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May 20, 2018

A Commercial Tale

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A Commercial Tale

It’s telling that delegates to the first meeting of the national association in 1908 made no distinction between commercial and residential real estate in the organization’s founding documents.

It’s telling that delegates to the first meeting of the national association in 1908 — which included representatives from such major business centers as Boston, Chicago, Cincinnati, Philadelphia, and St. Louis — made no distinction between commercial and residential real estate in the organization’s founding documents. Yet, the men who gathered in Chicago that May certainly saw how their organization might influence the cities’ commercial development for the better through urban planning.

Pioneering members such as J.C. Nichols, who built the expansive Country Club District of Kansas City, Mo., and Harry Culver, who developed Culver City, Calif., advocated for community planning and zoning for residential districts. Many of their peers were more divided when it came to zoning of commercial districts. Ultimately, however, the association embraced the practice as a way to stabilize property values at a time when older neighborhoods were being drastically affected by indiscriminate development.

The 1920s were the economic heyday of downtown business districts. But even as downtowns approached their commercial zenith, a counter trend was underway. The suburbs were the new frontier. A telling statistic from Chicago: Between 1910 and 1928, commercial property values outside the downtown Loop area increased eight times faster than those within the district.

But with Nichols and others leading the charge to the suburbs (well before the advent of Levittowns), the association recognized the need to revitalize cities. In 1936, NAR created one of the first urban think tanks, the Urban Land Institute, to study the twin problems of blight and decentralization. The Washington, D.C.-based research group was spun off in 1940 and continues to be a major player in the field of urban studies.

The United States emerged from World War II in much stronger economic shape than it had entered it. Between 1945 and 1950, about 30 million square feet of new office space was constructed in the United States, an increase of 14 percent. Most of this building occurred in traditional downtown central business districts.

In the two decades that followed, commercial real estate branched off from residential and became its own business. All five of NAR’s current commercial affiliates — the CCIM Institute, the Counselors of Real Estate, the Institute of Real Estate Management, the REALTORS® Land Institute, and the Society of Industrial and Office REALTORS® — either began or experienced significant growth in the postwar years.

The postwar years also were a time when talk of the need for urban renewal programs became far more urgent in the real estate industry. What emerged was a two-pronged initiative that involved numerous freeway construction projects to relieve downtown congestion along with extensive slum clearance programs to reverse urban blight.

NAR’s involvement in these efforts was mixed. On the one hand, the association was a longtime advocate for more and better roads. But the wholesale destruction of inner-city neighborhoods was something association leaders had a hard time embracing. In 1952, NAR launched “Build America Better,” an urban renewal plan that stressed renovation and enforcement of existing housing codes over large-scale redevelopment projects.

In the next two decades, decentralization accelerated. There was also a national demographic shift with cities in the South and West growing at much faster rates than those in the Midwest and Northeast. What followed was a period of dramatic ups and downs for commercial practitioners.

In the late 1980s, NAR took steps to organize a commercial division and provide distinct services to commercial practitioners. Most important was the recognition that the local associations that formed the heart of NAR weren’t equipped to provide the kind of specialized education and services required by the commercial sector.

“Except in the area of government affairs, the commercial firms weren’t perceiving any value to being involved with NAR,” said Ron Myles, a broker from Denver.

The new approach ultimately included the creation of commercial overlay boards, which coexist and share in a geographic jurisdiction with one or more REALTOR® associations.

In 2000, NAR renamed its commercial division the REALTORS® Commercial Alliance. The RCA represents the collective commercial real estate constituencies of NAR and works to serve the needs of commercial practitioners. Today, the RCA produces a variety of communications for commercial specialists and is on the brink of a new milestone: a national commercial information exchange.

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