ARCHITECTURE

Phase II–Expansion
Rents Rise Rapidly
toward New
Construction Levels
the architect functions primarily to control costs of
construction and operation.
Sometimes the architect has another key role.
While successful products generating net profits are
a major component of development work, they are
not its ultimate aim: “It is the tenant that makes the
property valuable, not the building itself.” 20 Chapters
4 to 7 provide extensive design guidelines for product
types, detailing selected aspects: site, parking, exterior,
interior, and “privacy and security.” Architects
appear in these pages as specialists in attracting and
maintaining the right type of tenant.
High Rent Growth
in Tight Markets
New Construction
Begins
Demand / Supply
Equilibrium Point
Phase III–Hyppersupply
Rent Growth Slows
Supply Growth Higher
than Demand Growth
3.2.3
actors: attorneys, bankers and investors, and government
officials. 21 The final, unnamed category
consists of citizens’ groups, homeowners’ associations,
and community organizations. This group of
non-professionals, sometimes referred to simply as
“community,” has become an oppositional force in
recent times [See HH: 1994, 1997]. A good developer,
however, is able to partner with the community by
learning its interests. 22
While communities tend to desire the status
quo, developers want to replicate the popular, as
found for example in market studies. 23 Development
thus becomes the repeated reconciliation of community
and market, mediated by culture. Creativity here
takes on an additional purpose, beyond avoiding contingencies
and deferring structural conditions: it is
through creativity that development becomes an art.
Principles of Corporate Finance
Long-Term Occupancy Average
Cost-Feasible New
Construction
11th ed. (New York: McGraw-Hill Irwin 2014 [1980]), 976 pages,
$305.67
Richard A. Brealey, Emeritus Professor of Finance, London Business
School; MA in Philosophy, Politics, Economics Oxford
Negative
Rental
Growth
New Demand Excess
Space Absorbed
Low Rental Growth
Below-Inflation
and Negative
Rental Growth
Stewart C. Myers, Professor of Finance, MIT Sloan School of
Management; BA Williams 1962; MBA Stanford 1964, Ph.D. 1967
Franklin Allen, Professor of Finance and Economics, UPenn Wharton;
BA East Anglia 1977, MA Economics 1979; PhD Economics Oxford
1980
Assigned at: MIT Center for Real Estate, UPenn Wharton, Yale
Economics
Read by Manuel Shvartzberg Carrió
Phase I–Recovery
Source: Glenn Mueller, Legg Mason Real Estate, Baltimore, Maryland.
Physical Real Estate Cycle Characteristics, Peiser, p. 16.
get culture
Phase IV–Recession
Peiser and Hamilton divide the development world
into three groups of actors: The first is “building
professionals,” in turn subdivided into (a) surveyors,
planners, engineers, architects, and designers; (b)
specialized consultants, contractors, and tradespeople;
(c) tenants and customers. The second group of
“professionals” is comprised of legal and financial
Brealey, Myers, and Allen’s Principles of Corporate
Finance instructs managers in the use of financial
theory to accumulate and retain wealth. Their book
communicates general financial principles via examples,
including real estate case studies that explain
economic rents, hedging strategies, and the
nature of financial crises.
The book’s three initial sections define value
and risk, show how to calculate them, and explain
their use in investment decisions. Sections 4 through
8 discuss how to raise money through debt and equity.
Describing the use of options to modulate risk and
154 155