Barr believes that office and industrial rents haven’t yet recovered to the point where they can fully justify new building, particularly when escalating costs for raw materials like concrete, steel, PVC, or copper wire are factored in. “You need to have your total project costs at a point where tenants can afford the rent you’ll need to charge them, and that’s tougher to do today with rising land and materials costs,” Barr says.
So while traveling farther out from the urban core or dense suburbs often translates to lower land costs, there can be factors, such as a lack of utilities or infrastructure, high housing costs for workers, or limited public-transit service that offset the savings. For businesses or developers seeking locations closer to the 494/694 loop, redevelopment of obsolete or distressed properties can present rich opportunities but often a higher level of risk. The upshot is that, in a change from the ’80s and ’90s, there are few really desirable deals left in the metro area.
“There are no bargains out there any more,” Cunningham say. “You just have to figure out how to make deals work on land that is priced at levels we haven’t seen before in this market.”
