Friday, December 5, 2008

Inside Real Estate

Expert views: Dan Cordeau on tech real estate and the economy

By James M. Connolly

Video Gallery

In their own words: Tech Citizenship award recipient Bill Shander, CEO, Beehive Media

MHT reporter Efrain Viscarolasaga on NECN: Green tech brings jobs back to Mass.

Interactive map of Bedford's Crosby Drive tech hub

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Real Deal: MIT buys biotech buildings from family trust for $90M [July 3, 2008]

Recession rebuttal: Cost of lab space continues to climb [February 25, 2008]

Health IT firm Quantros opens Marlborough office, plans new hires [November 5, 2009]

As September and the third quarter drew to a close, there were storm clouds hanging over the economy, but the worst had yet to hit. As a result, the Q3 reports coming out of researchers at several of Boston’s major commercial real estate firms carried an air of cautious optimism, seemingly viewing the glass as half full.

Then October hit, and those storm clouds drenched everyone: Wall Street, consumers, real estate, everyone.

Among the experts who were upbeat before October was Dan Cordeau, executive vice president and a key researcher at Jones Lang Lasalle in Boston. He spoke with Mass High Tech recently to discuss how times in Boston real estate have changed in just two months. It’s an environment marked by numerous breakfast and lunch get-togethers where the key theme is figuring out the state of the real estate market.

One key development is that there is less focus on buying and leasing. “A lot of the movement in real estate right now isn’t about making moves, it’s about refinancing and debt. Companies are watching their capital a lot more than they were,” said Cordeau. “Activity certainly has slowed down. We’re seeing more companies postponing decisions and looking for one-year or two-year renewals.”

Another challenge surrounds tenant improvement, property enhancements that a corporate tenant wants done before a move. Both tenants and landlords are showing declining interest in paying for such improvements, said Cordeau. Down the road, watch for more property owners and financiers to be dealing with “distressed buildings,” where owners don’t have the funds to cover monthly costs, he added.

One result of concerns over distressed properties is that Cordeau has started to see more requests for proposals that call for information about the property owner, how it is financed and the identities of lenders.

But, wait, things aren’t all bad, according to Cordeau.

Watch for good news on the biotech side of real estate. “What I’ve heard is that when the latest quarterly news comes out, it’s going to shape up as a pretty good quarter, even though those were longer term commitments that were made a while ago,” he said.

He also cites a recent real estate deal completed with Exa Corp. of Burlington, which produces fluid dynamics-oriented design tools. Considering that likely customers for that type of technology would be in the troubled automobile industry, some might assume that Exa would suffer as a result. “But people are still going to make cars, and their technology helps those cars go further on a gallon of gas,” noted Cordeau.

Cordeau said that he is involved with five proposals, all of which are driven by companies’ growth.

Plus, there is money available for new deals, particularly in suburbia. “What I’m hearing is that if a developer wants to buy a building out in the suburbs and it’s under $25 million, there is a pool of lenders out there. If you have a good tenant and a good building, there is financing available,“ said Cordeau.