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Suburban markets: learning from adversity.

Adversity can be viewed as a teacher because it challenges us to learn how to overcome obstacles. Indeed, the economic adversity brought on by the recession has provided invaluable lessons for the suburban commercial real estate market. Suburban commercial markets can no longer be viewed as leafy satellites of Manhattan.

They have learned and are still learning from the Manhattan experience on how to create the market, rather than chase the market. The relative youth of the Class A properties in these markets has been an advantage, for they generally offer a far more sophisticated infrastructure than their older urban counterparts. This is a major draw if building infrastructure is strong enough to support the heavy-duty telecommunications and technology requirements of today's business. Whereas older buildings were designed long before anyone heard newer buildings are designed to support the acute power demands created by today's office technology.

Suburban Class B and Class C properties, however, will face something of a quandary in order to attract and/or maintain tenants. Using a baker's metaphor of doughnuts and danishes, the Class B and Class C buildings are closer to doughnuts for they offer colorful exterior designs without much infrastructure to handle high-powered offices. However, the more modern buildings could be considered as danish since their substance is on the inside with state-of-the-art technology infrastructures.

Retrofitting older properties will probably be the course of action if they are to remain competitive, but this will require the banking community's input and the crystal ball is somewhat cloudy in predicting financing trends. Financial institutions are, thankfully, more conservative today in their lending, which could be something of a two-sided blade. On the one hand, they may prove to be less-than-benevolent with properties lacking a strong lead tenant - what's the point in financing a property if it can't hold its own? But on the other hand, financing is now being handled with an acute sense of intelligence and imagination, for vacant properties inevitably affect regional economies in general and financial institutions in particular. This is a situation which will be addressed on a case-by-case process.

On the plus side, suburban property owners could benefit by stressing incentives offered by municipal and county governments and public utilities. Urban Enterprise Zones, which are generally considered as springboards to rebuild depressed inner city economies, can also be a goldmine for suburban markets. Our facility in Jersey City is located in one of nine Urban Enterprise Zones in New Jersey. We can therefore provide our tenants with handsome tax incentives and PSE&G utility cost savings. These incentives, coupled with a state-of-the-art infrastructure, have influenced more than a few of our tenants when they were scouting for new office space.

Marketing efforts on the whole are more savvy in suburban markets. Marketing copy and collateral material have never been so sharp and attractive. Advertising efforts are tighter and more focused, aiming for more bang from the buck, while long-over-looked importance of public relations as a key marketing tool.

Overall, the future for the suburban market looks favorable. This stronger, streamlined environment will prove to be fertile ground, as the hard-won lessons learned from this economy prove invaluable in the not-too-distant future.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:evaluation of suburban real estate markets in New York region
Author:Bowman, Ronald
Publication:Real Estate Weekly
Date:Oct 21, 1992
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