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First Principles of Development

September 17, 2018

 

 

I was recently asked by a client to give an impromptu in-house seminar to his staff on development from an architect's perspective. In preparing for this and collecting my thoughts, I was able to distill the process down to what I consider to be the First Principles of Development.

 

"First principles" are the fundamental concepts or assumptions on which a theory, system, or method is based. An understanding of that theory, system, or method hinges on being able to simplify the rudiments so that someone first being exposed can grasp the purpose of each, and then follow on with branches of information and the subsequent processes for completion.

 

In recent years the term “development” has become a catch-all buzzword that is used in the media and among other interested groups to define virtually any type of building construction effort. In reality, development is a narrowly defined process that has been honed and refined over the last 100 years to answer a small group of specific questions:

 

1) What type of business (if any) can be successful and sustained at a certain location?

 

2) Does the potential profitability of the business sufficiently offset the cost and risk of site development and new building construction (or existing building renovation)?

 

3) If the business must vacate due to financial difficulty or desired relocation, can the property be efficiently and expeditiously adapted to accommodate another business?

 

4) Will the overall development and improvements be a benefit to the community and the environment in the long term?

First Principles of Development

The first principles of development {from an architect's perspective} were derived over the last fifteen years of working with and for developers, and are an attempt to boil down the issues and pitfalls into a short list of mandates that, if can be satisfied, will give a new development effort the best chance at success. Just like studying for an exam; the exercise is won more in the preparation than the execution.

 

 

One

If a business cannot be justified through analysis to be potentially successful at a designated location and within the desired improvements, the effort is a non-starter.

 

The financial and economic health and well-being of any potential development should always be the first and foremost consideration, above all other factors. Even businesses with excellent initial analysis markers fail. Therefore the qualitative analysis indicators for market, demographics, and economics must be demonstrably positive before proceeding with development.

 

Development for the sake of development has created a glut of empty, derelict structures all over the U.S. This phenomenon was brought to the forefront of public consciousness during the 1980’s building boom, which produced what was known as the “see-through years”; a period of time where expansive commercial developments and even high rise buildings were without tenants and people could literally see through the building in the sunlight.

 

A particularly public and pointed case of ignoring the research is Euro Disney.

 

["Feasibility studies" are covered in greater depth in Part 2: Due Diligence & Design, which is linked at the end of Part 1]

 

 

Two

If a development cannot be readily adapted to another use in its life cycle, it might end up a total loss.

 

From the post-war 1950's all the way through to the 1990's it was very common to see business-specific development. From department store anchor tenants to small retailers on pad sites, these facilities housed sporting goods, clothing, shoe stores, computer outlets, baby supplies, children's toys, auto parts, pet food, electronics, and even batteries.

 

And then there was the internet...

 

The internet not only moved the goal posts, but in some cases deleted the entire playing field. No one could have anticipated the sweeping market power of direct-to-consumer sales before then. Dell Computers, eBay, and now the behemoth that is Amazon have almost single-handedly scuttled dozens of formerly large and very successful brick-and-mortar retailers.

 

Sears, the very institution that invented buying products by catalog, is now on life-support with future financing in jeopardy. K-Mart, which was once the largest retailer in North America, now shares ownership with Sears and is closing the last remnants of their once awesome nationwide footprint. Even the mighty Walmart has found themselves in direct competition with Amazon for on-line sales, and have recently closed many newly-opened "Neighborhood Markets".

 

Adding to this list is Toys-R-Us, Radio Shack, Payless Shoes, and dozens of others, who also were blindsided by this technological juggernaut. And in their wake they have left millions of square feet of buildings that do not readily lend themselves to adaptive reuse. 

 

We are also seeing this with the large shopping malls that were constructed in the ‘70s and ‘80s. With the exponential growth of internet shopping, thousands of these expansive, air-conditioned, cities-of-commerce now sit empty all over the country.

 

Some portions of empty retailers and malls have been developed into trade schools and colleges, as well as churches and sports centers. However these uses typically encompass a small percentage of the overall area, and provide only a stop-gap measure for owners and investors.

 

In light of these market conditions, any development of an appreciable size must have an eye towards potential adaptive reuse for any number of other diverse types within its anticipated life cycle.

 

 

 

 

Three

If the environmental impact (both micro and macro) of a development is not beneficial and sustainable, it has steered towards failure even before occupancy.

 

Businesses large and small have learned over the last two decades that being environmentally conscious and responsible is not just good corporate citizenship, but good business.

 

In the past developers would pave over every square foot of site area to allow the maximum parking and sidewalks, and minimize landscaping costs. This of course backfired, in that in the final analysis buildings are built for people. And people appreciate and prefer trees, hedges, turf, and plantings of all types. Given the option, a company will now lease space in a development that is eco-friendly with a plethora of flora, and bypass a development that substitutes concrete for natural settings.

 

 

 

 

This has been punctuated in recent years by a better understanding of the “albedo” of materials [the proportion of the incident light or radiation that is reflected by a surface] and the “urban heat island effect”, which is caused by a preponderance of concrete, asphalt, and other heat-absorbing materials which store solar energy and slowly reradiate it into the surroundings, creating a cumulative effect on temperature, and making urban areas several degrees warmer – both day and night – than suburban and rural areas.

 

It’s not your imagination: large cities are considerably hotter, especially in the summer months, than the suburbs.

 

There is also the carbon footprint to consider. Experience and research has repeatedly shown over the last 30 years that designing with sustainability in mind equates to financial benefits that go far beyond good stewardship of resources.

 

Cool roof solutions dramatically cut down on HVAC demand loads; proper daylighting techniques reduce interior lighting requirements and the associated heat loads and expense of electricity usage; passive design techniques such as building orientation and location of fenestration and glazing (doors and windows) have a pronounced effect on user comfort and sense of well-being, and mitigate the need to compensate for deficits in design with active mechanical building systems and powered lighting.

 

Green building is not just for office buildings either. Industrial developments have embraced the concept with high-albedo white roofs (typically TPO and PVC membranes) to supplant the previous built-up asphalt and EPDM membranes, which were either ballasted with river rock or composed of black rubberized materials, both of which absorb solar energy.

 

They also incorporate natural daylighting through skylights and beneficial interior air circulation using large, ceiling-mounted industrial fans which operate at a slow rotation but move considerable amounts of air, increasing the interior comfort without adding supplemental HVAC.

 

 

 

 

Four

New development is not always the answer.

 

Any savvy business will survey and scour the market for an existing facility and/or development that could successfully and swiftly be adapted for their purposes before embarking on a potential costly and time consuming new project. There is also the “agglomeration benefit” of being closely located to your suppliers, vendors, clients, and customers. Oftentimes it makes more sense to lease in a more expensive area where you will have close contact to these players, as opposed to building in a less expensive but more remote locale.

 

Businesses are typically in business for a particular purpose, or a core competency. Tesla builds cars, Amazon sells and ships products, and Walmart sells groceries and home goods. None of these businesses are specifically in business to develop new sites or construct new buildings. If they do so, it is because their primary business function had a requirement for this, and it wasn’t available on the existing real estate market.

 

 

 

 

For decades both Amazon and Walmart located their distribution (or fulfillment) centers in third-party owned tilt-wall concrete warehouses that were developed by speculative interests just for these purposes. It wasn’t until both of these mammoth retailers outgrew the existing market supply did they begin to build their own 1-2 million+ square foot distribution depots in rural areas where land is inexpensive and super-large facilities can be constructed to consolidate operations previously located at many different locations.

 

 

NEXT: Part 2: Due Diligence & Design

 

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