IN 2005, I TRAVELED to China to get an insider's look at the residential construction boom sweeping the country. At the time, despite the overwhelming presence of towering high-rises, the country was investing heavily in Western-style single-family housing.
I remember being driven through the streets of Beijing and Shanghai by dare devil taxi drivers, all the while looking up and thinking to myself, “How in the world will they make this work?” This country, so accustomed to multifamily-style living and so congested by an evergrowing population, couldn't possibly comprehend what it would take to develop a white-picket-fence lifestyle. Plus, they didn't have the land.
Fast-forward to 2012, and China is struggling to avoid a severe housing industry–triggered recession. And in the aftermath of this realization, the country is also recognizing a need to invest in its traditional form of housing—the multifamily unit.
At the start of the year, The Wall Street Journal reported that China is in the throes of an intensive development program to build 36 million public housing units by the end of 2015—in the words of the WSJ, “enough units to house the entire population of Germany.” The implications for U.S. development could be significant, particularly in the impact on raw materials and construction equipment.
More than anything, what's happening in China today is proof that what goes around comes around. I suspect that no one in real estate is surprised. If there's one thing housing professionals know it's that this is truly one of the most cyclical industries in the world. We have seen it all before, and we'll see it all again. And if you time the market just so, you can make not only a comfortable living but also a lasting impact on the world's built environment.
The importance of market timing is brought home in this issue's cover story, “Eye on the Prize,” by senior editor Jerry Ascierto, which warns that today's low cost of capital presents an opportunity for multifamily investors and developers that likely won't last long. Even as optimism reigns supreme throughout the industry, the lessons of the recent past are still fresh. A wave of aggressive CMBS loans written in 2007 will start maturing this year, and the need for defensive refinancing capital will spark the market for preferred equity and mezzanine debt. (See “Up the Stack and Back,” for an elucidating examination of this complex financing niche.)
This month marks the end of another cycle—mine as editor-in-chief of Apartment Finance Today. So for that reason, it's time for me to offer a bittersweet arrivederci. That's actually one of my favorite Italian words; it translates into “until we meet again.” And it's an appropriate word for this moment.
While I have made myself a home in real estate journalism for the past seven years, I'm excited about my shift to a new venture— joining a start-up production company to develop TV and Web video content for a variety of networks. And the next cycle of the magazine, under the apt management of our editorial director, John McManus, whom many of you have met at various industry events, promises to take our content to great heights in a new and exciting cycle.
I wish all of you the best in your endeavors. Arrivederci, until we meet again.