Green Shoots for Developers at the Edge of the Fiscal Cliff

After nearly five fallow years, developers start to see (a few) opportunities beyond the obvious ones for apartments. In any gateway market, building an efficient floor-plate, LEED gold or platinum office tower will command attention from tenants who start to pay up for the chance to reduce their operating costs. They can lower utility bills, gain greater flexibility and decrease future expenses in altering layouts, win kudos and possibly attract young talent for using environmentally correct space, and buy into the notion that more natural light and fresher air creates healthier, more productive work environments. These new wave buildings successfully leech tenants out of last generation space and can be cheaper to build than buying existing trophy product at current cap rates. The only losers here are past generation, brown buildings which cannot hold onto tenants. It’s another sign that pricing for existing trophy product in these 24-hour markets may have peaked or at least leveled off. 

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