real estate are still eelin Sept. 11.

ALAN ABRAMS
Special to the Jewish News

T

he horrific events of Sept.
11 • have affected both the
commercial and residential
real estate markets in met-
ropolitan Detroit, with much of the
downside for consumers still to be
felt.
So believes Maurice "Maury"
Binkow, whose practice at Detroit's
Honigman Miller Schwartz and Cohn
LLP law firm has for the last 43 years
specialized in real estate and real
estate finance.
Binkow's sentiments were echoed by
some key players in both the commer-
cial and residential arenas. The con-
sensus was clear that the commercial
real estate market is vastly different
today than it was in 2001.
The situation is not as bad as in
previous down-
turns, and no
Maurice Binkow:
one
is hanging
Sept. 11, insurance
bed
sheets out
soften market.
of high-rise
office windows
proclaiming free rent, said Sharon
Strichartz, vice president of Brokerage
and Office Services for Southfield-
based NAI Farbman. But one major
player, Burton-Katzman Development
Co. of Bingham Farms, is offering
brokers such as Strichartz an array of
dazzling incentives if they bring in a
client that will ink a lease.
The broker incentives range from a
Maserati Spyder worth $100,000 for a
$5 million-or-over deal to a $25,000
Harley-Davidson motorcycle for a $2
million-plus deal.
In between are an assortment of
Thunderbirds, Corvettes, Porsches
and even a Jaguar.
"No one has grabbed a Maserati
yet, but we're doing our best to give
one away," said company president
Peter Burton.
The incentives do not only extend
to brokers. Burton-Katzman is offer-
ing tenants one month of free rent for
each year of the term of the lease, said
Larry Goss, executive vice president of
the firm.
Said Burton, "One would have to
be living in a vacuum to think that
the commercial real estate market is as
strong as it was one year or two years
ago. And it is not unknown in our
industry that when things get diffi-

cult, we work out programs to stimu-
late business. We just did it in a dif-
ferent way and in a method _that cre-
ates more excitement.
The current downturn is "nothing
like, the last time around," Burton
stressed, although he conceded that
the events of Sept. 11 "caused consid-
erable stoppage. It turned off the
faucet. No one bothered doing any-
thing."
However, Burton said business has
since "picked up nicely, although not
to the levels of a year-and-a-half ago.
Simply put, there is over-capacity in
the commercial end of the business."
Burton doesn't see it as being "disas-
trous. There is just more product than
there is new business."

House Sales Up

But the picture is different on the res-
idential side where, according to
Goss, "residential sales are propping
),
up the economy.
As an example, he pointed to sales
of their Westminster Abbey Homes in
a number of locations where, "during
the months of February and March,
we were delighted to find one new
sale a day.
Much like Burton, Richard Komer,
president of Southfield-based
Wineman & Komer Building Co.,
also saw a "fairly large drop in traffic
and in sales" post-Sept. 11. But he
said the downturn was accelerated by
factors such as the decline in the stock
market, layoffs at Ford and auto-relat-
ed suppliers, and highly publicized
bankruptcy problems at companies
ranging from Federal-Mogul to
Kmart.
"The first-time homebuyer market
remained fairly strong all through this
period as people were taking advan-
tage of low interest rates," said
Komer. They left rental apartments
to start building equity in a condo or
single home."
Komer is also starting to see a
rebound in the sale of used homes. It
is still a buyer's market, he said,
although there are signs the market is
shifting slowly back towards a seller's
market. "Still, it is a very excellent
time for buyers of used and new
homes" because of the good interest
rates.
Komer said builders are optimistic
about starting new subdivisions and

33 C(

that new apartment projects are also
being built primarily because of the
low interest rates for developers.
Unique to this area has been the
continued emergence of the national
companies such as Pulte Homes, Toll
Brothers and Centex. The latter two
are relatively new players in the area,
having respectively acquired the
Silverman Group and Selective
Homes. Komer said their presence has
resulted in "the little guys sharpening
their product and merchandising and
forming groups to have more buying
power and clout."
Another area of residential growth
has been in refurbished lofts in down-
town Detroit, said developer Jerald
Rosenfeld, president of the JR Group,
LLC.

Downtown Boom?

Indeed, Rosenfeld has shown his com-
mitment to the resurgence of a revi-
talized downtown by opening his
office in one of the Farbman Groups
loft developments on Woodward
Avenue.
Rosenfeld points to numerous fac-
tors that will contribute to bring peo-
ple back to downtown: the
Compuware headquarters project, the
move of General Motors to the
Renaissance Center, Ford Field and
Comerica Park, and the possibility of
permanent casinos going into the
Grand Circus Park
area.
He projects an even-
tual redevelopment of
Washington
Boulevard, and credits
new Detroit Mayor
Kwame Kilpatrick for
creating a favorable
environment for
developers.
Back at NAI
Farbman, Strichartz,
one of the few women
in her profession,
stresses that this is the
first year that real
estate has been down
after 10 years of doing
well. She also points
to the ripple-down
effect of Sept. 11, but
attributes part of the
problem to companies
downsizing, resulting

in two-and-a-half million square feet
of sublet space in the tri-county area.
She said that makes for some good
deals for tenants.
Strichartz said the central business
district vacancy rate is at 15 percent
and "probably up to 17 or 18 per-
cent" in the suburbs. She said this was
a result of corporate consolidations.
But Binkow at Honigman Miller
said there are several new issues facing
developers that will greatly affect the
future of the market.
"The risks and costs rising out of
Sept. 11 in terms of protecting and
insuring against terrorism, whether it
is a regional mall or, an office build-,
ing," will result in higher insurance
rates as developers are faced with
insuring against `-`terror, threats and
catastrophe. "
He said not only will insurance
rates spiral, but so also will utility
rates as they absorb the added costs of
security and insurance and pass them
on to real estate consumers. This
includes the cost of business interrup-
tion insurance.
"In addition, insurers will have to
make up for the losses of Sept. 11
while they continue to insure against
future threats. And they will pass on
these costs," said Binkow.
Developers acknowledged the
potential impact, but still remain
optimistic that economic recovery for
their industry will occur in 2003.1-1

4/12
2002

Sharon Strichartz: Good deals available.

19