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Even more in today than ever before there is a drive not only to “keep up with the Joneses”, but to “be the Jones”. Trying to make one more sale, develop one more innovation, and do whatever is necessary to “close the deal” while chasing the ultimate goal of financial success.
This drive for financial success is rapidly being replaced by the desire for financial power and greed. As a result, lack of respect, and a disregard for ethics seem to be the new norm. Respect and morals trickle down from our superiors. Parents teach their children, employers set the bar for their company, and government leaders set the tone for the nation. When irrational behavior, mockery, and deceit are not only condoned but encouraged by our “role models”, it is difficult to do the right thing. People instead do the easy thing. What is easy is rarely right.
Cutting corners or changing the deal is too easy, especially when business is hard and saving money is paramount. Keeping your commitment is hard when business is slow! It is critical, now more than ever, for company leaders to set and maintain ethical standards, and not allow outside elements to lower the ideals that have made American businesses successful.
“If you don’t stand for something, you will fall for anything.” ~ Alexander Hamilton
40 years ago, businesses traditionally increased employee productivity through either monetary reward (high salary) and/or reprimand (fear of job loss).
The 21st Century business philosophy for increased employee productivity is vastly different than it was back then. Today, productivity is thought to be motivated by increased employee engagement. This is defined as “an employee’s emotional commitment to the organization and its goals”.
Scheer Partners has welcomed this 21st Century philosophy. We nurture employee engagement through a variety of team building initiatives that have a positive impact on productivity. Scheer Partners has a sense of community and employees are engaged.
While I agree that employee engagement is a key ingredient to office productivity, I also feel the drive to yield results is hard wired in certain individuals. The Scheer Partners office is lucky enough to have such individuals. So, like most things in life, I think productivity requires balance; balance between employee engagement and a determination to work hard.
That’s my opinion. What’s your take?
The area of North Rockville has gone through cycles of being an active and thriving market to the highest sustained vacancy rate in suburban Maryland. Nonetheless, it is still the nexus for a highly skilled workforce, and offers convenient access to exploding developments and prime real estate. Looking at Shady Grove, the area is presently undergoing some exciting expansion. On the East side: Mom’s Organic Market and a new CVS are now in full swing at Shady Grove Road and Choke Cherry Road. 1788 Holdings/Lantian Development is in the planning phase of redevelopment of seven existing office buildings.
Moving over the West side, PS Business Parks is laying out plans for their 75 spec suites – a sweet opportunity for tenants in the market for space. The suites will range from 1,500 – 7,500 of square footage.
And, the National Cancer Institute is poised for their next major expansion!
As Montgomery County moves forward with new development projects, 2016-2017 is on record as seeing prodigious expansion for Bethesda with major projects that will unfold over the next two decades. The Bethesda Master Plan was approved by County Council and made headlines with announcements such as the Marriott moving their headquarters to 7750 Wisconsin Avenue, and the Downtown Plan, approved by the Montgomery Planning Board, with a central focus on social, economic, and environmental stability.
Several buildings in the area have been acquired for expansion or redevelopment with new deals being inked at these locales: The Landlow Building on 7910 Woodmont Avenue, 7700 and 7979 on Old Georgetown Road. Developers like Donohoe Companies and Brookfield Properties are making their mark in the area with several property deals. Revitalization is the buzz word as Bethesda will continue to see growth with renovations at Crescent Gateway on 6931 Arlington Road with plans to redesign the building both inside and out. Landlords are looking at new opportunities as they consider how upgraded rentals will attract new residents to desired locales.
Read our Bethesda Market Report here.
Last week, GSK announced a $139 million investment to expand its Rockville manufacturing site to meet anticipated demand for its lupus drug. The expansion would allow the company to boost bulk production of a substance used in several of its drugs, including Benlysta, by about 50 percent.
The 420,000-square-foot campus and manufacturing site, 9911 Belward Campus Drive, has more than 400 employees. GSK’s investment will go toward retrofitting an existing facility at the Rockville manufacturing site, which GSK inherited when it purchased Human Genome Sciences Inc. in 2012. It will also cover demolition of existing suites, engineering, installation and validation of equipment.
This is exciting news. GSK, like many other industry leaders, has recognized what Montgomery County can offer an organization for growth opportunities.
We need to continue the momentum and continue creating a county which is business friendly and open for business.
The National Institutes of Health will get a $2 billion funding boost over the next five months, under a bipartisan spending deal reached late Sunday night in Congress. The agreement marks a sharp rejection of President Trump’s proposal to cut $1.2 billion from the medical research agency in the current fiscal year.
The deal does not address funding for 2018, when Trump has called for a slashing the NIH’s budget by about a fifth, or $5.8 billion.
But it sends a clear signal that lawmakers on both sides of the aisle prioritize funding for medical research and intend to honor the agreements laid out in the 21st Century Cures Act, a bipartisan bill that called for raising NIH funding and speeding approvals of new drugs and medical devices. This will be the second year running that Congress gives a $2 billion funding bump to the agency, which funds medical research across the country.
And what does this mean for the region? Innovation needs to win. Our region needs to ensure that we create a winning environment for emerging companies who collaborate with NIH and other research institutions–quickly. We need to seize every opportunity to introduce new treatments and medical drugs to improve lives, create opportunities for businesses to prosper in the region, and most of all, create a region with appeal to those companies who want to be innovative, forward-thinking and be the possible cure-finders.
In this bright future you can’t forget your past.
Trends: Reflecting on the Past
As much as we focus on the day-to-day political and economic crises, we need to remember that it is trends that dictate how business operates and reacts. Trends are a way to remember the past and gauge what the future could hold. And when we closely examine Montgomery County, we are reminded that our county is a snapshot of global trends and global opportunities.
Let’s take a look at a few societal trends and an interesting development trend which could lead to very exciting opportunities for the right tenants and landlords in the region.
Societal Trends Impacting Commercial Real Estate
Lately, I have been reflecting on what is next in terms of the next big real estate trend—what is going to impact how businesses plan for their spaces and create performance driven environments. So let’s take a look at a couple of trends which impacted the commercial real estate industry.
January, 2009, ADA amendments and requirements took effect impacting the commercial real estate market. Owners and developers focused their attention to developing an inclusive office environment for all employees and create spaces where all would be welcome. Design and construction turned changes in elevation, curb ramps, elevators and restrooms. This changed the industry and had a lasting impact on how we design and plan for inclusiveness.
Recognizing and planning for those with disabilities changed how office leases were done, what amenities were important and all to create an inclusive environment and advance business.
Fast forward to another subset market trend—the green, energy-efficient building.
Commercial building owners and managers will invest an estimated $960 billion globally between now and 2023 on greening their existing built infrastructure. WOW….and to think the green building trend started in the late 90s.
Industry pioneer organizations like USGBC created industry standards to help guide building owners in creating efficient and healthier spaces. And the trend took off like wildfire across the region—from tinted glass windows, to low consuming water systems, to energy efficient HVAC systems—owners constructed building improvements and tenants expected green buildings.
“Millennials” may rank as one of the most-used words in the English language in recent months, but it’s for good reason. This generation, born roughly between 1980 and 2000, make up more than one-third of the U.S. population, making them easily the country’s largest demographic.
The millennial generation’s experience has been unique, thanks to the fact that it was the first to have lifelong access to the Internet. This fact, along with all of the connectivity that it implies, has profoundly affected the cohort’s attitudes and behaviors, and this, in turn has impacted our society to a tremendous extent.
Today’s workplace, with its rooftop terraces, gourmet coffee, comfortable lounges, bike racks, and meditation rooms can all be attributed to the millennial active needs and wants. It’s one of the many ways that this generation is impacting commercial real estate. Look at the recent transactions in the market—Marriott’s move to attract the millennial workforce—changes going on in the Bethesda market to cater to the millennials needs of creating a live, work, dine city.
So, what do these three trends tell us…focusing on one market subset catapults the industry. With ADA, we had an opportunity to revitalize buildings and accommodate; with the Green trend, we made our work spaces healthier, and millennials challenged how we design workplaces and the communities which surround those workplaces. I say that our past trends, and how they have been embraced, have only furthered the industry and created economic opportunities for all.
Neighborhood Trends: Developing the Hidden Gem
In our county, there are not too many neighborhoods left for development and growth opportunities. But there is one pioneer, Stephany Yu, who is leading the charge with redeveloping the Parklawn Drive corridor with state of the art facilities and buildings to house growing, forward-thinking organizations.
She and her company have done it before and I have faith that she is going to do it again. Past trends in the county, like the revitalization of Silver Spring, and the exciting activity surrounding Pike & Rose show that taking perceived under-used neighborhoods, and investing in those neighborhoods can lead to developing thriving economic centers. The Parklawn corridor could be the next development trend in the county.
Stephany is the founder and chairman of Greencourt Group, a real estate investment and development company that has developed over 30 million square feet of residential, commercial and retail properties. Greencourt currently owns and operates more than 1 million square feet of commercial property in Shanghai, and holds more than 20 million square feet of land reserve in China.
Recently, Greencourt expanded to Washington D.C. metro area with their first project on Parklawn Drive. The Greencourt Innovation Center capitalizes on the trend of creating environments where collaboration and the entrepreneurial spirit grow.
But what is interesting is what Stephany has planned for the Parklawn Corridor to transform that corridor into a thriving district where arts, business and living come together—creating excitement, new business opportunities and growth potential for the county.
If you are curious about this project, reach out to me and come tour the next up and coming neighborhood in Montgomery County.
As the White House slowly settles down, and with the recent release of President Trump’s budget blueprint, we are beginning to see a possible direction the new administration may be taking. Key word being possible.
But what about commercial real estate-what could be next? Here are a couple of things to consider:
Lower Taxes, Less Regulation, More Lending
From the beginning of his campaign, President Trump has been a supporter of lower corporate taxes, deregulating the government, and economic prosperity. We know that rapid economic growth means that the Federal Reserve will step in to temper the growth by raising interest rates. Raising interest rates in turn will put pressure on commercial real estate yield spreads, but could also encourage more bank lending.
Could higher interest rates and a healthier economy mean more lending by banks? The Trump administration’s executive order aimed at scaling back the Dodd-Frank Act, as well as his freeze on new or pending regulations means banks should be able to do business without worrying about new restrictions or penalties for the first time since the financial crisis. Higher interest rates should also make banks more willing to lend because loan spreads will be more attractive.
As the Economy Goes, So Goes Commercial Real Estate
Typically, that which is good for the economy is good for commercial real estate. The administration’s support for lower taxes and increased infrastructure spending should spur economic growth. Dubbed by some as the ‘Trump bump’, his policies are expected to encourage more bank lending and greater activity in the capital markets.
With the ‘Trump bump’ comes very irrational and combative dialogue from the White House. The American people have not seen such an outspoken and rash White House like we have seen since January. And that makes investors nervous. The protectionist stance the Trump Administration is taking on trade and immigration is raising investor’s concern about global economic growth. And when there is concern, it leads to “pause” of investor activity. With regards to commercial real estate, the heated debate around illegal immigration, as well as the high percentage of illegal immigrants in the construction industry, might exacerbate existing construction labor shortages. If the economy grows, demand for office buildings increase, will we be able to meet the need?
What Does the Future Hold?
I have hopes that commercial real estate will continue to maintain satisfactory growth in 2017. Our industry has been driven by solid fundamentals, historically low interest rates, good value and strong total returns. The real estate market has performed well without overheating. Prices are back to pre-crisis levels for most major property types but the pace of gains has eased as investors and developers have demonstrated more discipline. These factors have helped create a stable foundation for the market and point convincingly to continued sustainable growth.
Longer term, however, most investors are focused on whether the market is getting closer to the end of its current cycle and whether it is reaching a peak. With a very outspoken, and at time irrational President and the market’s solid foundation, we expect the near-term market to be strong but beyond that caution should be exercised based on historical economic and market cycles and if interest rates are significantly raised.
Finding the Value in the Market
Value can and will be able to be found in the commercial real estate market. We have been exploring alternative property types in Montgomery County. Assets that need repositioning is a perfect target for many current investment strategies. For example, vacant office parks that are converting to laboratory space could offer investors enticingly higher returns. Every investor wants to have the ability to select an investment that is tailored to their specific needs, requirements and control. We know of those options in the market. Contact us to hear more.
I believe the future could be bright for the commercial real estate industry—but we need to be informed, cautious and prepared.
And if you are thinking about getting into the market or have concerns about your current properties, give me a call. I would be happy to share what I know, and where the market could go.
The open houses for the Bus Rapid Transport (BRT) have begun in Montgomery County last week. Which means that slowly but surely BRT will be coming to our county—and it could not come faster in my opinion. BRT will help connect businesses, provide transportation options, and expand where organizations can recruit to further their growth.
How does Montgomery County remain competitive with markets like Boston? Sure, we are able to compete when it comes to an educated workforce, access to universities and colleges, and actual space for businesses to operate. We have the distinct advantage of direct access to the federal government and agencies. If you line up the pros and cons of both markets—the winning piece would be who can solve the transportation equation the smartest and the fastest.
In the recent weeks, the mayor of Boston released his transportation plan titled Go Boston 2030 which is intended to improve transportation within the city and address a multitude of existing transportation challenges. Read the article here.
So here is the deal—it is time Montgomery County moves quickly and efficiently in solving our transportation challenges. Ease of navigating the county roads, the ability for employees to access their workplace economically and efficiently is one of the biggest recruiting challenges for major corporations. If we do not begin to move forward with the BRT and other transportation options, we will continue to lose out to other major markets—especially frustrating to me and many others because this region is ripe for explosive growth.