David Kirk, Kirk & Co.

New market, historic rehabilitation, low income housing and energy credits are major federal and state tax credit programs for real estate development. Public and non-profit grants and subsidies and betterment and improvement programs can be accessed for development and operations of real estate to supplant or supplement traditional equity and loan programs to reduce capital costs. The capital stack can be thick and complex or simple. With commercial real estate and mixed use development which benefit from low cost capital sourcing, feasibility, marketability and highest and best use analysis and related conclusions are components of the diligence for funding. Necessarily, energy conservation credits and certain other low cost capital programs are underwritten with less or no property related considerations.

Real estate markets are studied and measured in many ways using a variety of methodologies. The market context of supply and demand, distribution and mixture of uses, pricing and occupancy are helpful components in determining feasibility and sustainability for a development and use even if the funded project is one of low cost or even no capital cost, and for a public or institutional use. Increasingly, with an evolving mixture of uses, some not anticipated in zoning ordinances or building codes, detailed identification and description of uses outside traditional commercial property groups is required to understand the market context, recent and prospective trends. Vacant and improved, surplus public property is often analyzed as part of diligence for disposition by sale or lease.

The public and non-profit sectors have been active participants in the commercial real estate markets forever. The level of wealth and activity of these sectors has become more visible, transparent and vigorous. Integration of these sectors with the taxpaying property sector has provided more opportunities for synergy and smart growth however defined. While traditional market metrics such as cost, price, and value can often be determined for comparative analysis, some uses such as open and recreational spaces, community meeting areas are challenging to measure with traditional metrics. Using surrogates and pie charts and planning precedents can be illuminating if not precise. Rigor for the sake of rigor is meaningless without merit.

Low cost capital and tax credits for property investment have enhanced the feasibility and sustainability of commercial property investment and performance and strengthened neighborhoods and markets. The real estate professional has already demonstrated the skills and willingness to implement these new directions described by credits and lower cost capital. The simple next step is broadening the activity and acceptance in the public and private sectors.

David Kirk, CRE, MAI, FRICS, is principal and founder of Kirk & Company, Real Estate Counselors, Boston.