 |
|
|
| Charting a Course for Waterfront Development |
|
| Navigating
the Risks
and Rewards |
|
| By John Lanham |
|
 |
|
F
or many developers it is hard to pass up waterfront redevelopment opportunities. After all, there is a finite amount of waterfront property in the world and everyone wants to be on it. That supply and demand calculus means there is a premium to building on the water and a tremendous upside potential.
What many inexperienced developers fail to appreciate and prepare for is the heightened downside risk associated with these highly visible, expensive and complex projects.
A Distant, Expensive Pot of Gold
Developing on the water is different from developing anywhere else largely because there are so many different people looking over your shoulder and because the approval process is so long.
Since waterfronts are so rare, communities that possess them are extremely invested in development activity on or near the water. If the average city planning board meeting has five citizens attend, a meeting where waterfront development is on the agenda will have 105. Media scrutiny will also be intense. As a result, the entire process is at risk of becoming politicized and mired in disputes having little to do with the project.
Waterfronts are also highly regulated by state and federal environmental agencies. Many of these issues are difficult to anticipate and only arise after development plans are already underway. Negotiations and compliance can delay a project significantly and even derail it entirely. Also many waterfronts are considered brownfields—former industrial sites—where environmental clean-up costs can overwhelm unsuspecting developers.
Understanding these pitfalls is the first step to knowing how to avoid them. From the beginning, community relations must be a major focus. Local residents and officials need to have confidence in a developer's abilities—most often established through documented experience. They must also believe that the developer is a "force for good"—an attitude most easily facilitated through understanding local political dynamics and forging relationships before the project is even proposed.
Developers need to treat the community like an investment partner who must informed, heard and respected. Even with the best community relations, however, a developer should expect a waterfront project to take substantially more time to complete than its landlocked counterparts.
The extended development schedule is not the only factor that increases the cost of waterfront projects. Construction costs are far greater on the water because of the unique soil and weather conditions. Many of the physical structures must be reinforced with stronger materials and have their foundations laid on pylons. In addition to the cost of materials, these jobs require greater skill and more expensive labor. Insurance costs are also much higher for waterfront developments.
Get the Right Mix of Uses
No two waterfronts are alike and so no two waterfront developments should be alike either.
A lot depends on the dynamics, demographics and history of the local market. Some areas can be transformed into a regional and national destination while others are more suited for local audiences.
A developer's first task is to understand exactly what kind of project can be supported. Madison Marquette recently underwent this analysis for its project in Asbury Park, New Jersey, which encompasses 1.25 miles of oceanfront retail and entertainment. Throughout the first half of the last century, Asbury Park was considered the premier beach resort in New Jersey. That distinction faded throughout the latter part of the century as the boardwalk area was neglected and fell into disrepair. A poor education system, high crime and depressed economy took its toll on the community. Meanwhile other surrounding beach towns are thriving as primarily residential communities.
Madison Marquette analyzed Asbury Park's position in the market and concluded that we had an opportunity to revive its historic role as a destination for the region. To that end, the company is devoting substantial time and effort to first rebuilding the retail, restaurant and entertainment component of the boardwalk. These uses have the potential to bring people back, generate excitement and be far more successful than residential and hospitality uses—which will come later. This phased strategy is careful to recognize the nature of the destination being created and the importance of getting the right balance to ensure the entire project is staged for success at every turn.
Lift the Entire Community
Much of the remaining undeveloped waterfront land is located in blighted areas. It is not a successful strategy to build a project for an affluent demographic and expect them to travel through blighted areas to get there. A developer must recognize this reality and expect to work with local officials to lift the entire community—not just the waterfront. This commitment may include grants to schools and local law enforcement and providing job training to ensure local residents benefit from the new project's employment opportunities.
Madison Marquette recognized that Asbury Park faces many of the traditional challenges of a long-neglected community. To help lift area residents, the company unveiled a plan which will help connect waterfront redevelopment with downtown development, help grow the local police force and bolster the local education system.
Go In With Your Eyes Wide Open
Successful waterfront development can be a high profile, defining achievement for any development company. By going in with eyes wide open, a developer can successfully assess which opportunities are real and which ones are set up for failure. Never underestimate the risks and costs associated with these projects and always know exactly what challenges lay ahead.
P |
|
|
|
|
|
|
|
|
|
|
|
|
|
John Lanham
SVP, Development
John oversees all development functions including entitlements approvals, construction, tenant fit-up, and turn-over to operations for the Northeast and Mid-Atlantic and the Eastern part of the US and has over 20 years of construction management and development experience. He has an Engineering degree from Southern Tech, and an MBA from Georgia State University. |
|
|
|
|
|
