America's entrance into the 1960s marked society's movement from black-and-white to color. The Civil Rights movement was launched; the world saw color pictures of the Earth from the moon; and the psychedelic culture nudged the horn-rimmed glasses and loafers of the 1950s into the past.
Americans were not intent on merely living the secure life. There was the normal ebb and flow of the economy (there had been a brief recession between 1957 and 1958), but as a whole, people were enjoying a general state of prosperity and the population was booming.
Economic security, combined with the continued advancement of the thruway system and suburbanization, helped spur two pronounced real estate industry trends: The spread of the regional shopping center and the proliferation of hotels and motels. Also, the creation of the Real Estate Investment Trust (REIT) and the prevalence of the real estate syndication would also make their marks in the 1960s.
Malls slip into overdrive The 1960s was the decade where the shopping center format caught on with Americans and spread across the country. The suburban shopping center was not an entirely new concept, but by the early-1960s, sales in the new suburban form edged out their downtown retail rivals by a decided margin.
"While almost every decade of the shopping center industry has been marked by tremendous change, I believe the 1960s marked a seminal change in the way retailers related to their customers," says Melvin Simon, founder and co-chairman of Indianapolis-based Simon Property Group, now ranked as the largest public retail REIT. "The decades to follow really represented an evolution of the [shopping center] concept that was formed in the 1960s."
In the 1960s, the stirrings of the modern consumer society began to emerge. The baby boom was entering adulthood, resulting in a huge universe of young consumers, and the credit card was widely used. The explosion of radio and television media also acted as a catalyst to shopping activity and was crucial to the national expansion of retailers. Consumer attitudes were having a profound effect on the retail industry by the early-1960s. Department stores and shopping centers were testing nighttime shopping, shedding the "never open on Sunday" philosophy of the past and forcing those in the shopping center industry to keep up with the changing demands of consumers.
At this juncture, the industry was searching for what academics call an "exemplary model"- a successful form that could be imitated on a larger scale. One hundred years in the making, developers had refined and modified earlier retail configurations in search of the right combination of design, scale and location.
Two malls completed in the 1950s - the Northgate Shopping Center in Seattle and Southdale Center in Edina, Minn. - served as models for the rapid growth of the regional shopping center that was about to take place.
This new brand of mall was located in the suburbs but was designed to attract consumers from areas well outside of the suburb in which it was located. Anchor stores (first one, then two anchors) drew shoppers into smaller tenants clustered around a central area.
Included in the design were freestanding sites offering banks, gas stations and movie theaters, as well as ample parking. Both were located just off the freeway. Shoppers were drawn to one-stop shopping, and the thruways brought them from doorstep to mall parking lot.
The single innovation that enabled nationwide imitation was the original design of the Southdale Center by Viennese architect Victor Gruden. He enclosed the common areas where pedestrians walked - air-conditioned in the summer and heated in the winter. This broke down any regional barriers existing for outdoor malls. Now, despite cold, harsh winters in the northeast and the sweltering heat in the southwest, people could enjoy the mall experience and shop year-round.
Shopping center development boomed in the 1960s and continued throughout the early-1970s. From 1960 to 1970, more than 8,000 shopping centers were built in the United States - more than twice as many as the brisk development activity experienced in the 1950s. Simon notes, "It was during this chaotic period [of expansion] that a number of really first-class developers began to emerge."
Soon the centers were not only gaining in number, but in size. To provide more space without increasing walking for shoppers, developers soon built centers two or three stories tall.
Shopping malls have reached mammoth proportions in the 1990s, but some of the properties produced in the early-1970s were nothing to sneeze at. By 1969was under way on the huge 2.1 million sq. ft. Galleria Mall in suburban Houston. Considered one of the largest malls when construction began, it currently ranks as the fifth-largest mall in America.
Lodging industry steps up The 1960s was one of the most significant decades in the history of the lodging industry. The demand for motels spurred by the continued development of the interstate highway system - culminating in the Highway Beautification Act of 1965 - was augmented by the increased travel caused by the widespread use of the airplane. The "roads to everywhere" movement brought good fortunes for many and busts for those not located on the right road.
Robust levels of new development of roadside motels that had begun in the 1950s continued. As the no-frills - largely mom and pop - motel lost its novelty and its negative perception improved, the hotel industry was forced to acknowledge its new competition. By 1962, the American Hotel Association had changed its name to the American Hotel and Motel Association (AH&MA) now based in Washington, D.C.
By the early-1960s hotels had also begun to form brand identities. The hotel chain - pioneered by Kemmons Wilson and Atlanta-based Holiday Inn - proliferated. Less than 10% of all motels were part of a chain system in 1965. That percentage reached 40% by 1975. In 1966 the Urban Land Institute predicted that "mom and pop hotels are a thing of the past."
The fact that the 1960s were a turning point for the lodging industry does not mean the industry was healthy. The wave of development that was changing the face of the industry also led to high vacancy rates. Vacancies hovered between 65% and 70% for much of the decade. Competition and sharply rising labor costs undermined many operators' profits.
By 1968, Kemmons Wilson was constructing more than 80 new Holiday Inns totaling 40,000 rooms across the nation. By the end of the decade, Holiday Inns could be found in 45 states. Roadside motels were not the only lodging property type to expand. In an attempt to keep pace with the increase in family travel, destination spots were also receiving new supply. The rush of new supply that was taking place in Florida - specifically in Miami, Ft. Lauderdale and Orlando - continued.
In 1967, developers building near Disney World in Orlando received a blow when Roy Disney announced that the park would be enclosed and more than 70,000 rooms would be built by his company for visitors. Around the world, in America's island state, new construction was also booming. At the end of the decade, more than 40,000 new rooms had opened in Honolulu.
The 1960s were noteworthy for the pervasive nature of the expansion. Across the economic and social spectrum, lodging was being created for the new, traveling consumer society. Toward the end of the 1960s, a new idea - the budget motel - had gained momentum and became a nationwide trend.RE syndicates reign no more
Real estate syndications were all the rage in the 1950s; so much so that their popularity seemed sacrosanct. The opportunity for the small investor to place money in property investments alongside real estate barons - coupled with handsome tax benefits - was viewed by some as one of the century's master strokes of capitalism. The flow of money to all property types through this vehicle was significant. By the early years of the decade, it was estimated more than $12 billion had been placed in syndications, and that number was growing quickly.
The 1960s were a time of revolution, however, and syndication saw its best and final days in this decade. The first hit was taken from a competitive investment structure: the REIT. Good, old-fashioned excess was the second hit with the influx of capital rendering the syndicates fat, happy and sloppy. So happy that they were perceived as bidding up prices to questionable levels. Tales of mismanagement and poor investments battered the syndicates in the public eye and they soon relinquished their popularity to the newly formed REIT.
A broader playing field? To most newcomers, the thought of the real estate industry without a national structure seems unbelievable. But that was the way it was in the 1960s for the majority of investors. Two forerunners to the nationalization trend were Sam Zell and his late partner Bob Lurie, who left college and a sizable apartment portfolio behind in Ann Arbor, Mich., to take a swing in the big leagues. Zell reminisced recently about the real estate scene of the mid-1960s.
"Those were very interesting times," says Zell. "The real estate investment business was limited to large cities and large investors. When we were investing in Ann Arbor, we were used to 14% returns. When I came back to, I was faced with 4% to 5% returns. There was so much competition for those assets, so we went outside those areas where there was little or no investment dollars - usually high-growth cities like Tampa, Fla., Orlando, Fla. and Reno, Nev. Without all that competition we were able to get very nice returns.
"We had the world to ourselves from 1966 to 1970," he continues. "Then an offshore mutual fund that invested in real estate followed us to the secondary and high-growth markets."Senior living modernizes
The delivery of improved living facilities for the elderly has been one of the most striking and appreciated developments of the real estate industry. The nursing home of today took its first steps in the late-1950s and early-1960s. Nursing homes leading up to the 1960s were mostly a mix of private homes, renovated apartment buildings and the large urban institutional-style buildings that had been around since the turn of the century.
Bill Colson, president of Salem, Ore.-based Holiday Retirement Corp., a leading industry player, says, "The seniors housing industry was all mom and pops before this time. We started to see the congregate care housing start in the early-1960s. By 1963 or so, the movement was really rolling and it continued into the overbuilt phase of the early-1970s."
As the 1960s came to a close, the mood in the real estate markets was optimistic. Corporate America was not only expanding, it was posting record high profits. Demand for office product was high and development activity began to surge as capital flowed.
By the late-1960s, some major markets were experiencing significant tower development - the first since the 1920s. As capital persisted, the "race for the skies" kicked into high gear in the 1970s.