By Roger K. Lewis
Saturday, September 29, 2007
"Location, location, location" may be the mantra of real estate, but equally important is "timing, timing, timing."
Even the most well-located projects can be hurt by factors such as tightening financing, escalating construction costs, weakening market conditions, and decreasing income from sales or leasing.
For grand projects -- building a new town or rebuilding a city neighborhood -- part of the challenge is phasing. Which elements of a grand plan should be built in the first phase? What should be deferred to later phases?
A mega-project requires huge amounts of capital invested over years, or even decades, for land acquisition, planning, engineering, architecture, zoning, permits, construction of infrastructure and buildings, marketing, and continuing operations. During the lengthy course of development, conditions inevitably change, frequently for the worse. Segmenting such projects into multiple phases can minimize investment risks. And why build something before it is needed?
Phasing accomplishes two essential objectives. It allows developments to proceed at a rate that meets changing market demand. And breaking project financing into sequential increments helps ensure year-to-year matches between a project's cost and revenue.
Yet excessive phasing can be a disadvantage. Building things before they are absolutely needed could be rational.
Success for certain kinds of projects may depend on having a vital, sufficiently dense mix of facilities and amenities available on opening day.
Projects aspiring to create immediate, high-impact identity need to achieve critical mass from the start. If the goal is to excite the market and capture a substantial share, then building too little or too modestly at the outset can be a big mistake.
The Washington region offers several examples of large developments where quickly achieving critical mass guided phasing policy.
In the 1960s, after assembling thousands of acres of land in the Fairfax County exurbs, Robert Simon began developing the new town of Reston. To anchor and catalyze the town's development, he and his designers decided that the early phase would include the innovatively modern, high-density, very urban Lake Anne Village Center.
This striking architectural ensemble included a high-rise apartment tower, a harbor surrounded by pedestrian promenades and a plaza framed by a crescent of duplex apartments over shops. Along with Reston's incipient infrastructure, it represented an initial investment of many tens of millions of dollars. Although the center's concept was way ahead of its time and had limited market appeal, it motivated people to drive out to see what Reston was all about.
In Montgomery County, Rockville Town Center, substantially completed this summer, is a one-phase development occupying several blocks near the heart of the city. It encompasses a mix of commercial, civic, cultural and residential buildings. Developed through public-private collaboration, the center's memorable hallmark is not a building but rather a pedestrian plaza.
Surrounding and energizing the plaza are restaurants, shops, a supermarket, a public library and an art center. Because it was not developed piecemeal, Rockville's new downtown core has achieved the critical mass necessary for long-term viability.
Nevertheless, Rockville Town Center is not immune to the risks of timing. As elsewhere in the region, sales of condominiums have slackened, and Town Center apartments are now being rented instead.
National Harbor, in Prince George's County on the Potomac River shore just south of the Woodrow Wilson Bridge, exemplifies the "build it and they will come" vision, or in this case, "build plenty of it."
For phase one, hundreds of millions of dollars are being invested just for site acquisition and infrastructure -- utilities, roads, parking, landscaping, docks, marina, public art -- serving the 300-acre enterprise. Animating the streets and waterfront will be scores of restaurants and stores in more than a dozen mixed-use, mid-rise hotel and apartment buildings. Next to these is the Gaylord National Resort and Convention Center, scheduled to open in spring.
Developed by Peterson Cos., National Harbor's ambitious first phase promises to be a quintessential demonstration of how achieving critical mass at the outset of a new community's life can heighten chances of success.
Phasing is always a daunting issue for public-sector projects, and often an opportunity for big mistakes. Consider the Washington Convention Center, still awaiting development of an adjacent convention hotel and related amenities. Those missing ingredients have proved to be a serious marketing liability.
Then there is the Dulles Metrorail extension, which should have been designed, financed and built years ago.
The convention center and Metrorail extension illuminate one other, very real risk of phasing and thus deferring key project elements. You may get to those phases too late, and sometimes not at all.
Roger K. Lewis is a practicing architect and a professor emeritus of architecture at the University of Maryland.