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Goodbye, bells and whistles, hello practicality. The Great Recession is forcing architects and designers to strip down even urban projects to the basics, says GreenbergFarrow. The Atlanta-based design firm, which also has offices in New York, has worked on such urban redevelopments as the conversion of the one-million-square-foot Bronx Terminal Market in New York City into a retail complex, and Fordham Place, the rehab of a Bronx Sears department store into a mixed-use complex. GlobeSt.com spoke with Navid Maqami, principal-architecture and John Clifford, principal-planning, on how urban projects are adapting to changing economic times.

GlobeSt.com: The development atmosphere has changed radically in the last year. Has it affected how you approach design?

Clifford: Definitely. It’s night and day even from this time just a year ago, before everybody realized what was happening. Now projects that are going forward are going forward much more cautiously, and they’re very selective, high-demand projects. The appetite for any kind of risk is much lower than it was last year.

GlobeSt.com: Does that mean the scope of the projects have changed, or the price?

Clifford: All of the above. Projects have been scaled back, or people have looked at how they can save. Certainly, construction costs now are incredibly important now, because rents have fallen so much. … It’s prohibiting projects from going forward. That’s the sad thing about a lot of projects — even where there is tenant interest, and the rents may … seem reasonable for the current economic climate, the construction costs prevent [developers] taking that risk. You can negotiate a rent a little up or down, you can negotiate land costs a little up or down, and you can value engineer to get a little bit of cost off. But if the construction costs aren’t budging, we’re seeing projects not going forward.

Maqami: For the ones that are going forward, their focus has changed. A year ago, people wanted the “Wow” factor, a lot wanted their projects to stand out. Now everybody wants it to be value, value, value – efficient, pragmatic. They want to get it done. One has to be more creative in a sense. It’s very easy to create things with a lot of money or an unlimited budget – which we never had, any way. But once you have to tighten things, it becomes more difficult. In terms of planning, you have to be a lot more creative because you don’t have access to the tenants you once had.

GlobeSt.com: No more marble staircases, then. How do you rise to the challenge, particularly when you’re dealing with a constrained urban environment?

Clifford: Everyone looks at everything, even the layout of a building: How do you minimize the surface area even before you start determining what the building is going to be skinned with? If you can reduce the quantities, they want to do that, even if you were going to do it in marble. There are certain things that may not be visible to the casual observer. Last year, we were probably building in more flexibility for future expansions or future redevelopments. Now no one can afford that kind of luxury; I guess it is a luxury because initially no one is paying rent.

Value engineering extends to every aspect, from the mundane – the mechanical systems and the window systems, site work, everything – to the “marble staircase” stuff, the Wow factor that gets completely ripped off because it’s superfluous. It has to become a typical functional building as opposed to a statement building.

Maqami: Hopefully in terms of strategy, there are parts of buildings that are not as critical in the design statement. In those areas, one can do the most economical design solution, then make sure that where it does matter, where people come, you can do something right.

Things are not going to stay like this forever. We try to convince our clients not to be too short-sighted. When it was a boom, everyone thought it was going to last forever, now it’s a recession, everyone thinks that will last forever. But these buildings are going to stand for a good number of years. You don’t want to build something bad.

Clifford: Most of our clients believe and understand that, too. It’s not so much battling with them, but collaborating with them to figure out where these dollars are best spent, especially if they’re a long-term owner, so that it is a quality project, that the important materials are where they should be. You just have to pay extra careful attention to the back-of-house stuff to see if you can save money there to use it where it matters. We look at longevity of materials, and maintenance, or the ability to have flexibility. It just depends on the program; the ownership structure; who’s paying for the maintenance, tenants or landlords.

GlobeSt.com: Are owners now reluctant to invest in sustainability?

Maqami: Nobody wants to spend any money they don’t have to right now. That’s the bottom line. Wherever they think they’ll get any value out of being sustainable or going green, they will consider it. But if they don’t have to, I think they’ll eliminate it.

Clifford: The return on investment margins, even if they’re existent, have become so narrow. Even with those narrow margins, the risk now is infinitely higher than it was last year because of the weakness of the retail market. Borrowing costs are higher, more cash equity has to be put into deals. The stability of the retail tenant world as a whole is a lot weaker than it was last year, so the ability to pay back construction loans through rental income is not as rosy as it was two years ago, either. Look at all the retail tenants that have dropped out of projects. There aren’t a lot banging down the doors to get into those empty spaces. That 1% [premium for sustainability] is a lot more money relatively speaking than it was last year or a year before that.

GlobeSt.com: Is your specialty in urban design particularly helpful, because more densely populated areas will attract development?

Clifford: Yes, but not as much as I would like. The only markets that really have any retail demand, even anecdotal, are urban markets. They’re not as over-retailed as, say, suburban Atlanta, which had a low barrier to entry.

Almost all retailers will tell you their highest performing stores are in Manhattan or the other four boroughs. But they’re nervous because there are still higher operating costs, still a huge capital cost aside from rent to open a store. Retailers are looking at their overall performance. I hope we’re seeing a bit of thawing of that, but certainly from September through January or February, the market was frozen for a lot of reasons. Retailers were watching their sales fall through the floor, their profits erode and their cash reserves erode, and so the landlords are left with no tenants. The only interest we’re seeing is still in urban sites around the country, but that doesn’t mean they’re rushing full speed ahead to open stores there. Everybody is in a wait-and-see [mode], and there are many more external pressures that are causing people to delay.

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