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Five hot areas for real estate investment.

How can a development company function in this economy?

In the case of CDI/East, the commercial development subsidiary of Kajima International, Inc., we are seeking to acquire, or develop, good quality office buildings in areas of the United States that are stable or recovering.

I hear a skeptic asking "do such areas exist? The answer is yes. In our case, we've identified five such areas:

* Houston. Our company made its first major acquisition here in 1992, when we purchased the 21-story, 400,000-square-foot U.S. Home Building in the Galleria/West Loop area.

Strategically located at the intersection of the West Loop and San Felipe Road, the U.S. Home Building (1800 West Loop) is near several exclusive residential areas and hotels, as well as Houston's finest retail shopping, at the world-famous Galleria. It is also convenient to the central business district, Houston Intercontinental Airport, and Hobby Airport.

We expect that this purchase will be just one of several CDI acquisitions and developments in this market area and that it will eventually lead to the opening of a regional office.

Although the market in Houston is flat now, indications are that a recovery could be underway in 1994. Recovery is never a straight line, but rather a series of steps, and Houston will continue to climb them. It is now the fourth largest city in the U.S. and is home to the nation's second largest port. In general, we're very bullish on Houston.

* Atlanta. A recent survey cited metropolitan Atlanta as the fastest-growing region in the nation. The city itself contains the world's largest airport; three major inter-state highways intersect within the city; Atlanta has a new state-of-the-art rapid-transit facility, a world-class arts and cultural community; and it will host the 1994 Super Bowl and 1996 Olympics.

I think the northern submarkets of the city are particularly strong. They have excellent access from all areas of metropolitan Atlanta. Furthermore, the population of this section of Atlanta has more than doubled in the last 20 years, and the current vacancy rate in Class-A office buildings is about 12 percent.

* Orlando. For many years, Florida was a place our parents went for retirement. With due respect to our parents, that is not a strong inducement for real estate growth, because when the economy goes downhill, discretionary income dries up.

Orlando is different. It is not retirees who are driving the growth -- they still prefer the shore -- but rather the twin forces of corporate America and tourism. To my mind, Orlando is one of the very few cities in the United States with a future of solid growth.

* Washington, D.C. While we're looking primarily to acquire in the preceding three cities, Washington has opportunities for new development.

At least since Herbert Hoover's time, and more than any other city, Washington has been as assured of steady growth as any place in the nation.

In Washington, we are especially bullish about the central business district. Growth, coupled with obsolescence, is the driving force in this active market. All of this suggests that development makes sense in our nation's capital.

* South Bronx. I'm one of those real estate people who believe we have an obligation to our society, as well as to those areas of the country that enable us to function profitably. Obviously, the South Bronx is one of the areas which has been terribly neglected, and to which we could bring new life.

The South Bronx also makes sense purely from an economic point of view. While I am not especially bullish on New York City generally, I believe the South Bronx offers excellent opportunities for developers of build-to-suits, such as my firm. Not only is it a key emerging enterprise zone, but the South Bronx offers a large labor pool, access to major highways and an extensive rail and subway system.

In addition to all of these advantages, the South Bronx has civic leaders and a borough president who truly understand what business requires in order to thrive.

In general, we're very niche-oriented. Although the markets are generally depressed, pockets of opportunity still exist. We at CDI/East are eager to explore those opportunities.
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Title Annotation:Mid-Year Review & Forecast, Section III; Houston, Texas; Atlanta, Georgia; Orlando, Florida; Washington, D.C.; South Bronx, New York, New York recommended by president of Commercial Developments International/East Inc.
Author:Kessler, Alan T.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
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