

When will the market clear? When the Federal Reserve and Treasury think it’s safe to recognize losses, or when appraisers recognize building depreciation and auditors have to claim loans insolvable. Mark says job gains in recessions are fueled by startups (often by people laid off from bigger companies), but that banks in trouble from excessive CRE loans aren't loaning to entrepreneurs. Mark doesn’t see improvement in ’10: Companies will still downsize space, and for the first time in Texas there will be no new construction. He believes the first buyers in will be wild-catters: high net worth individuals who don’t mind risk. (Not to be confused with cougars.) Core buyers will not get back in until they see improvement.

CB's Sanford Criner

Sanford had no good news, either: Houston lost 90k jobs in ’09 (construction lost 26k, the most in this decade), unemployment is at 8.2% (up 2.8% from ‘08), and it was the worst year for office demand since the oil bust of the 80’s. Besides layoffs, companies are using space more efficiently, and vacancy is at 15.9% with a YTD net absorption of minus 2.7M SF, almost negating the gains of ‘08. Houston has only 2.5M SF under construction, almost entirely from three buildings: BP’s Helios Plaza (370k SF), Hess Tower (944k SF) and MainPlace (979k SF). Sanford sees deterioration in the CBD and West Loop areas in 2010, as well as continued drop in real rental rates, more foreclosures, and more negative absorption as job losses continue. But let’s end on a positive note: The luncheon was one of CB’s best-attended ever.

StudioRED Collaborative president Pete Ed Garrett

HUB certification helps facilitate government contract procurement. It stands for Historically Underutilized Business—or, at least 51% minority-owned. Most HUB companies (Hubbies? Hubsters?) have one or two owners who are minorities. But StudioRED Collaborative, a new local architecture firm, has 20. Pete Ed Garrett (who tells us "when in Texas, you gotta have two first names"), prez of StudioRED Architects, from which the collaborative sprung, feels architecture school don't teach enough business know-how; and that the usual process new architects face (a slow buildup to actual design work) is a waste of time. He focuses on educating his young employees but decided giving them more control would boost their productivity, help them improve faster, and make better use of their talents.

Thus, Pete helped found the Collaborative, and invited his 25 architects to buy some percentage of the company. Ownership ranges from 2 to 34%, and pay is based on effort rather than seniority. Since the Collaborative included 11 women and nine minorities, he applied for HUB cert for more job opportunities. The packet took about six weeks to put together and included documentation on each owner. The Collaborative is about 30 days from locking in its first contract; projects they’re chasing range from $10-$30M. They’re currently designing the City of Houston’s new permit building, a conversion of an old warehouse on Washington Ave, and just completed a theater for UT Brownsville.

Our publisher snapped these pics of so-called “CityCenter” in Las Vegas last week. It’s the most expensive private development in the history of the US, nestled (if that can be a word for 67 acres and 18M SF of development) between the Monte Carlo and Bellagio right on the Strip, where you probably didn’t think they could fit anything else. Those Veer Towers that look like they’re falling over (a deliberate optical effect of course) were designed by Helmut Jahn, who designed NYC’s CitySpire building, among others.
This is part of a 500k-SF retail and entertainment complex called Crystals, designed by Studio Daniel Libeskind with interiors by David Rockwell. The whole CityCenter used 77k tons of steel, 1.2M cubic yards of concrete, 30 cranes, 3.7M SF of curtain wall façade, 17k miles of electrical wiring, and the resources of MGM Mirage and Dubai World. (When Dubai World had resources.)
A lot of glass here at the 4,004 room Aria Hotel, where your ever-sacrificing publisher stayed on the 51st floor and constantly had to run down to the casino to get cell phone reception. (Interesting slice of humanity you run into at the gaming tables at 6 AM.) The Aria, designed by Pelli Clarke Pelli of Winter Garden fame, and the neighboring Vdara Hotel (a little boutique at just 1,495 rooms, though all suites) by Rafael Vinoly—both sport interiors by BBG-BBGM. There is also the teenie weenie Mandarin Oriental at 392 rooms done by Kohn Pedersen Fox. Do we like it? Well, stunning architecture, but, to be perfectly honest, it’s a bit too 22nd Century sleek for us; we’re still transitioning into the 21st.
Send story ideas to Catie Brubaker, catie@bisnow.com
Reznick (Building)
Transwestern (Houston)
Red Coats
Burton (Arizona)
Leo A Daly
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