It’s that time of year again. Pundits, prognosticators and general know-it-alls read the stars, tea leaves and whatever else they can find in hopes of predicting what the New Year will bring.

In this general spirit of far-sighted (and sometimes far-fetched) analysis, this column brings to you what it believes are three of the most challenging issues facing commercial real estate today. In the coming weeks, I hope to research, analyze, pontificate and receive your feedback regarding these crucial elements in the marketplace.

First, decreasing access to capital. While fears of more expensive capital may have been somewhat alleviated with this week’s interest rate cut by the Federal Reserve, signs of potential economic woes abound. These may well prompt investors to shuffle dollars away from riskier equity investments to recession-proof bonds, commercial paper and the like. Commercial real estate must find ways to avoid an overbuild in these uncertain times, assuring access to capital for well-justified projects.

Next, publicly traded real estate players must slay the beast that is Wall Street. For too long, real estate stocks have been undervalued, even by pre-technology-boom standards. Groups such as the National Association of Real Estate Investment Trusts have gone a long way toward lending credibility and positive industry spin. But firms must continue to cut away the fat and focus on heightened performance for investors if they want to earn higher valuations.

Finally, real estate must leverage technology to heighten its energy efficiency and ensure continual access to power sources. Since our president-elect has named energy one of his first and foremost issues, let’s examine further the energy trends affecting commercial real estate.

Just a year ago, few folks knew what kind of power crunch the state of California was facing. But now a shortfall in supply has forced remedies that most companies never believed would really come to fruition: rolling brownouts, rolling blackouts, skyrocketing electric bills and general hysteria.

Last summer, the managers of California's power grid declared about 15 “stage two” emergencies. These are triggered when reserves fall below 5 percent, the point at which “voluntary” outages go into effect. This is expected to continue, becoming even worse in the summer of 2001.

To ensure that tenants have a ready supply of energy in the future, many commercial real estate firms now are considering taking power into their own hands. Literally.

In California, some firms are building solar power and other generation facilities in tandem with new construction of office buildings and industrial parks. It’s an extremely expensive proposition, boosting building costs by at least 20 percent at the outset. But for firms who can outlay the capital, energy bills are cut dramatically for the next couple of decades.

In some cases, these on-site resources will provide about half of the development’s needed power supply from a combination of solar energy, gas turbines and “clean” internal combustion engines. The rest will come from the usual source – the power grid.

Expensive, yes. But in a state where energy costs could conceivably double next summer, it’s something to think about. And for the rest of the states, it’s a clear shot across the bow.

Real estate firms intent on providing 24 x 7 power to tenants must start thinking ahead, since California’s power woes will take many years to solve. And until its new power plants can come online, the rest of the nation will have many megawatts sapped away by the West Coast.

In the coming weeks, I’ll talk to industry gurus and generally analyze the effects that energy policy, power generation and environmentalism will have on commercial real estate in the new year. If you would like to share your thoughts on the issue, please feel free to drop me a line.