Each year, the Foster School of Business and the Runstad Center join forces to co-sponsor a real estate symposium. This year’s event focused on a review of the lessons learned and changes in the industry since the financial crisis of 2008 as well as a look ahead at how real estate companies are innovating in the face of rapid market and technological change.
The Keynote speaker was King Davidson from Fundrise. Fundrise is innovating in a variety of ways to increase the accessibility of real estate investment. Amongst these innovations are a range of eREITs which focus on a variety of regional markets and investment profiles. The company has also established an eFUND which investors in walkable TOD townhome products in primary coastal markets with high wage/high housing cost market dynamics.
The remainder of the program consisted of two panels. The “Look Back” panel, moderated by Runstad Center Director Simon Stevenson, considered the financial crisis from the benefit of ten years. The panel included Ed McGovern (Managing Director for Capital Markets, Security Properties), Lynn Fisher (VP Research, Mortgage Bankers Association), Lori Mason Curran (Director of Investment Strategy, Vulcan) as well as keynote speaker King Davidson. The discussion considered a wide range of issues, including what the biggest lessons and consequences of the financial crisis and subsequent economic recession were and also the current state of both the real estate market and the economy. There was particular focus upon the impact of the changes in the regulatory environment post crisis and how that has affected both the mortgage market and real estate more generally. The panel also considered how Quantitative Easing and Federal Reserve policy on interest rates has affected the market and what may be the implication of ‘normalization’ of rates.
The panel did agree that despite the strength of markets such as Seattle there are distinct differences in market conditions compared to a decade ago. During the last cycle the easy availability of credit was a major factor behind the house price appreciation observed in many markets. In comparison markets like Seattle have today far stronger economic and demographic fundamentals, while the failure to deliver sufficient supply is also playing a key role. However, it was also noted that the heightened importance of fundamentals, rather than credit, was resulting in greater divergence in performance in markets across the country. The importance of institutional memory was highlighted by all of the panelists, as Lynn Fisher noted “Real estate is cyclical but we tend to forget that every cycle, at just about this point in the cycle”.
Kate Knight of Redfin moderated the innovation panel, teasing out the theme that if you want to be innovative in the current real estate market, one had better mind the plethora of government regulations affecting the business and take an active role to preserve the flexibility necessary for developers and investors to assume additional risk. On the other hand, those regulations can create business opportunities. Mott Smith, founder of LA Prep, described the food production facility they developed to facilitate the ability of multiple small food companies to quickly obtain their wholesale license through the use of pre-qualified food preparation and storage facilities. Eric Scharnhorst of Gehl argued that changes in parking requirements and the advent of driverless vehicles are going to render obsolete the 89.5 million square feet of structured parking space in the city of Seattle. Anthony Maschmedt, Founder of Dwell, used his “Emerald Star” sustainability designation to differentiate his 42 unit Columbia City project, attracting buyers to his high-performance homes throughout the recession. Finally, Michelle Connor, EVP Strategic Enterprises for Forterra, brought the conversation to the regional level, arguing that non-profits, community groups and developers need to be creative and collaborative in navigating around regulatory barriers and market challenges to bring value to a project or a community. Blunt NIMBY arguments can have adverse consequences for communities facing development pressures – wise use of political capital and negotiating leverage can result in win/win scenarios even when neighborhood change must be accommodated. “Seattle is hot and it is going to stay that way. One could say the sun is rising in Seattle even as it is setting in San Francisco,” said Scharnhorst. Successful real estate innovators are using that heat to light the way towards sustainable, efficient project solutions.