A Texan's take on the Lone Star of building ownership.
You can almost hear the oil pumps turning as Joe Hudec looks across the professional landscape from his Houston offices. There's a faint breeze of realization, of something that might be percolating under the surface of buildings ownership in the United States.
Who knows, he says. Might just hit something here.
Hudec is president and CEO of Premisys Real Estate Services, Inc., Houston. Premisys is a wholly owned subsidiary of The Prudential that manages more than 60 million square feet of commercial space nationwide.
The premise Hudec is considering? That building ownership in the United States has shifted from long- to short-term.
"It used to be people would buy a property for 20 or 30 years. Now they buy it for five years and call it long-term," Hudec says with a thoughtful drawl. "That's not long-term in my book."
"Ownership is certainly changing," he says. "People used to buy properties for long-term, ... Today, it's more a short-term mentality: Cut the costs, get the return up, fill it up any way you can, get the income, then flip that thing so you can make a profit."
Not that the 30-year veteran buildings professional is uttering discouraging words. Nor is he arguing for what another Texan might have called a "kinder, gentler" profession.
Hudec does wonder aloud, however, as to where the intangible assets of ownership have gone: corporate goodwill, both with tenants and with the community-at-large; and the prestige of serving flagship buildings or top-rate tenants.
"It was investment that got them in there, but there was also a social attractiveness to owning a property," according to Hudec. "It made a statement. It was a monument to the owner or the company's name."
Prestige could also follow serving a brand-name tenant.
"I can remember a time when one of my clients wouldn't have sold a building because of their relationship with a tenant. ..." Hudec says.
"Now, if it comes time to sell the property, owners are going to sell the property and go."
Tenants have always been fickle, of course. Although building owners have sought to corral tenants with unprecedented service improvements, the typical leasee can still startle at the distant thunder of cheaper rent over the horizon.
"It's not that building owners aren't taking care of tenants. That's not true," Hudec says. "In fact, they're taking care of tenants better than they ever have."
It's not a change in tenant attitudes, then, that has driven owners' shrinking definitions of long-term.
Rather, it may be driven by the herd mentality found, say, in some stock markets (the paper kinds), in which investors demand dividends now, not re-investments for later. Real estate investors may demand similar, more immediate returns on investments.
Hudec wrestles the idea down to this: Today's philosophy of buildings ownership is almost Machiavellian, he says, spitting out a big political word in a state familiar with big politics. All's fair in love and politics, the philosophy states. Ends justify means.
"I'm not saying there's anything wrong with it, but I am saying that it's a different approach than it used to be," he says. "There was a softer approach, a more forgiving approach, where, today, it's hard numbers that rule the game."
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|Title Annotation:||Joe Hudec, president and CEO of Premisys Real Estate Services Inc.|
|Date:||Apr 1, 1996|
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