For everyone connected to private and public sector development and construction, 2012 continued to be a year of challenges but, in a few sectors there were signs of recovery. Though economic forecasting is best left to the experts, self-proclaimed or actually knowledgeable, we’re more encouraged than ever by the state of our industry at the end of 2012. FitzGerald is increasingly optimistic about new business opportunities for the New Year.
To begin 2013, we rounded up our Principals, Associates and Project Architects and asked them for assessment on Multifamily, Retail, Commercial, Industrial, Planning, and Energy sectors.
Here, now, we offer our observations and outlook for the 2013 transition and for the months ahead.
As some sources suggest that city college and university enrollment have plateaued, we suspect that there will be fewer student housing development opportunities in the year ahead. Additional downward pressure on this sector is the rapid growth of online learning platforms such as Coursera, Kahn University, and University of Phoenix. This medium requires no campus and no student housing.
Outside the student housing sphere, the trend for smaller (and more affordable) rental units continues as the desirability of shared amenities, such as community rooms suitable for hosting the occasional large gathering, theaters, more elaborate exercise rooms, children’s playrooms becomes the norm.
Wood-frame building structures will continue to make inroads into building types once reserved for heavier structural systems. Growing acceptance of wood systems has been bolstered both by the easing of once restrictive building codes as well as a greater understanding of the financial benefits to developers. For buildings up to five stories the construction type is considerably more cost-effective than steel, concrete or hybrid counterparts according to Principal Mike Cody.
Lenders are increasing the loans to developers of multi-family housing. The relative ease of financing apartments has stimulated the design business with an estimated 10,000 apartment units currently on the drawing boards at area architecture firms.
Senior Housing will see an influx of skilled nursing care as active seniors age in independent living facilities according to Associate Principal Robbie Brundige. “As Baby Boomers age they increasingly move to skilled nursing or memory care facilities,” he reports. He adds that growth will be modest as home health and nursing care allows seniors to continue to remain in their homes longer.
Affordable Housing initiatives will come under increasing pressure as Low Income Housing Tax Credits become scarce as state and federal governments look to increase revenues according to Principal Rick Whitney. “Competition for fewer LIHTCs will become very heated in the coming years,” he says.
On the retail front, individual and multi-location retailers continue to revamp retail spaces to counter lost sales from online retailers searching for more distinctive, social shopping experiences. And contrary to recent trends, some on-line retailers are launching physical stores and pop-up retail venues. Principal Mike Cody adds that regional malls will see major remodeling initiatives and innovative tenant uses as landlords seek to reverse the declines in traffic. “Without protections from on-line retailers such as Amazon, regional malls outside of major markets will continue to lose relevancy,” says Mike. He adds that the grocery and electronics segments will continue to evolve as consumer tastes change and on-line retail dominates some sectors.
While the need for commercial office space has slowed to nil and some relatively new suburban office buildings are being demolished, new models of high-density-open-office plans gain ground. Knowledge workers in creative design and tech industries are increasingly situated at common work stations requiring 40 square feet or less per employee. “The new model of teams sitting side-by-side and face-to-face not only requires less real estate but stimulates collaboration, creativity and production efficiency” according to Pat FitzGerald. “Companies like Apple, Facebook and Google have long recognized the benefits of tightly packed, highly connected work groups,” adds FitzGerald.
As business travel improves the hospitality sector will see increasing renovation and modernization opportunities according to Rick Whitney. We’re already seeing increasing demands for renovation work as our clients delayed renovation work for an improved economy. Rick adds that there is increasing pressure from on-line ratings services such as Trip Advisor and Google demand that owners and operators keep hotel properties and furnishings fresh.
Around the Chicago, neighborhoods both favorites and emerging destinations continue to flourish. The South Loop is coming back—population there is growing as the shadow condo market fills in. A larger residential population in the Loop is stimulating retail in the CBD, leading retailers to expand and experiment with new concepts to draw customers. FitzGerald’s home neighborhood, the West Loop, is also improving despite the departure of Oprah. The new Morgan “L” stop is encouraging deals right in our back yard. The stimulative effect is driving office and retail development.
In the suburbs, Transit Oriented Development (TOD) is finally being taken seriously. As prices rise and unit sizes fall in the city, the suburbs along CTA and Metra routes continue to be attractive options for young professionals and families.
Principal Rick Whitney reports that “We have observed that the expansion and success of FitzGerald-designed TODs is encouraging single Millennials, young marrieds and partnered couples to live along these transit nodes. We predict that municipalities will even begin relaxing some parking-count requirements, as the reliance on rail and an anecdotally reported bicycle boom de-emphasize the automobile.”
Inside the home sophisticated home automation has finally arrived as an option for the average homeowner. With technological advancements like the iPad, the Nest thermostat, and Philips’ highly-controllable Hue LED Light Bulbs, smarter home operation is made easier and more accessible than ever, according to Associate Principal Steve McFadden.
The International Energy Conservation Code 2012 will have a significant impact on new developments throughout the region, bringing with it a new emphasis on the commissioning of buildings. “The expanding “green” building codes will take more and more of the spotlight away from the green ratings systems such as LEED, Green Globe and Energy Star, as large cities like Chicago begin to tailor the technology and design practices to best fit their economic and natural climates,” according to Associate Principal James Broughton.