CREJ

June 2019 \ BUILDING DIALOGUE \ 15 NEW COLORADO SPRINGS OFFICE B R I N G I N G O U R E X P E R T I S E C L O S E R T O YO U . . . 303.865.5500 | nancy@k2avt.com D E S I G N S E R V I C E S • Audio/Video • Acoustics • IT/Telecom • Security A Certied, Women-Owned Small Business W W W . T H I S I S K 2 . C O M eration manuals or hires an experienced operations company to manage the building for up to eight years. Opinions about these measures are mixed. The consen- sus seems to be that they are far less than ideal, but adequate enough to warrant the design and construction of some con- dominium projects. Would a full restoration of “right to cure” improve the flow of new condo products to market? It’s hard to imagine this is the only issue preventing construction, but it is theoretically possible. There are, however, additional possible factors. Cost is a huge issue impacting all sides of the project. It’s ex- pensive to buy, build and purchase these units. Some of the new condo product that has come on line has (often rightly) been criticized for a lack of design appeal and contextual rel- evance. However, these projects are generally constrained by tight proforma predictions, limiting budget for features such as attractive massing, systems or details. Unless the developer has the ability to hold a property for years, significantly rising land costs ultimately have a large impact on the final product. Additionally, while construction labor costs can appear dis- proportionately high, the reality is that those costs may be ap- propriate givenpressure on the labormarket to performat high levels, over many consecutive years. So, while many consumers are fast to question the size of project profit margins, few com- prehend the depth of risk burden taken on by the developers. Another lesser-known issue is micro-location. Many condo projects are technically in areas generally considered desir- able. However, often the available sites are limited, pushing the boundaries of the “desirable area” outward. Others are closer to the target zones but adjacent to less attractive, more affordable parcels. That means less risk from a land cost perspective, but it may adversely impact reception of the final product by po- tential buyers. There is also the possibility that the first-time homebuyer – in many cases millennials – simply want more from their first purchase. While I have written in the past that the some- what-maligned reputation of this large cohort is often based on bad data, it’s entirely possiblemany are reluctant to lock into the market through “starter homes” in less coveted areas. Per- haps younger buyers are rejecting these units in favor of rent- ing in more popular areas while they save for a single-family home. It’s likely that a combination of factors is affecting the slug- gish condo market. Each project is different enough that one might be affected by a few of the above issues while another is impacted by a different blend all together. To overcome these issues, it’s important that we, as a project team, first understand and respond to each unique contribut- ing factor. This is the first step on any of our projects. Ideally, this is a collaborative effort with the owner’s acquisitions, develop- ment and sales team, and the designer’s architecture and en- gineering team, as well as the general contractor and relevant subs and fabricators. Making these projectswork for owners, buyers and the broad- er community requires effort. Bottom line: The effort is worth it. A diversity of condominium projects would positively con- tribute to a healthier and more robust market. Here’s hoping we see the commercial real estate market respond with more creativity and commitment to collaboration in the near future. I know we’re committed to doing our part. \\ Bridging the Gap