Future-Proofing Large Developments in a Time of Change
“Future-proofing” is a central goal for developers as they assess changing priorities for tenants, panelists said at a ULI Washington event titled “Designing for a New Decade.” This means thinking about how climate change affects projects and how disruptive technology can alter the industry landscape.
Panelists said much of the discussion focuses on amenities—how many parking spaces should be allocated for electric vehicles that will need to be charged, how big the bike room should be and whether multiple bike rooms will be needed, and whether tenants will even want a place to park their cars on site in the future.
“It is no longer about meeting a set of green goals on a scorecard with boxes to check,” said Pedro Sales, principal at BCT Architects. “It is about taking a more holistic approach to designing buildings that can be owned for 50 to 60 years.”
That means developers must evolve in how they think about value in a building’s design. “Developers want to stay on the leading edge, not the bleeding edge,” said Andrew McIntyre, executive vice president at Combined Properties. “We are trying to keep up with the latest and greatest, but how all that plays into value is something we are constantly evaluating.”
“People put a premium on clean air and water,” said Katie Rothenberg, managing director at Paladino and Company. “When it comes to real estate, people don’t see sustainability as a privilege.”
One question to evaluate is how much people are willing to pay for sustainability. Owners are more interested in investing in solar panels, whereas a renter may not see that as a priority, McIntyre noted. So it is important to think about who will be occupying a property—whether it be residential, office, retail, or something else—when deciding whether to invest in sustainable features.
Similarly, tenants value aesthetics and the differentiation that comes with some sustainable features, McIntyre said. But it can hard to assess whether an expensive feature will be valuable or worth the investment decades into the future. The growing use of mass timber in construction was cited as one example. For larger developers, costs associated with investing in sustainable, future-proofed features can be spread and absorbed over the broader portfolio, Rothenberg noted.
One example of a development project that had long-term sustainability as a key driver is the Fort Washington Office Park near Philadelphia. Justin Schor, principal at Wells + Associates, described the project as a “booming” office park that addressed flooding issues with important investments in infrastructure. A major public investment began with the completion of two dry dams upstream from the site. “The property addressed flooding and became an appealing mixed-use property with forward-looking transit appeal,” he said.
Sales noted that his firm was able to use sustainability principles in modernizing a property near Baltimore’s Inner Harbor. “Many of these properties have had power systems in the basement that do not meet new GSA [U.S. General Services Administration] requirements to modernize buildings to deal with changing weather patterns,” he noted. Modernization led to the development of a premier property, 10 Pratt Street.
“The most sustainable thing you can do is to update and modernize a building rather than creating a whole new property with sustainable features,” Sales said.
In addition to addressing changing weather patterns, thinking about parking, driving, and transportation is a key issue when planning for future development projects. A big issue can be figuring out how much parking to include. “When you are planning today for a property that will be delivered in six years, it can be risky for developers to not plan for enough parking,” McIntyre said.
The real estate industry is seeing a fundamental shift in parking attitudes, he noted. However, it can be hard to convince an underwriter to support a future-proofed property if, judged by current market demand, inadequate parking is included in the design. Looking forward, developers need to incorporate charging stations into their parking designs and ask themselves how many charging stations will be enough. Longer term, property owners may even be able to charge tenants for use of the electric vehicle charging stations.
But providing parking and access to it will not be particularly useful if the property is not set up to support the kind of technology and connectivity that will be prevalent in the future. “The kiss of death in a Yelp review is a comment saying a hotel guest can’t get a signal,” McIntyre said. Strong wi-fi or cellular connectivity is a default expectation, even as these standards are still evolving.
New technologies must also be considered when a property’s design features are being planned. Holly Lennihan, director of sustainable design at Hickok Cole, noted that future-proofing even includes decisions about the type of glass to use. Will tenants prefer windows that work like sunglasses over the use of conventional shades? Will certain types of glass or construction interfere with the 5G signals of the future?
Similarly, Rothenberg said a move away from steel and concrete to timber is a sustainable choice, even if it may not appear to be the case at first. Many forests are privately owned, she said, and giving owners an economic reason to plant and grow trees is a more sustainable choice than otherwise developing that land.
Ultimately, creating future-proofed properties should not be a matter of convincing underwriters and tenants that the latest technologies are environmentally friendly features they can acquire without tradeoffs, the panelists said.
“It is important to understand the business base of our clients,” Rothenberg said. “We are not trying to sell. We are trying to educate. But there is no question the business case is there.”