Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Monday, April 19, 2010

More proof of the downtown real estate market being a national/global market

Over the years I have written quite a bit about the commercial property tax system in DC and how the value of much of the commercial property in the city, even in marginal areas such as Georgia Avenue, H Street NE, Brookland, and elsewhere, gets revalued upwards as a result. In the case of small spaces for retail, it makes the asking price for rents higher than the true market value of the property based on square footage and the likely sales/square foot--which of course is dependent on the customer base/retail trade zone for the store.

Generally, a retail business should pay no more than 4% to 10% of their gross revenue on rent. What happens is that retailers are asked to pay about 25% of their gross revenue on rent. Since most businesses net at best about 15% after taxes, there ends up being no profit...

This is why there isn't much of a thriving independent retail sector in DC.

Last week the Wall Street Journal reported on how Brookfield Properties, based in and Toronto with a large presence in DC, is looking to acquire the portfolio of CarrAmerica, which is mired in debt and now owned by Tishman Speyer of NYC. (Tishman Speyer has lost a bunch of properties over the past year, as they paid top dollar at the height of the property boom, only to crash hard.) Brookfield has acquired a significant amount of the outstanding debt, giving them a superior negotiating position. See "Brookfield Swoops In on Washington Buildings."

(Brookfield by the way is attempting to do something similar with regard to General Growth Properties, a major retail shopping center company. GGP is particularly active in the Baltimore metropolitan area, as the company acquired the Rouse Company, which was one of the region's leading developers, including malls, Baltimore's Harbor Place, and Columbia Town Center.)

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