Blog assignment #7

I would just briefly like to extend the thoughts provided in my previous post to this article I came upon in the Wall Street Journal

http://www.wsj.com/articles/real-estate-investors-shift-focus-to-new-developments-1413311706

Previously, I wrote about the risks of real estate development. According to this article, companies are now demanding these developments and redevelopments of properties in high income properties that also offer higher risks. The article revolves Boston Properties that are now pivoting their investment strategy towards these high risk pieces of real estate. Mr. Zuckerman, the chairman of Boston Properties expresses that "we're certainly more bullish on development than buying buildings". Since the credit crisis, real estate development is once again doing very well.

As I pointed out before, real estate development is one of the most risky lines of real estate business. If the economy sours, companies are often reluctant to sign pricey long term leases leaving developers with vacant spaces that create no income. This transition towards the risky real estate development must therefore be a sign of an increase in confidence in the real estate market in general which is very positive for the economy.

To take an example, Boston Properties recently bought this magnificent piece of real estate in down town Manhatten. Fomally known as the City Group Center, this building located on 601 Lexington Avenue was bought to reflect the change in strategy - higher income and higher risk. They expect that this property as well as two others in Boston will put the company on track for more than $2 billion in property sales.

I have just included this example to illustrate the gained confidence in high end development and the demand for these. Real estate development is not expected to slow down in the coming years so we can expect buildings like these go be developed and be sold for an even higher amount of money. Of course, only time will tell.