Will the Economic Downturn Slow Green Development?
According to a survey of 243 principal members of the National Association of Industrial and Office Properties (NAIOP), the economic slowdown is making developers more than a bit nervous. Their concerns range from the availability of capital and the deterioration of rents to the desirability of office development in both the central business district and the suburbs.
About one-third of respondents saw their rents deteriorate in 2008 and 28 percent expect further decline next year. Office vacancies have increased from 12.6 percent at the end of 2007 to 14.1 percent at the end of the third quarter 2008.
Will economic conditions hurt green development? Will green be seen as an unnecessary luxury in difficult financial times? Jerry Lea, vice president, conceptual construction for Hines, says he thinks green development will probably slow, but no more so than traditional development.
“Part of the reason tenants are focusing on sustainability is recruiting and retaining talent, so if unemployment continues to rise, then they’ll be able to pick and choose people,” he says. This means that demand for green office space may slow.
But because tenants will be scrutinizing every corner of their budgets, energy efficiency may become more important, says Lea.
“My opinion is that we’re not going to go backward,” he says. “We may not grow at the same pace we had been, but we’ll be okay.”