Question of the Month: "What are the greatest challenges for commercial real estate in the next year?"

"Challenges to the suburban commercial build-to-suit market in 2013 include a lack of affordable buildable sites throughout our area. The existing commercial inventory still available at below replacement costs makes ground-up construction your last option. Appraisals for commercial buildings may also be problematic due to the recent market cycle of properties selling at 50 percent replacement costs, which has affected comparable sales data contemplated by lending institutions while processing financial applications. Escalating costs for building materials and labor have commenced since market lows, but have not had much impact on the industry to date. Historically, it is still a good time to build compared to the hyper-inflated construction costs of the 2004-2007 market. A contributing factor to the slow build-to-suit market is unattainable expectations of commercial users who lack extensive experience with cost models for corporate facilities or tenant build-outs. As a traditional design-builder for nearly 30 years, Dacon has faced five years of challenges relating to a collapsed build-to-suit market, despite the tremendous construction activity in Boston, Cambridge, and in pockets along Route 128 for newly approved lifestyle centers. Last year was a much healthier year and 2013 started well, but has seen less momentum carrying forward as we approach the third quarter." Charles Reilly, vice president, Dacon Corp., Natick, Mass.