Speculative Development | Risk/Reward
Do you know that some of our largest office parks would not even exist if it wasn’t for developers being willing to take extreme speculative risks?
In the classic movie “Field of Dreams”, an Iowa farmer played by Kevin Costner hears a mysterious voice one night in his cornfield saying, “If you build it, he will come,” and feels the need to act. Despite great criticism, he builds a baseball diamond on his land. Afterward, the ghosts of great players start emerging from the crops to play, and it ultimately becomes much more.
The movie closes with hundreds of cars approaching the baseball field. In other words, he built, and they came.
FUN FACT: The iconic line “If you build it, he will come” from the movie is often confused with “If you build it, they will come”. “If you build it, they will come” is never said in the movie but remains the line most often used in popular culture.
In the Field of Dreams metaphor, action, time, and effort (and money) are added to intention. Even then, there is no guarantee. In the movie, even though the character builds the Field and they come, it doesn’t exactly happen in his time frame or in the way he intended. In the high stakes game of commercial real estate development, we see this scenario played out often.
Past Speculative Projects
Landmark projects such as RiverPark Corporate Center in South Jordan and Cottonwood Corporate Center in Cottonwood Heights were both built on a purely speculative basis. No Preleasing. No Kick-Off Tenants. And guess what? They ultimately created new centers of gravity and redefined our market…not to mention adding millions of square feet, attracting new corporate headquarters and employment.
I was fortunate to be involved with these projects, witnessing John West and EsNet Group (former owners of WordPerfect) transform an old gravel pit at the mouth of Big Cottonwood Canyon into a world-class office destination, and David Layton, Bill Child and Jeff Flamm take the dusty river bottoms of South Jordan, and transform it into the largest office park in Utah (so far). The results have been breathtaking, but came at great financial risk to those visionaries who dared dream big. And both projects had their critics and naysayers.
Another highly speculative project from the recent past worth mentioning is Jordan Commons – from the brilliant entrepreneur, Larry H. Miller. He took significant risk, investing $65 million before securing any bank financing. He didn’t wait, and charged forward with what became one of the most dynamic projects in the market. Who would have ever imagined a 10-story Class A office building and 20 screen megaplex theater with restaurants and amenities at 9400 South State Street? Larry H. Miller did, and Utah continues to be blessed long after his passing by his vision and willingness to take a risk.
Utah would be a much different place if it wasn’t for those who took an extraordinary risk, employing a “Field of Dreams” approach and attitude.
Current Speculative Projects
Although truly speculative projects continue to be rare, we are currently observing two impressive examples rising in the heart of what many refer to as “Silicon Slopes”. In Lehi, an expansive 600,000 square foot office park called Innovation Pointe is under construction on its first 5-story Class A office building—on a purely speculative basis. David Layton and Jeff Flamm (who conceived RiverPark) are taking great risk to develop this project and continue to change the skyline. In Draper, The Boyer Company is under construction on 136 Center, with no preleasing yet in its first 5-story ultramodern suburban office building—located on I-15 with shimmering glass exterior.
Although these developers who have been changing the Utah landscape have been taking a risk, I believe they are taking calculated risks, driving projects and deals that make economic sense and create extraordinary value. Speaking of driving, one of my favorite quotes of all time comes from Mario Andretti, who stated, “If everything seems under control, you’re just not going fast enough”.
I give special tribute to the risk takers of development, who have made it possible for Utah to join the national stage. They remind me of the following words taken from the epic “Think Different” campaign launched by Apple in 1997:
“Here’s to the crazy ones. The rebels. The troublemakers. The ones who see things differently. While some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”