Retail Traffic: What trends have you noticed in retailrecently?
Andy Frankl: In the projects we've been doing we are seeing a lot of new restaurants, a lot of food stores and many, many high-end boutiques along Fifth Avenue and high-end corridors in cities. So retail will do pretty well if interest rates don't go back up. If so, there might be a soft landing. Another thing that's been changing is that a lot of people are now interested in green construction. We've done projects where the heating and cooling is done through the earth. There is a lot of recycling done when we do demolition. Many of the materials that go in are biodegradable and don't cause pollution.
RT: What are the challenges of building retail properties in urban settings?
Frankl: The urban locations are usually more difficult because they are in existing buildings. Some of them are old, some of them are landmark and some of them are not functional, so it makes your job more expensive. And, the retailers tend to be higher-end so they want to show off more. So the urban stores are inherently more expensive. The ones outside the city are simpler and more uniform in design.
RT: How has the move toward mixed-use impacted your work?
Frankl: Before, you would go down Fifth Avenue in New York City and see a corridor of skyscrapers with banks at the bottom. Today, the bottom of the buildings is going to be high-end retail, like much of the area in downtown Manhattan. It creates a specific gravity, a critical mass. It's the right mix. The Time Warner Center is close to that — it's got office, retail, restaurants and a hotel. But it's still not quite big enough. At first, they weren't sure if it was going to succeed. Now, it's incredibly busy.
RT: Do you think mixed-use properties can work anywhere or are they best suited for urban environments?
Frankl: I think they do work anywhere, that's why they are so popular and people are building them all over right now. I think developers are finding that they do work and it's a good formula. It's happening in Los Angeles,, Atlanta and Palm Beach. As the population gets older and people retire they are moving to different areas, where they want the comfort of having all those things nearby. They don't want to drive long distances and it's just a comfortable formula.
RT: Has there been any relief in construction prices as the price of oil dropped?
Frankl: Construction prices actually were going up before the price of oil fell because the economy was doing very well and the housing boom was through the roof. Developers were trying to get units on the market quickly — they knew they had to build them fast and would do anything to build them. Now, prices have started to drop. Everything was going up 10 percent to 20 percent a year and that's pretty much stabilized and hopefully it will stay like that.
RT: How much have the increases in the price of steel affected you?
Frankl: We do various types of projects and some of the downtown projects are interior projects, so steel is less of a factor. But, steel is usually 7 percent to 10 percent of a job. Steel prices are leveling off now after going up 10 percent to 20 percent a year. It was also hard to get because of supply and demand. Same thing happened with concrete — the prices have doubled over the past five years. You just couldn't get it. Now, the situation is better.