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ARES Urbanexus Update #179

The American Real Estate Society (ARES) distributes a periodic compilation of real estate-related news and information curated by H. Pike Oliver. Press the “bar” above to access the free update.

The American Real Estate Society (ARES) distributes a periodic compilation of real estate-related news and information curated by H. Pike Oliver. Press the “button” above to access the free update.

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ARES Urbanexus Update #176

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ARES Urbanexus Update #175

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ARES Urbanexus Update #174

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Update #173 is available HERE.

Update #172 is available HERE.

https://www.urbanexus.com/pikeurbanexuscom/2025/2/4/ares-urbanexus-update-172

Update #171 is available HERE.

https://www.urbanexus.com/pikeurbanexuscom/2025/1/7/ares-urbanexus-update-171

Update #170 is available HERE.

Office

Tech, especially AI, is driving U.S. office leasing

The tech industry boosted its share of U.S. office leasing to 18% in the first three quarters of this year, partly fueled by companies involved in artificial intelligence (AI). CBRE’s Tech-30 report analyzes the tech sector's influence on office demand and rental rates across 30 major tech markets in the U.S. and Canada, as well as select submarkets.

This 18% share marks a 3.8 percentage point rise from the 14.2% recorded for all of 2023, placing tech ahead of Finance & Insurance (16.5%) and Professional & Business Services (15.7%). After trailing both industries in 2022 and early 2023, tech regained the lead in last year's third quarter and has now held the top position for five consecutive quarters.

This year marks a comeback for the tech industry, following layoffs in 2023 and a slowdown in U.S. venture capital funding from 2021 to 2023. Tech job growth rose by 1% in the first seven months of the year, compared to 0.3% in 2023. Venture capital funding, particularly for AI companies, increased 13.3% year-over-year in the first half of 2024, and large-cap tech stocks lifted the Nasdaq stock index.

Learn more here.

Residential

U.S. mortgage rates remain high

Based on Freddie Mac's latest Primary Mortgage Market Survey (PMMS), the 30-year fixed-rate mortgage (FRM) averaged 6.78 percent as of November 14, 2024

• As of Thanksgiving 2024, the 30-year FRM averaged 6.81 percent, down from 7.44 percent in November 2023.

• The 15-year FRM averaged 6.01 percent; in November 2023, it averaged 6.76 percent.

Learn more here.

House payments vs. household income in the USA

In another sign of America’s ongoing housing affordability crisis, the National Association of Home Builders /Wells Fargo Cost of Housing Index (CHI) found that in the third quarter of 2024, a family earning the nation’s median income of $97,800 needed 38% of their income to cover the mortgage payment on a median-priced new home. Low-income families, earning only 50% of the median income, would have to spend 75% to pay for the same new home.

The figures track identically for the purchase of existing homes. A typical family would have to pay 38% of their income for a median-priced existing home, while a low-income family would need to pay 75% to make the same mortgage payment.

Learn more here.

Retail

Bifurcation away from the “middle”

Consumers increasingly gravitate toward luxury or value offerings and away from the ‘middle.’ Add extended economic uncertainty, rapid expansions, and product diversification from top value-oriented retailers, and you have an explosion of visits to the value lane.

But there is a ceiling to that growth, especially in the discount and dollar store space. Throughout 2023 and the first part of 2024, visits to discount and dollar stores increased steadily. However, no category can sustain uninterrupted visit growth forever. Since April 2024, year–over–year (YoY) foot traffic to the segment has begun to slow, with September 2024 showing just a modest 0.8% YoY visit increase.

Learn more here.

Cost-conscious consumers and value grocers

The rising cost of living has pushed the discount retail segment into overdrive, and value grocery chains are also benefiting. The category has flourished in recent years, with many bargain-oriented grocery chains adding new stores quickly to meet burgeoning consumer demand. 

Like visitors to specialty grocery chains, value shoppers demonstrate segment-specific behaviors that reflect their preferences and habits. And perhaps most strikingly, foot traffic data reveals that these shoppers tend to stay longer in-store than visitors to traditional and specialty grocery chains.

In Q3 2024, 26.5% of visits to value grocery chains lasted longer than 30 minutes, compared to 23.4% for traditional grocery chains and 23.7% for specialty and fresh-format chains. This suggests that these stores attract shoppers who take their time and carefully consider price points, looking for the best value for their dollar—a need that the chains they frequent seem to be meeting. 

Learn more here.

Real estate finance

Growth in lending

Research by CBRE shows that the commercial real estate lending market continued its upward trajectory in the third quarter of 2024. There was a notable increase in acquisition financing and strong issuance across asset classes, including large office transactions.

The CBRE Lending Momentum Index, which monitors the rate of CBRE-originated commercial loan closings in the U.S., rose by 13% from Q2 2024 and by 15% year-over-year, indicating enhanced lending activity. The index closed Q3 2024 at 214, approaching the pre-pandemic five-year average of 229.

In Q3 2024, the average spread on closed commercial mortgage loans was 183 basis points (bps), down 35 bps from the previous year and stable from Q2 2024. Multifamily loan spreads narrowed slightly to 168 bps for the quarter.

Learn more here.

Climate change

Changing weather degrades buildings

Longer, more severe heat waves degrade roofs and strain air conditioning and HVAC systems. Wild temperature swings bring thermal cycling that expands and contracts concrete and masonry walls, hastening cracks and water intrusion. Asphalt shingles, the most common covering on residential homes in the US, warp under an unrelenting sun, while pavement buckles, steel rails, kink, and siding suffer “solar distortion.” Foundations can shift in drought or high temperatures, leading to cracked walls, burst pipes, and serious structural problems.

Trepp, a real estate analysis firm, found that repair and maintenance costs were up 30% last year in many major US markets, including Dallas, San Francisco, San Diego, and Houston. One study by Atlas Real Estate found the average cost of repairs in rental property — driven by material costs, inflation, and labor costs — rose from $290 per incident in 2018 to $501 in 2024. And, unlike floods or storm damage, insurance often doesn’t cover these problems.

Learn more here.

Resilience and sustainability

Ten principles for building resilience

A 2018 Urban Land Institute publication considers the economic, environmental, and social factors that contribute to resilience and how the concept of resilience translates to the private sector, municipal decision-makers, and communities. Ten Principles for Building Resilience equips real estate developers and asset managers, city officials, city leaders, and the public to address vulnerabilities and enhance resilience as relevant to their communities, real estate projects, and broader civic involvement.

The Ten Principles include:

• Understand vulnerabilities

• Strengthen job and housing opportunities

• Promote equity

• Leverage community assets

• Redefine how and where to build

• Build the business case

• Accurately price the cost of inaction

• Design with natural systems

• Maximize co-benefits

• Harness innovation and technology

You may download the report here.

Adaptive reuse in Paris

There is a remarkable trend of old buildings being converted to new housing in Paris. Some of the city’s major social housing developers have made adaptive reuse a central part of their strategy for adding new housing. See Brian Googin’s post to his Substack Housing in Practice to see several recent examples, including a conversion of military barracks to social housing.

Metropolitan and regional trends

Hope for U.S. factory towns

For much of the last half-century, economic life in manufacturing regions of the U.S. has been dominated by factory closings, joblessness, and downgraded expectations. Textile mills and furniture plants have been undercut by low-priced imports from Mexico and China, and tobacco processing jobs have disappeared. Yet over the last several years, an infusion of investment in cutting-edge industries like biotechnology, computer chips, and electric vehicles has lifted the fortunes of long-struggling communities.

North Carolina presents a conspicuous example of this trend, yet a similar story is playing out elsewhere. From industrial swaths of the Midwest to factory towns in the South, areas that suffered the most wrenching downsides of trade are now capturing significant shares of investment into forward-leaning industries, according to research from the Brookings Institution, a public policy research organization in Washington.

Learn more here.

Around the world

Foreclosures in China soar

Banks in China are foreclosing on apartments after homeowners could not pay their mortgages, as the country’s housing crash threatens the financial system. According to official data, the roster of homes seized and listed for auction leaped 43 percent last year. Numerous Chinese banks have disclosed increases in mortgage defaults during the first half of this year.

Foreclosures are a sensitive subject in China, where the government keeps a tight grip on society. Regulators adopted new rules that make it hard for banks to evict some defaulting homeowners. Bidders who buy apartments in foreclosure auctions must often purchase the apartments sight unseen and then work with neighborhood officials to persuade the occupants to leave.

Real estate prices have fallen almost 30 percent from their peak in 2021. In China, banks and the government wonder how much worse the problem could get.

Learn more here.

Industrial

7,000 robots in a big Amazon warehouse

In Southern California’s Inland Empire, a region accustomed to Amazon’s smiling arrow logo on warehouse buildings, the scale of the online retailer’s latest warehouse stands out. At six stories and roughly 4.5 million square feet, the Robotics Sortable Fulfillment Center in Ontario is Amazon’s largest U.S. facility.

Besides its size, the Baker Avenue complex in Ontario, CA, is special for another reason — more than 7,000 robots help the warehouse’s 2,000-plus human workforce process as many as 1 million daily shipments. The warehouse, which can hold up to 50 million items, receives, unpacks, packs, and sends a wide range of consumer goods to points locally, nationwide, and worldwide.

Learn more here.

A changing industrial market in the USA

The nation's industrial market slowed in the third quarter of 2024, building on a two-year cooling-off period after its pandemic heyday, but the market could soon hit bottom. Preliminary data from Savills found the U.S. industrial vacancy rate hit 7.4% in Q3 2024, a 350-basis-point increase from Q3 2022. It's also the highest vacancy rate within the U.S. industrial market in a decade.

In response to the slowing market, new construction has declined, with starts in Q3 hitting their lowest level since 2016. According to Cushman & Wakefield PLC (NYSE: CWK), as of the third quarter of 2024, 309.3 million square feet of industrial space nationally was under construction, the lowest level since the end of 2018.

Learn more here.

Nearshoring

According to Henry Steinberg, Global Head of EQT Exeter, the biggest lesson from the COVID-19 pandemic for investors in industrial real estate is that proximity matters. Businesses want to be closer to their customers, whether they are a medical company distributing vaccines or a manufacturer producing chips. That means they need more warehouse space, industrial land, and power.

Nearshoring is reshaping the warehouse real estate market. According to Steinberg, it is a structural shift in how businesses manage their supply chains. As more companies look to diversify and de-risk their operations, nearshoring may continue to drive demand for industrial real estate in the U.S. and Mexico.

Learn more here.

Office

Converting offices to dorm-syle co-living

The United States has a shortage of 4 million to 7 million homes and, at the same time, an all-time-high office vacancy rate of 20%, meaning that more than a billion square feet of office space is unused. However, despite the urgent need for housing and policymakers’ desire to convert underused office space to apartments to help revitalize downtowns that lost residents and businesses during the pandemic, construction costs remain too high to make most such conversions profitable.

New research from The Pew Charitable Trusts and Gensler, the global architecture, design, and planning firm, has identified a more economically viable approach to office-to-residential conversions. It employs a design that reduces construction costs and enables affordable lower rents for people earning less than an area’s median income.

The design calls for converting buildings to co-living dorm-style apartments rather than conventional apartments. Each floor features private, locked “microunits” along the perimeter, with shared kitchens, bathrooms, laundry, and living rooms in the center.

You may learn more here.

Climate and environment

Decarbonizing building operations

The real estate industry faces growing pressure to reduce the emissions caused by building operations. The good news is that the technology already exists to solve the problem, and a new way to formulate decarbonization plans can make it easier and more cost-effective to take action, as McKinsey partner Brodie Boland discusses with McKinsey Global Publishing’s Katy McLaughlin.

The real estate industry accounts for approximately 40 percent of global combustion-related emissions, of which over 25 percentage points come from building operations. That means most of the emissions come from running buildings rather than building them.

So here’s the good news: it’s often possible to achieve full operational net-zero emissions in a financially neutral or positive way. The ways to do it exist at scale today and do not require newfangled technologies. Viable approaches include heat pumps, the electrification of heating, cooling, and cooking elements, improved building envelopes and better insulation, and installation of on-site renewable sources such as solar panels. In some cases, it involves installing widely available devices that can do things like turn the lights off when people leave a room.

Learn more here.

A builder’s guide to carbon-neutral construction

There are three key strategies to lower—to zero and even negative—the amount of embodied carbon in our buildings: reusing infrastructure, designing to minimize carbon emissions, and using lower-carbon materials. And since reducing upfront carbon is an additive process, you can use these approaches individually or in any combination to reduce a building’s overall carbon footprint.

See the graphic below and learn more from Craig Savage’s Journal of Light Construction article here.1

Moving into climate-risk areas in the USA

These U.S. counties regularly experience hurricanes, major wildfires and floods, and punishing heat. They’ve been some of the most popular places to move for two decades as Americans have flocked to the South and West. The country’s vast population shift has left more people exposed to the risk of natural hazards and dangerous heat at a time when climate change is amplifying many weather extremes.

A New York Times analysis highlights the dynamic in new detail:

• Florida, regularly raked by Atlantic hurricanes, gained millions of new residents between 2000 and 2023.

• Phoenix has been one of the country’s fastest-growing large cities for years. It’s also one of the hottest, registering 100 straight days with temperatures above 100 degrees Fahrenheit this year.

• The fire-prone foothills of California’s Sierra Nevada have seen an influx of people even as wildfires in the region become more frequent and severe.

• East Texas metro areas, like Houston, Austin and Dallas-Fort Worth, have ballooned in recent decades despite each being at high risk for multiple hazards, a fact brought into stark relief this year when Hurricane Beryl knocked out power in Houston during a heat wave.

Learn more here.

Climate-fueled disasters across the USA

Across the US, natural catastrophes are becoming more expensive and more common. Global warming supercharges the atmosphere with more water and energy, fueling increasingly violent weather. Destructive storms, droughts, floods, and wildfires are colliding with communities where millions of people live, with more costly homes and possessions—and so much more to lose. Learn more here.

Real estate decarbonization in the USA

A coalition of leading sustainable building organizations has released a detailed agenda for the next presidential administration. The U.S. Green Building Council (USGBC), New Buildings Institute (NBI), Institute for Market Transformation (IMT), and Carbon Leadership Forum (CLF) collaborated to develop the recommendations. The agenda aims to help commercial buildings recover from the current downturn and better prepare for the future.

Specifically, the agenda calls for expanding the Sec. 48E Clean Electricity Investment Tax Credit (ITC) in the U.S. to cover energy efficiency investments. The ITC currently covers only electricity-generating technologies, such as on-site solar, even as energy efficiency is widely viewed as a foundational solution to energy and climate challenges.

The proposed expansion would drive significant economic activity in retrofitting buildings to be more energy efficient and provide parity under the tax code for energy efficiency as the ITC transitions to a technology-neutral structure in 2025. It would also reduce demand on the grid and accelerate our ability to meet clean energy targets.

Learn more here.

Planning

Reversing the “urban doom loop”

A recently released report, Reiminaging Cities: Disrupting the Urban Doom Loop, from Cushman & Wakefield with Christopher Leinberger and Places Platform, analyzes 208 regionally significant urban centers in 15 major metro areas across the US. These centers include four types of WalkUPs: downtowns, downtown adjacent, urban commercial, and urban universities.

These walkable centers are efficient economic engines: They comprise only 3 percent of the land but generate 57 percent of the GDP in these cities. “One could argue that these WalkUPs are the reason the city exists,” says Leinberger. Better functioning WalkUPs would improve the nation’s economy, the report argues.

The “doom loop” results from WalkUPs putting “too many eggs in the office basket.” The report concludes that using portfolio theory to rebalance real estate toward less office space (work), more play (culture, entertainment, retail), and more residential (especially for-sale housing) would shift these urban centers back to the positive economic track they were on before COVID.

You may download the report here.

The high cost of excess parking

Look at almost any city’s zoning code in North America, and you’ll find a table of parking ratios, usually dating back 50 to 80 years, mandating a predetermined number of parking spaces for all new buildings —and for every new bedroom, church pew, or bowling lane. If new developments were built with “adequate” off-street parking, the thinking would be that cars and curbsides could be managed. However, one-size-fits-all mandates, determined by city planning offices, were the wrong tool for the job. Guessing at the right numbers, most jurisdictions erred on the side of excess.

Beyond creating an oversupply— parking that doesn’t get used—mandating too much parking carries a raft of unintended consequences. Too much required parking outlaws the kinds of buildings that define cities’ historic, walkable neighborhoods, blunts housing construction, drives up home prices and rents, and increases barriers for entrepreneurs who want to invest in their community. Instead of managing on-street parking, these regulations have locked cities into patterns of sprawling development that make traveling without a car impossible.

Parking is expensive to build. On the low end, a surface parking lot might cost $5,000 to $20,000 per space. A multilevel parking garage can cost $60,000 (or more) per spot. Those costs are passed down, rolled into the price of food, rent, and taxes, whether you park a car there or not. Every parking spot per home can increase rent by 12.5 percent2 (or more than $200 per month3).

Parking costs us in dollars and space. A good rule of thumb is that parking lots must be as large as the building they serve when mandates reach three parking spaces per 1,000 square feet, with 330 square feet[8] for each space. That is a common value. Of the localities studied for a recent report by the Seattle-based Sightline Institute, 61 percent required at least that much parking for offices, and 80 percent required that minimum for stores. Restaurants have it even worse: the typical jurisdiction requires parking lots to be 3.3 times larger than the eatery itself.

Learn more here.

Environment

A bumblebee and housing in California

As California grapples with a deepening housing underproduction crisis, developers might face an unexpected challenge: Crotch’s bumblebee. As more insects become eligible for protection, it could be just the beginning of a new era of endangered species protection, and the methodology for understanding listing and protection might be very different for insects. The bumblebee has an extensive range within California. It has also been observed in southwest Nevada. Bumblebees are most active between March and September, with queens most active in the spring.

If the bumblebee were to be listed, it could pose significant challenges to developers all across the state. They would have to adhere to new regulations, including undergoing extensive survey processes and implementing unclear conservation practices, potentially delaying previously established timelines.

You can learn more here.

Housing

Rent setting algorithm sparks anti-trust litigation

In August 2024, the U.S. Department of Justice (DOJ) and several state attorneys general sued RealPage Inc., claiming the pricing algorithm used in its software violates federal antitrust laws.

Experts say resolving the litigation, whether through settlement or a trial, is likely to take some time. However, the claims laid out in the DOJ's allegations prompt more significant questions about the role of technology in everyday real estate practices such as lease negotiations.

At the heart of the DOJ's claims is that apartment owners share information not publicly available with RealPage's software, which inputs that information into an algorithm to suggest lease rates to other software users — and industry competitors. That, according to Attorney General Merrick Garland, "enables landlords to share confidential, competitively sensitive information and align their rents," which the DOJ alleges violates the Sherman Antitrust Act.

You'll be able to learn more here.

Top-rated rental properties in US metro areas

The ORA® Power Rankings, developed by J Turner Research, is a monthly, independent ranking of apartment properties and management companies based on their Online Reputation Assessment (ORA) scores. The ORA score is a statistical model that consolidates and assesses online ratings from various review sites and Internet Listing Services (ILSs), resulting in a single score on a 0-100 scale.

These rankings recognize the online reputation of the highest-performing communities and management companies. The September 2024 ORA Power Ranking spotlights the nation's 25 most populous metropolitan statistical areas (MSAs) and recognizes the top 10 properties in each based on their ORA scores. The average ORA score of each MSA is also highlighted. Learn more and view an interactive version of the map here.

Residential zoning in California

Researchers from UC Berkeley’s Othering & Belonging Institute crunched the numbers and found nearly 96% of all the land zoned for residential use in California is reserved for single-family homes. To dramatically increase housing stocks and decrease housing costs, state regulators are requiring cities to plan for more affordable housing construction, which often requires rezoning.

The state mandate resulted in a plan for 250,000 more housing units in the City of Los Angeles. An article by L.A. Times housing reporter Liam Dillon highlighted the fact that L.A. planning officials proposed to meet the state requirement by making high-density neighborhoods even denser while leaving low-density, single-family-home communities virtually off-limits

After years of study, the city planning commissioners had to decide: Where should all those new homes go? After hours of public comment and debate, commissioners opted for the status quo.

Why too few homes get built in the USA

The housing crunch that has existed for years in high-cost big cities has moved into the rest of the country. New York Times housing reporter Conor Doughterly explains that the culprit is building too little housing, which began two decades ago. In the three years leading up to the Great Recession of the late 2000s, homebuilders started about two million homes a year. That number plunged during the crisis and never fully rebounded. Since 2010, builders have started about 1.1 million new homes a year on average — far below the 1.6 million needed to keep up with population growth. America is millions of homes behind, and it gets worse each year.

Learn more here.

Regional and metropolitan trends

House price changes across the USA

House prices changed unevenly across U.S. metro areas from the second quarter of 2023 to the second quarter of 2024. House price appreciation ranged from -4.6% to +20.7%. In the second quarter of 2024, 14 metro areas, highlighted in red on the map above, had negative house price appreciation, while the remaining 370 metro areas experienced positive price appreciation.

Meanwhile, house prices in the second quarter of 2024 are much higher than before the pandemic. Nationally, house prices rose 49.7% between the first quarter of 2020 and the second quarter of 2024. More than half of the metro areas saw house prices rise by more than the national price growth rate of 49.7%. Among all the metro areas, house price appreciation ranged from 13.8% to 81.0%. House prices in the South and the West have grown faster than in the Midwest and Northeast. Within the top 20 metro areas that had the highest house price appreciation, 11 metro areas are in the South Atlantic Division and six in the East South Central Division, while none were in the Midwest.

You may learn more here if you’d like.

Retail

Chapter 11 bankruptcy filings by retailers

A spate of retail bankruptcies has opened up vacancies in retail centers across America. Columbus, Ohio-based Big Lots Inc. became the latest major retailer to file for Chapter 11 bankruptcy protection earlier this month. It plans to close more than 300 stores as part of its restructuring. Other retailers like rue21 Inc., Express Inc., and The Body Shop International Ltd. announced plans earlier this year to close hundreds of stores. Discount retailer 99 Cents Only Stores LLC said this spring it would close all of its 371 stores. LL Flooring Holdings Inc. and Conn's Inc. also have filed for bankruptcy this year, as did Red Lobster, with the Orlando, Florida-based chain closing more than 100 restaurants as part of its recently concluded Chapter 11 proceedings. Most of those sites were freestanding out parcels of shopping centers.

In some markets and centers, retailer store closures have been backfilled quickly and at a higher lease rate than what the previous occupant was paying. However, in other places, the type of store that's closing—and its location—can make it difficult to re-fill vacated spaces. Executives at publicly traded retail real estate investment trusts have largely cited the interest in acquiring retail leases at bankruptcy auctions as a positive sign amid the closures.

Learn more here.

Transportation

Motorization of the United States

Even with an urbanization rate of more than 80 percent, the United States is still seen as a country that has to rely on transportation via passenger vehicles due to the varying quality of its public transit and long-distance train and bus network. However, the idea that U.S. residents own more than one car is, on average, untrue.

Statista calculations based on data from the U.S. Census Bureau and the U.S. Department of Transportation show that only nine U.S. states have a motorization rate, meaning the number of motor vehicles per capita, at or above 1.0. Since the data doesn't disaggregate the pool of motor vehicles by private and commercial use, a higher density of, for example, agricultural businesses or companies relying on larger vehicle fleets might skew the results. Another factor to consider is that not every motor vehicle is classified as a car. This caveat notwithstanding, no state comes close to Montana, with an average of two motor vehicles per capita.

On the low end of the spectrum are some of the country's smallest states like Delaware, the District of Columbia and New Jersey, which are easier to get around in if you don't own a car. One of the exceptions from this rule with a motorization rate of 0.46 is New York, which ranks 30th out of 50 states and the District of Columbia in terms of land size. However, it exhibits a high urbanization rate and, for example, a well-connected public transit system in New York City. The state's capital is home to around 43 percent of all residents of New York state, according to the most recent U.S. Census from 2020.

US driving and congestion is higher than ever

After a reprieve from car traffic in 2020, vehicle miles traveled have now surpassed pre-pandemic levels in almost every metro area. 

Lockdowns and the widespread adoption of remote work in the early days of the pandemic offered a rare glimpse of streets without the usual noise and air pollution from traffic. Four years later, though, both traffic and congestion exceed pre-pandemic levels across most of the US, according to a report from the transportation analytics firm StreetLight Data. The total miles traveled by all vehicles, or VMT, jumped 12% between May 2019 and May 2024, reaching record levels. You may learn more here.

Regional and metropolitan trends

Areas with the worst traffic

The ConsumerAffairs Research Team analyzed three key traffic measures for 49 major U.S. metros to determine which cities have the heaviest congestion, most extended travel times, and most fatal crashes. They combined these factors to calculate an overall traffic score for each area and rank them. See the top 9 (worst) traffic areas in the chart below.

You can learn more here.

Retail

Zombie pharmacies in New York City

Scores of chain drugstores that once anchored shopping hubs across New York City remain shuttered even as much of the city’s storefront real estate has bounced back from the Covid-19 pandemic. Many could stay that way for years to come because of ironclad leases, the difficulty of finding new tenants for the sprawling spaces, and seismic shifts in the drugstore business, brokers and industry analysts said.

The result is over a million square feet of prime real estate collecting dust in some of the busiest commercial districts, according to a new analysis of the city’s pharmacy market. Critics say the stores have become neighborhood eyesores that attract illegal activity and detract from nearby businesses.

Learn more here.

Free rent (for a while) in downtown San Francisco

The city, which was among the most devastated in the country after the pandemic, is trying to lure businesses back with a free rent period. Under this Vacant to Vibrant program, the city and business leaders provide free rent for six to nine months to entrepreneurs who want to set up shop in empty spaces, many of which are on the ground floor of office buildings.

Beyond free rent, Vacant to Vibrant provides permit assistance and up to $12,000 to businesses to help cover insurance and other expenses. The program also offers grants of up to $5,000 for building owners to cover costs for tenant improvements in the spaces and other expenses like utilities. Most of the selected businesses are small operators that already have an online following or whose products and services can lure shoppers out of their homes.

Some 850 entrepreneurs initially applied for a slot, and 17 businesses were chosen to occupy nine storefront spaces in the fall of 2023. Out of those businesses, seven extended their leases and now pay rent.

You can learn more here.

Hospitality

Short-term rentals reach a turning point in the USA

Short-term-rental supply and demand have both lagged somewhat in the face of higher interest rates and a slowdown in bookings since the COVID-19 pandemic, but the industry could be poised for a rebound.

Supply growth is slowing compared to a year ago, according to data from AirDNA LLC. The short-term rental analytics platform reports there were about 1.56 million listings nationally in 2023, up 14.7% from 2022. This year is estimated to have about 1.65 million listings, a more modest 5.8% annual gain in supply.

Demand, meanwhile, is markedly improved from a year ago. It grew 11.4% in May versus May 2023. That compares to a year-over-year decline of 1.8% in May 2023. Year-to-date, demand is about 6.8% higher than last year, according to AirDNA.

Learn more here.

Office

Return to office metrics in the USA

June 2024 was a watershed moment for post-pandemic office attendance. According to the Office Building Index from location intelligence software company Placer.ai, the national average for office attendance was down only 29.4% compared to June 2019. Placer.ai's data was based on foot traffic analytics from commercial office buildings in major metro areas.

There are signs that in-office momentum is likely to build even stronger in the remainder of 2024—especially with September typically being marked by a jump in in-office rates. But beyond that, more top executives expect a full return to the office for many positions. That would be a welcome sign for commercial real estate developers, landlords, cities, and small businesses dependent on office commuter traffic.

Residential

The fifty largest U.S. new home markets

According to Builder Magazine's annual Local Leaders List, housing markets with jobs, population, and relative affordability fared the best in 2023. While affordable coastal markets have struggled largely due to rising prices, markets in the Southeast continue to demonstrate strength.

This year’s list, ranking the nation’s 50 largest new-home markets by closings in 2023, includes eight markets from Texas, Florida, and North Carolina in the top 10. Phoenix-Mesa-Chandler maintained its spot at No. 3, while Raleigh-Cary moved up five spots to No. 10, joining Charlotte-Concord-Gastonia (No. 9) in the top 10.

Learn more here.

Home size demand vs. supply in the USA

Results on the square footage buyers want in their next home were published in the 2024 edition of What Home Buyers Really Want, based on a representative sample of 3,008 recent and prospective home buyers conducted in 2023. The size of homes started comes from NAHB tabulation of the recently released 2023 data file from the Census Bureau’s Survey of Construction. Learn more here.

A way forward for unhoused persons

While L.A. County grapples with homelessness, elegant new housing projects in Long Beach and Venice signal the solutions — and challenges — ahead. What works is housing. That’s what all the evidence, not to mention common sense, suggests. But building homes—as opposed to shelters or even tiny-house villages, useful but temporary measures that more Western states now embrace—can take ages, cost a fortune, and run headlong into community roadblocks and a mountain of legal obstacles.

You can learn more here.

Master planned communities

The RCLCO top 50 selling U.S. communities

Every year since 1994, RCLCO has conducted a national survey identifying the top-selling master-planned communities (MPCs) through a rigorous search of high-performing communities in each state. They report the annual sales among the Top-50 communities at the end of the year and publish this mid-year update in July. For the mid-year 2024 report, they surveyed MPCs nationwide to establish the current rankings as an update to their The Top-Selling Master-Planned Communities of 2023 published in January 2024.

New home sales among the 50 Top-Selling Master-Planned Communities remained similar to the pace set by the top communities in the first half of 2023.

• Sales among top MPCs outperformed the broader new home market, as the pace of single-family home sales nationally was 1.1% lower through the first half of 2024 compared to the prior year. June new home sales nationally experienced a 7.4% decline compared to 2023, while master-planned communities held strong.

• Lakewood Ranch is the top-selling all-ages community in the country, with 1,238 sales, while The Villages is estimated to retain its place as the top-selling community overall, with sales predominantly to 55+ buyers.

• Sunterra in Houston, TX, has earned the third-place rank with 774 sales – a 16% increase over the same time last year.

• The Houston MSA was the top-performing metropolitan area with 13 communities in the Top 50, representing over 4,500 sales, or almost 24% of all sales among ranked MPCs.

• The state of Texas represented about 39% of sales among ranked communities, followed by Florida at 36%.

Learn more here.

Singer Akon’s city in Africa faces challenges

A single arched concrete block juts out of a field in Senegal where R&B singer Akon laid the foundation for his $6 billion metropolis four years ago.

The West African nation granted the artist 136 acres of land on its Atlantic Coast in 2020 to build his Akon City, which it envisions as a real-life Wakanda, the fictional country from Marvel Studios’ Black Panther films.

Complete with condominiums, amusement parks, and a seaside resort in gravity-defying skyscrapers rising above the rural landscape, Akon City would run on solar power and his Akoin cryptocurrency, the American-Senegalese singer said during a flashy presentation in Senegal’s capital, Dakar.

Today, goats and cows graze the deserted pasture 60 miles south of Dakar, and authorities are growing increasingly impatient. Sapco-Senegal, the state-owned entity charged with developing the country’s coastal and tourism areas, has given Akon formal notice to start work on his project, or the government will take back 90% of the land granted to him, General Manager Serigne Mboup said by email.

You can learn more here.

Demographics

Increasing diversity in the US post-2020

The 2020 census showed that the 2010s was the first decade in the nation’s history when the white population declined and the second consecutive decade when the white population under 18 declined. The new census estimates between April 2020 and July 2023 show that both trends are continuing through the 2020s. This is leaving the growth of many areas reliant on the rise of members of other races and ethnic groups, especially among their youth. The nation’s “diversity explosion” represents an important part of its future, a phenomenon that American policies and politics must recognize.

Learn more here.

Climate

Beachfront discounts hint at more to come

David Moot assumed he’d never be able to afford his dream of owning a beachfront home on the Massachusetts coast, his vacation retreat for nearly 20 years. When he spotted one on Cape Cod listed at a surprisingly low $395,000, he jumped at the deal.

There was a catch: The ocean might soon be at his doorstep. The house, at 157 Brownell Road in Eastham, MA, sits just 25 feet (7.6 meters) from an eroding sand bluff. With the tides projected to encroach 3 feet closer to his door each year, his investment could get swept away within a decade.

What Moot paid for the Eastham home was 67% less than the $1.195 million the seller initially sought in 2022. On Nantucket, a seaside house at 28 Sheep Pond Road sold in June 2024 for just $200,000, about a 10th of its assessed valuation this year.

Learn more here.

Around the world

Clearing a path to rebuild Gaza

As of mid-2024, more than 70% of Gaza’s housing, already depleted in previous conflicts, has been reported as damaged, along with schools, hospitals, and businesses. Aid agencies say that most of its 2.2 million people are displaced, crammed into a tiny slice of land along the Mediterranean coast, essentially cut off from fresh water, food, medicine, and basic sanitation.

So far, Israeli air strikes have left more than 42 million tonnes of debris across the Strip, according to the United Nations. That’s enough rubble to fill a line of dump trucks stretching from New York to Singapore. Removing it all may take years and cost as much as $700 million. Unexploded bombs, dangerous contaminants, and human remains under the rubble will complicate the task.

Rebuilding Gaza and the lives of its residents will require a complete overhaul of its entire physical infrastructure and some form of political solution over what a new Gaza will look like. But before any of that can happen, the collection and disposal of all the rubble — after the war ends — will be of paramount importance.

You can learn more here.

What makes European cities so liveable?

Every year, the Economist Intelligence Unit ranks a large group of global cities on their liveability. This year’s rankings have seen quite a bit of movement. But the top of the index remains dominated by the continent that best combines stability with a high quality of culture and the environment, education, infrastructure, and health care, all of which the index’s authors aim to measure objectively.

Vienna, Copenhagen ( and Zurich take gold, silver, and bronze in the global index, as they did last year. These places are rich, democratic, beautiful, cultured, green, and walkable. Their citizens are correspondingly healthy, educated, and happy. Such places also have politics that could uncharitably be called boring but which our index recognizes as “stable”—a good thing for a quiet life.

This can be illustrated by contrast with the movements down the rankings of some European cities. When very few points separate them, small changes to their scores translate to significant moves in the rankings. So, German cities (which saw far-right protests), Dublin (significant riots in November), and Barcelona (street crime) all received small decreases in their stability subscores, which translated into more significant falls down the rankings. The same thing occurred in Stockholm in last year’s index. Future improvements could see them rise again just as quickly. To be clear, these are still among the world’s best places to live.

You can learn more here.

Office

Incentive programs to save downtown

Across the USA, cities large and small are launching or expanding incentive programs as part of a broader bid to save downtown communities after the one-two punches of the COVID-19 pandemic and the onset of remote work. Although some workers return to the office, hybrid work means many are no longer filling office spaces five days a week.

According to data from tracking firm Placer.ai, while nationwide office visits reached a post-pandemic high in June, that number remained more than 29% below what it was in June 2019. That decline in activity, combined with rising interest rates, has led to to huge losses in value for office buildings — declines that in turn lead to less tax revenue, creating the potential for what could be a vicious cycle.

Experts are divided, however, on how much incentives can help turn the tide and what incentives particular cities should offer to help bring people back to office properties, especially in downtown districts. Economists often point to the research of Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research, who, in a 2019 book, wrote that companies often prioritize factors other than incentives for new facility locations or expansion decisions. Only 25% of the time do incentives alter the outcome of a relocation or expansion decision, Bartik found.

Residential

Apartments begin to struggle financially

A growing number of rental properties, especially in the South and the Southwest, are in financial distress. Only some have stopped making mortgage payments, but analysts worry that as many as 20 percent of all loans on apartment properties could be at risk of default. These problems haven’t yet become a crisis because most owners of apartment buildings haven’t fallen behind on loan payments. According to the Commercial Real Estate Finance Council, only 1.7 percent of multifamily loans are at least 30 days delinquent, compared with roughly 7 percent of office loans and around 6 percent of hotel and retail loans.

The issues facing apartment buildings are varied. In some cases, owners need help to fill units and generate enough income. In others, the apartments are full of paying tenants, but owners cannot raise rents fast enough to generate the cash to cover rising loan payments. As a result, almost one in five multifamily loans is now at risk of becoming delinquent, according to a list maintained by the data provider CRED iQ.

You'll be able to learn more here.

Share of smaller lots at a new high

Nearly two-thirds (65%) of new single-family detached homes sold in 2023 were built on lots under 9,000 square feet, less than 1/5 of an acre. According to the latest Survey of Construction (SOC), this is the highest share on record and reflects stark changes in the lot size distribution over the last two decades. In 1999, when the Census Bureau started tracking these series, less than half (46%) of new for-sale single-family detached homes occupied lots of that size.

A shift in speculatively built (or spec) homes towards smaller lots continued despite the pandemic-triggered suburban flight and presumed shifts in preferences towards more spacious living. The steadily rising share of smaller lots undoubtedly reflects unprecedented lot shortages confronted by home builders during the pandemic housing boom and their attempts to make new homes more affordable.

A closer look at the lot size distribution since 2010 shows that most dramatic shifts took place at the lowest end, with lots under 0.16 acres increasing their share by 13 percentage points. In 2010, 27% of all sold single-family detached homes occupied lots under 0.16 acres, and an additional 20% were on lots between 0.16 and 0.25 acres. Fast forward to 2023, these shares increased to 40% and 25%, respectively.

You can learn more here.

Housing affordability in the USA

A recent analysis by Attom Data Solutions LLC examined housing data from U.S. counties with a population of at least 100,000 that sold at least 50 single-family homes and condos in the second quarter of 2024. Homes remained unaffordable for many prospective buyers, with single-family homes and condo prices being less affordable during those three months compared to historical averages in 99% of the nation's counties.

The analysis also found that expenses for existing homeowners on median-priced homes are on the rise. According to Attom, those costs consumed 35.1% of the average national wage in the second quarter, a high point since 2007. It's the latest data point to underscore how much property taxes, insurance, and other homeownership costs have climbed since the COVID-19 pandemic.

You'll be able to learn more here.

Mansions in the desert

Southern California is riddled with luxury enclaves, but it’ll cost you. As housing prices soar, some Angelenos are bailing on the big city in favor of hotter, dryer, and more remote places, sprawling out into Riverside, San Bernardino, and Kern counties in search of dirt-cheap mansions. In L.A., $1 million might not even buy a second bedroom. A few hours outside L.A., $1 million can buy a dream house.

You can learn more here.

California's housing crisis meets California's insurance crisis

For decades, housing advocates, and some policymakers, have stressed the dire need to develop new housing in infill areas and — for a host of reasons — leave open space alone. These advocates now have an ally, albeit it an unwelcome one, in the form of the insurance industry.

Recently, property insurers in California have curtailed the number of types of policies they are willing to write in parts of the state determined to be prone to wildfires and the potentially massive property losses that they can cause, especially when research indicates that climate change has exacerbated the frequency and severity of wildfires.

At least seven significant insurers—State Farm, Allstate, Farmers, USAA, Travelers, Nationwide and Chubb— have reduced their coverage in California. They’ve been pressured not only by losses but also by inflation and rising reinsurance rates. Most of all, they have been hemmed in by Prop. 103, the 1988 ballot measure that requires the state to approve rate increases and prevents carriers from using future projections to estimate losses and set rates. The trend may affect future development significantly if insurance companies decline to write new policies.

Many of the properties that insurers have abandoned are located on the urban fringe, in small towns surrounded by forests or chaparral, or in entirely rural areas.

These areas are particularly susceptible to wildfires, which have grown intense, numerous, and destructive in recent years. The proximate cause of this trend goes back to 2017, when over 1.5 million acres burned — up from less than 1 million in each of the previous eight years. Further perilous, expensive years followed. (This year, over 400,000 acres have already burned.)

A recent study estimates that 4.5 million homes are located in the wildlands-urban interface (WUI), and 1.5 million homes face a high fire risk. The areas considered at risk by the Department of Insurance encompass hundreds of zip codes in most of California's 58 counties. These areas are mainly concentrated on the western slope of the Sierra Nevada Mountains, many inland portions of coastal counties, and nearly the entire state north of Redding.

Even though the insurance trend may inadvertently support the state’s goal of limiting development in WUI, it could undermine the efforts of exurban and semi-rural counties to meet their housing targets under the Regional Housing Needs Allocation (RHNA) system. Rural counties have low RHNA targets, but exurban counties on the metropolitan fringe– many located in high-risk areas – have higher numbers.

Retail

Overview

The positive retail momentum observed in Q1 2024 continued into Q2 – as stabilizing prices and a strong job market fostered cautious optimism among consumers. Year-over-year retail foot traffic remained elevated throughout the quarter, with June particularly seeing significant weekly visit boosts ranging from 4.7% to 8.5%.

The robustness of the retail sector in Q2 was also highlighted by positive visit growth during the quarter’s special calendar occasions, including Mother’s Day (the week of May 6th) and Memorial Day (May 27th). And though consumer spending may moderate as the year progresses, retail’s strong Q2 showing offers plenty of room for optimism ahead of back-to-school sales and other summer milestones.

You can learn more here.

A significant value drop in Seattle

In late May, the 335,000 sq. ft. Pacific Place vertical retail mall in downtown Seattle and its 1,200-stall parking garage sold for $88.25 million. This is a quarter of the pricing obtained when they last changed hands. The mall sold for $66.75 million, well below its 2014 sale price of $271 million. The garage sold for $21.5 million, down from $87 million in 2016.

The drop in value is just the latest backslide for the struggling downtown shopping center. The mall underwent a multimillion-dollar renovation that wrapped up in 2020 but has struggled to attract marquee retailers. The latest departure was Lululemon, which announced it would shutter its Pacific Place store. The shopping center is mostly empty, with more than half of its space vacant, and most foot traffic heads upstairs to the AMC theater or Din Tai Fung on the top floor. 

You'll be able to learn more here.

The challenge of Walgreens and CVS vacancies

With Walgreens and CVS whittling their store count across the USA, landlords will be left with sizable buildings to market to prospective tenants. In late 2021, CVS announced plans to close roughly 900 stores through 2024. During a June earnings call, Walgreens revealed it planned to close additional stores.

While both companies have many coveted locations, the size of the stores makes them challenging to release. The average size of a Walgreens store is 14,500 square feet, and CVS stores traditionally range from 8,000 to 15,000 square feet. Both stores also typically sit on 1 to 2 acres.

The store footprint could make it challenging to market the building as-is. The larger the building, the smaller the prospective pool of tenants

Learn more here.

Industrial

Data centers

The proliferation of data centers across America is helping to power the nation's increasingly digital economy. The data center boom has been around for a while, but the rate at which these projects are being planned, proposed, and built is quickly escalating. While data centers once concentrated in a few key markets, they're now fanning out to metro areas nationwide.

Data centers are booming largely because of how digitally interconnected the world has become. The advancement of generative artificial intelligence is also ramping up data requirements. This spring, the Goldman Sachs Group (NYSE: GS) estimated that data-center power demand will grow 160% by 2030, partly because of AI. According to market research and consultant company Parks Associates, the average U.S. household with internet access had 17 connected devices in 2023. People are also spending more time on their devices now than they ever have, and the activities they do on those devices have become more data-intensive.

This drives demand for the buildings that store, process, and distribute digital data and applications, supporting an increasingly digital ecosystem relied upon by people and businesses alike. North American data center inventory grew 24.4% year-over-year in the first quarter of 2024 among markets tracked by CBRE Group Inc. (NYSE: CBRE). Northern Virginia, the nation’s largest data center market, led with 391.1 megawatts of new supply. That market also had the most significant year-over-year net absorption, at 407.4 MW, and the lowest vacancy rate, at 0.9%, in Q1.

Facilities supporting growing data needs typically require significant resources like power and water. And while data centers usually carry a hefty investment—hundreds of millions, if not billions, of dollars for one facility isn't uncommon—they typically don't come with many permanent jobs. As demand grows, facilities also increase in terms of square footage, land, and wattage requirements.

You'll be able to learn more here.

Hospitality

Airbnb hosts want guests to come to them directly

It’s getting harder to be an Airbnb host, in the US at least. Through May of this year, year-over-year earnings for US hosts had declined in 22 of the past 28 months, according to analytics firm AirDNA. The declines have been moderating in recent months, and US host earnings have risen in three of the first five months of this year.

Some markets have been saturated with short-term rentals, and demand for large vacation homes is weakening because travelers are again considering competitively priced hotels and overseas trips. Several key cities, including Los Angeles, New York, Phoenix, and San Diego, have restricted short-term rentals, locking hosts out of the market. Some hosts also complain that Airbnb has made it harder to make money with its refund policies and its algorithms to decide which properties appear at the top of its search results.

The headwinds are inspiring hosts to try to cut out Airbnb. In part, this is what always happens when people rely on internet platforms to make a living. It’s akin to Uber drivers asking passengers to call them directly the next time they need a ride or YouTube influencers and TikTok celebrities cutting side deals with brands to secure advertising income they won’t have to split with the platforms. Who likes a middleman?

There’s a specific opportunity in the shift to mid-term rentals—stays longer than 30 days but shorter than the yearlong leases people sign for their primary apartments. Attracting a steady stream of people to rent an apartment once or twice a week requires a service like Airbnb. If you’re only looking for a few renters a year, it becomes more reasonable to find them yourself.

You can learn more here.

Real estate taxation

The art of challenging property tax assessments

In this podcast, Blake Oliver discusses the intricacies of property tax assessments and appeals with Josh Malancuk, President and Founder of JM Tax Advocates. Josh explains how his firm helps businesses minimize their property tax liabilities by providing a more accurate market value for their properties, which often differs from the assessor's valuation. He walks through the appeal process and the importance of meeting deadlines. He also shares a case study of how his firm saved a client millions of dollars in property taxes.

Construction

Project abandonments surged 10.7% over the past month, according to Cincinnati-based ConstructConnect’s Project Stress Index, a measure of construction projects that have been paused, abandoned, or have a delayed bid date. Delayed bid activity posted no change in June, while work put on hold decreased by 6.6%. Overall, the Project Stress Index increased by 1.5% last month. Learn more here.

Around the world

Amazon rainforest is urban too

It's important to remember that the Amazon is not just a rainforest but also home to vast urban areas with tens of millions of human inhabitants. Their needs and trials often go unnoticed in conversations about the rainforest, but they are a crucial part of the ecosystem, and their stories need to be heard.

More than 24 million of the nearly 30 million inhabitants of the Brazilian Amazon — 60% of the South American river basin — live in cities. Their numbers have multiplied seven-fold since 1970. And their well-being is inextricably intertwined with the vitality of the Amazon basin itself.

You can learn more here.

Atlas of Sustainable City Transport

The first annual Atlas of Sustainable City Transport looks at nine metrics of sustainable mobility in more than 1,000 metropolitan areas worldwide. These measures include the percentage of residents safe from highways and proximity to transportation amenities, including protected bikeways, car-free places, frequent transport, and rapid transport. The atlas’s focus on proximity, rather than the size of the system or the mode of transit, provides insight into residents’ transportation choices. Learn more here.

Sustainability

Solar energy growth exceeds expectations

What makes solar energy revolutionary is the rate of growth. Michael Liebreich, a veteran analyst of clean-energy technology and economics, puts it this way: in 2004, it took the world a whole year to install a gigawatt (gw0 of solar power capacity (1gw is a billion watts or a thousandth of a terawatt) in 2010, it took a month; in 2016, a week. In 2023, single days saw a gigawatt of installation worldwide. For 2024, analysts at BloombergNEF, a data outfit, expect 520-655gw of capacity will be installed: up to two 2004s a day.

The past 20 years of solar growth have seen naive extrapolations trounce forecasting soberly informed by such concerns again and again. In 2009, when installed solar capacity worldwide was 23 gw, the energy experts at the IEA predicted that in the 20 years to 2030, it would increase to 244 gw. It hit that milestone in 2016 when only six of the 20 years had passed. According to Nat Bullard, an energy analyst, over most of the 2010s, actual solar installations typically beat the IEA’s five-year forecasts by 235% (see chart below).

You'll be able to learn more here.

Residential

What’s been happening in the housing market

The year 2023 saw a significant impact of the pandemic on the housing market. National existing home sales hit their lowest point since 1995, primarily due to spiked rates, making the 'switching costs' of moving prohibitively high for many homeowners. However, the sales of new homes, while declining from the highs of the pandemic housing boom, remained consistent with the pre-pandemic trend, marking 2023 as a solid year for publicly traded homebuilders.

Two new-build housing markets have emerged: larger, primarily public, and smaller, mid-sized builders. Larger builders have been able to be more aggressive with incentive usage when needed, including buying down the mortgage interest rates well below what a smaller builder is willing and able to do. The bigger builders have also been able to be more aggressive in their land acquisition, intending to increase their community count both this year and next year. In the land market, the bigger builders have priced out some of the smaller builders.

You'll be able to learn more here.

Land supply for housing in the USA

The land market is a perennial challenge for home builders. Lot supply in the USA tightened in the first quarter of 2024, with the overall market remaining significantly undersupplied, a trend that has persisted since 2017. Zonda's recently released New Home Lot Supply Index (LSI) indicates that lot supply tightened in 19 of the 30 major metros it analyzed.

According to survey data from the National Association of Home Builders, lot availability was the second biggest concern for home builders in 2024 due to a tight lot supply. Zonda’s April survey of division presidents indicates that 60% of respondents are moving “full steam ahead” with land acquisition, while around one-third are cautiously moving forward. Additionally, nearly two-thirds of respondents said land prices have increased recently.

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Phoenix leads the USA in build-to-rent houses

The Phoenix metro area saw the most significant increase in the nation last year, with over 4,000 built-to-rent homes completed, a 10-year high. Dallas was a distant second, with about 2,700. The Valley of the Sun also leads the country in new built-to-rent houses, with 9,345 units completed in the past five years.

According to a recent report by RentCafe, about 27,500 built-to-rent homes were completed nationally last year, a 75% increase from 2022. There was also a massive jump in 2022, increasing from about 10,000 in 2021 to 15,700. Such developments are typically popular in the Southeast, Southwest, and Sunbelt, where land costs less, but they've been slowly moving into other parts of the country.

You'll be able to learn more here.

Housing prices vs. buying power in the USA

In Los Angeles, buying power was a mere $413,108 compared to the median existing-home price of $923,750—meaning homes were valued at 124% above buying power. Buying power takes into account changes in income in a metro area and how interest rates influence the purchasing power of residents.

San Jose (98%) wasn’t far behind. Despite tech layoffs and migration trends, housing affordability in Silicon Valley and the San Francisco Bay Area remains a significant challenge. Buying power in San Jose was $722,849, while home prices were almost double, at $1.43 million. San Diego’s median price was 80% higher than buying power, while San Francisco’s was 76%.

Interestingly, there are more markets where housing appears to be undervalued relative to buying power than overvalued areas. You can learn more here.

Where prices exceed buying power

Where prices are lower than buying power

Mixed-use development

A project in L.A. gone wrong

The graffiti made the abandoned skyscrapers of Oceanwide Plaza in downtown Los Angeles infamous. However, this illicit work ranks relatively low compared to other challenges facing the billion-dollar development. With a potential fire sale of the residential, hotel, and retail project approaching, a far more complex and expensive question looms over one of the region’s all-time real estate catastrophes: Can it be saved from the wrecking ball?

You can learn more here if you'd like.

Master-planned communities

The Woodlands near Houston learned from others

Many design elements—from curvilinear streets in The Woodlands to villages in Peachtree City, Georgia, and lakeside mixed-use developments in China—bear at least some similarities to four of the largest master-planned communities that began in the 1960s, including Columbia, MD, The Woodlands, Reston, VA, and Irvine, CA.

The Irvine Ranch's influence is evident in William Pereira's planning and through the Woodlands Development Company's second president, Ed Lee, who used his Irvine Company experience to shape The Woodlands' real estate operations until he died in 1986. Columbia's influence is evident in The Woodlands, from its hierarchical road system and cul-de-sac "grid" to its Pavilion music venue.

Like The Woodlands, Columbia is divided into villages with village shopping centers as anchors. Its town Center aims to be a significant employment and corporate headquarters hub. One of Reston's Town Center designers brought elements of its urban, pedestrian-oriented design to The Woodlands Town Center.

You'll be able to learn more here.

Office

Losses start to pile up

Since the early days of the pandemic, owners of big buildings in New York and other large cities have been desperately hoping that the commercial real estate business would recover as workers returned to offices. But four years later, some properties are going into foreclosure and sold for sharply lower prices than valuations from less than a decade earlier, leaving investors with steep losses.

According to CoStar and the Mortgage Bankers Association, roughly $737 billion of office loans are spread across large and regional banks, insurance companies, and other lenders. According to Trepp, a data and research firm, the delinquency rate for office building loans that are part of commercial mortgage-backed securities was nearly 7 percent in May, up from about 4 percent a year earlier. However, a relatively small proportion of office loans, about $165 billion, are packaged into such securities.

The repercussions could extend far beyond the owners of these buildings and their lenders. A sustained drop in the value of commercial real estate could sap property tax revenue that cities like New York and San Francisco rely on to pay salaries and provide public services. Empty and nearly empty office buildings also hurt restaurants and other businesses that served the companies and workers who occupied those spaces.

You'll be able to learn more here.

Regional and metropolitan trends

Big city population improvements

Back in the throes of the COVID-19 pandemic, several commentators began to promote the “urban doom loop” theory, suggesting that big cities' demographic and economic vibrancy would continue to wane. This perspective arose in reaction to the pandemic-related exodus of residents from such cities, the rise of video conferencing platforms such as Zoom, and a reduction in city living. Yet newly released U.S. Census Bureau statistics through 2022–2023 reveal that—contrary to the urban doom loop theory—many cities have arrested the demographic declines they suffered during the pandemic's peak and have begun to turn a corner. You can learn more here.

Betting on San Francisco’s comeback

Despite all the worries about a doom loop fueled by post-pandemic hybrid work, persistent homelessness, and a fentanyl epidemic, San Francisco is once again attracting money. Powered by an AI boom and rebounding real estate demand, the city has halted years of population declines and is adding jobs.

Home sales jumped 22% in April to the highest monthly count since mid-2022, according to property brokerage Compass Inc. And after lagging badly last year in a closely followed measure of foot traffic, the city is now posting gains that place it in the top 10 nationwide.

Still, the recovery has its limits. It’s slow and uneven, while the city’s structural problems run deep. Closing a projected budget deficit of almost $800 million over the next two years has required cuts to some city services. San Francisco had a record 806 deaths from fentanyl last year. Pockets of crime and desolation still fester around Union Square and the Moscone Convention Center, deterring business travelers.

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Television markets

The map below shows a detailed representation of the 210 Designated Market Areas (DMAs) regions in the USA as defined by the Nielsen Research Group. Each DMA represents a distinct television market where the population receives the same (or similar) television offerings and advertisements. Television markets are also important for regulatory purposes and business decisions by TV networks and stations. They influence decisions on where to allocate resources, how to structure local news coverage, and how to approach regional advertising strategies. Go here to see a list that ranks the size of each market based on the number of viewers and here to see a larger view of the map.

City planning

Questionable economics of the 15-minute city

The goals of this trendy urban planning model are laudable, but cities need to be realistic about their ability to place retail, services, and jobs close to all residents. Unfortunately, the economics of 15-minute city planning go against foundational principles of how urban markets function—any establishment, whether a supermarket or an urgent care clinic, has fixed costs. Before even factoring in how many customers get served, there are costs of setting up the enterprise and keeping the lights on. The bigger the fixed expenses, the more patrons are needed to recoup them.

In very dense places, the catchment area for consumers can be pretty small — many patrons will be reached within shorter distances. Similarly, the radius can be smaller for services that are easily set up and consumed frequently, like coffee shops. But some businesses have higher set-up costs. Medical clinics need equipment and insurance; supermarkets demand a larger footprint for inventory. For them, the sustainable customer shed grows much more extensive. It grows even bigger in cities with moderate to lower densities, which are most US cities.

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2024’s most sustainable cities in the USA.

To mark World Environment Day on June 5, LawnStarter ranked 2024’s Most Sustainable Cities in the USA. They compared the 500 biggest U.S. cities based on five sustainability categories. Among 39 metrics, they examined the number of certified zero-energy buildings, alternative fuel stations, and greenhouse gas emissions. To learn how Lawn Starter ranked the cities, see their methodology.

The economy

The actual rate of unemployment in the USA

Using data compiled by the federal government’s Bureau of Labor Statistics, the True Rate of Unemployment tracks the percentage of the U.S. labor force that does not have a full-time job (35+ hours a week) but wants one, has no job, or does not earn a living wage, pegged at $25,000 annually before taxes.

Just as an accurate census is a prerequisite to funding American communities equitably, policymakers depend on economic indicators to shape monetary policy. The Ludwig Institute for Shared Economic Prosperity developed the True Rate of Unemployment to give analysts and decision-makers a more accurate measure of Americans’ financial well-being.

True Rate of Unemployment vs U.S. Bureau of Labor Statistics Headline Rate

Urban transportation

Dominant modes of urban travel around the world

A study of around 850 million people from 794 urban areas worldwide found that more than half of the respondents commute to work by car every day. Variations in transport tend to follow regional patterns.

The study—by Rafael Prieto-Curiel from the Complexity Science Hub in Austria and Juan Pablo Ospina from EAFIT University in Columbia was published in the Environment International Journal in March 2024. It is one of the largest of its kind. It uses more than 1,000 surveys to capture trends in global mobility. Messrs Prieto-Curiel and Ospina only included trips to work (comparable surveys on general journeys are harder to come by) and surveys conducted before 2019 (to avoid the effect of lockdowns, which hit various cities at different times).

The surveys show where people use the most active forms of travel. The 100 least active cities in the study are all found in North America—a result of decades of government pro-car policies and subsidies. The least active city outside North America is Birmingham, in Britain’s West Midlands, a region long associated with the country’s automotive industry. The most active city is Quelimane, a small seaport in Mozambique. Other cities in the top ten are all in Europe, including two each in the Netherlands and Spain.

• In the USA and Canada, almost 92% of journeys are made by car.

• The percentage of commutes by car in Northern and Southern European cities ranges from 50% to 75%.

• In several European cities, many commutes are made by bike or foot, such as Copenhagen (47%) and Utrecht (75%).

• Public transportation is crucial in some European cities. For instance, public transit accounts for most journeys in Paris (60%) and nearly half in London (45%).

• In Southern and Eastern Asia, public transportation accounts for a significant share of journeys, such as in Hong Kong (77%), Seoul (66%), and Tokyo (51%).

See the charts below and learn more here and here.

Residential

Green home building and remodeling in the USA

The National Association of Homebuilders in the USA reports that green building is becoming well-established in the home building industry, with over one-third of home builders and nearly one-quarter of remodelers reporting their projects qualified as green in 2003 based on strict definitions. Almost all (96%) of homebuilders and remodelers say they actively improve home building performance through the use of at least one of the following approaches: energy, water, and materials resource efficiency, healthier indoor living environments, resiliency, green site/lot development, and providing operation and maintenance manuals for green features. You can learn more here.

What homebuyers in the USA want

A National Association of Homebuilders study of consumer preferences—What Home Buyers Want Study*—asked about the features and amenities buyers want in the home and the type of community where they would like to live. The findings reveal that the ideal community offers three main attributes: convenience, walkability, and a suburban feel.  This conclusion is gleaned from the top five features buyers most want in a community, which are being close to retail space (e.g., pharmacy, grocery store) (70%), near a park area (66%), walking/jogging trails (66%), a walkable community (pathways connecting homes to transportation, shopping, etc.) (65%), and a typically suburban community (64%).

In terms of the overall location where buyers would prefer to purchase a home, 53% would like to buy in the suburbs (either close-in or outlying), a rural area (25%), or the central city (downtown or outside of it) (23%).  The study also asked buyers about the farthest distance they are willing to travel one way from home to work.  For the typical buyer, that sweet spot is 11.3 miles—unsurprising given that most desire to live in the suburbs.

Top 10 home builders in the USA

These firms closed 280,958 residential units in 2023, 42.1% of the estimated 668,000 new homes sold.

Apartments thrive in downtown L.A.

A stroll through downtown Los Angeles presents a study in contrasts.

The city’s homeless community is on stark display, with the population jumping by 10% in the latest annual survey. Office buildings once filled with thousands of employees are seeing vacancies skyrocket.

While one side of the street is bleak, the other is chic. New and recently developed apartment towers and complexes along Figueroa, 7th, Olive streets, and other thoroughfares enjoy robust demand.

You can learn more here.

Residential brokerage changes in the USA

The National Association of Realtors (NAR) has settled the lawsuit challenging how NAR member real estate agents are paid. This could lower the cost of real estate transactions, but it’s confusing buyers, sellers, and agents.

Two key points from the settlement:

• Beginning August 17, 2024, it prohibits any requirement of offers of compensation in the Multiple Listing Service between listing brokers or sellers to buyer brokers or other buyer representatives.

• Buyers will have to formalize an agreement with their agent and agree to pay them if the seller doesn’t.

You can learn more here.

Retail

Retail departures in San Francisco

A wave of retail store closures has impacted downtown San Francisco, with more than two dozen notable businesses shuttering or scheduling closures.

Those woes are now spreading at Union Square, once the center of San Francisco’s retail zone. The North Face closed its only S.F. store in Union Square this March. The closure came weeks after Macy’s announced that it would shut down 150 stores in the next few years, including the iconic location on Geary Street. Zara will also close its Union Square location in January 2025.

Six retail stores inside the San Francisco Centre, including Aldo, J.Crew, and Madewell, have closed this year. In August 2023, the mall's owner, Westfield, gave up the shopping center to the lender after Nordstrom announced its departure, which left the mall only 55% leased at that time.

This map shows the location of major retail closures in downtown San Francisco since the beginning of 2023. Learn more here.

A significant value loss in downtown Seattle

Seattle’s Pacific Place mall and its parking garage sold for $88.25 million this month, a quarter of the price the properties garnered when they last traded ten and eight years ago. The mall sold for $66.75 million, well below its 2014 sale price of $271 million. Its nearly 1,200-stall garage sold for $21.5 million, down from $87 million in 2016.

The mall underwent a multimillion-dollar renovation that wrapped up in 2020 but has struggled to attract marquee retailers. The latest departure was Lululemon, which announced it would shutter its Pacific Place store last month. 

The shopping center remains bright, sterile-feeling, and mostly empty. More than half of its space is vacant, and most foot traffic heads upstairs to the AMC theater or Din Tai Fung on the top floor.

You can learn more here.

Climate

Cranking up the heat in the USA

A new study reveals the emergence of an 'extreme heat belt' from Texas to Illinois, where the heat index could reach 125°F at least one day a year by 2053. This means that these areas will experience extreme heat conditions that are uncomfortable and potentially life-threatening, especially for vulnerable populations.

In just 30 years, climate change will make the Lower 48 states far hotter and more precarious during the summer.

• The findings come from a hyperlocal analysis of current and future extreme heat events published by First Street Foundation.

• The report identifies where households will be vulnerable to heat indices, which show how the air feels from the combination of air temperature and relative humidity.

• The developing "Extreme Heat Belt" forms a region of vulnerability from northern Texas to Illinois and includes the cities of St. Louis, Kansas City, Memphis, Tulsa, and Chicago.

• By 2030, some coastal areas in the Southeast and Mid-Atlantic region may also experience days with a heat index above 125°F, according to the report.

You can learn more here.

Around the world

The Ellinikon in Greece

Lamda Development’s $8 billion The Ellinikon, now under construction, is about 20 minutes from the Acropolis in Athens. It is Europe's largest urban reclamation project. The Mediterranean coastline site was an international airport and a 2004 Olympics site.

The project will feature a 1-km-long public beach and a large park, nearly doubling the green space per Athens resident. It will have thousands of luxury apartments, shopping, hotels, offices, entertainment, and a university. Sustainability elements include electric vehicle stations and rainwater capture.

The Lamda firm privately funds the development, which is expected to create thousands of jobs and attract tourists. You can learn more here.

Passings

D.R. Horton

D.R. Horton, founder of the eponymous home-building company, died on May 16 at age 74. He served as chairman of D.R. Horton since it was formed in July 1991 and held the roles of president and CEO from July 1991 until November 1998. He had been involved in the real estate and home-building industries since 1972. He was the founder, sole or principal stockholder, director, and president of D.R. Horton’s predecessor companies from 1978 to 1990.

Since its founding, D.R. Horton has built over 1 million homes and ranked as the largest U.S. homebuilder by volume since 2002. The company operates in 33 states and employs over 13,000 workers nationwide.

You can learn more here.

Retail

The mall is dead—long live the mall

In a piece for Governing, Alan Ehrenhalt describes the history and potential future of U.S shopping malls through the lens of two books, Alexandra Lange’s Meet Me by the Fountain (one of Planetizen’s Top Planning Books of 2022) and Kate Black’s Big Mall. Each book responds to the original vision of Victor Gruen, known as the father of American malls. Gruen saw the mall as a place to bring people together.

The decline of the mall in recent years may ironically be the key to getting closer to Gruen’s vision as mall owners and cities reimagine the properties to serve new needs. In perhaps the most startling transformation, Gruen’s Southdale Center in Minnesota, the first of the fully enclosed malls of the 1950s, is being re-created as a multipurpose development that includes luxury hotel rooms and apartment complexes, a fitness center in place of a defunct J.C. Penney store, medical clinics and daycare for children, and a variety of other public and private properties. Read the full story here.

The demise of 99 Cents Only stores

All 371 stores are liquidating after the company abruptly announced that it was going out of business. It’s a stunning fall for the beloved chain, whose stores are primarily located in urban areas and underserved communities, many of which lack close access to traditional grocery stores.

Company executives and industry analysts blamed a series of factors, including the COVID-19 pandemic, escalating theft and crime, competition, big increases in operating costs stemming from high inflation, and the expense of servicing its debt. The company also cited significant minimum-wage jumps, particularly in California, where 265 of its stores are located. Learn more here.

Office

Sell low and buy low in San Francisco

The $72 per square foot pricing in a foreclosure sale of a tower Bridgeton owned at 6th and Market represents a 90% drop in value from when the building last sold in 2016 for roughly $62 million. A day later, a 78,000-square-foot office building at 410 Townsend St. sold for less than one-third of the $82 million Clarion paid for it in 2019. Its buyer was none other than Bridgeton. Learn more here

Work from home may be fading

The Economist reports a gradual migration is underway from Zoom to the conference room. Wall Street firms have been among the most forceful in summoning workers to their offices, but even many tech titans—Apple, Google, Meta, and more—have demanded staff show up to the office at least three days a week. For work-from-home believers, it looks like the revenge of corporate curmudgeons. Didn’t a spate of studies during the COVID-19 pandemic demonstrate that remote work was often more productive than toiling in the office?

Unfortunately for the believers, more recent research mostly runs counter to this, showing that offices, for all their flaws, are the locus of better performance. A good starting point is a working paper that received much attention when it was published in 2020 by Natalia Emanuel and Emma Harrington, who were doctoral students at Harvard University. They found an 8% increase in the number of calls handled per hour by employees of an online retailer that had shifted from offices to homes. Far less noticed was a revised version of their paper, published in May 2023 by the Federal Reserve Bank of New York. The boost to efficiency had instead become a 4% decline.

Learn more here.

Hospitality

The improved condition of country clubs

Country clubs that made it through the leaner years of the Great Recession and the tumult of the COVID-19 pandemic are likely to see blue skies in 2024 and beyond — and that means well-situated clubs will be able to keep dues and initiation fees high.

Right now, indicators show clubs are largely in the driver's seat in 2024 with increased demand and limited supply, according to Chris Davis, a director at Club Benchmarking. Club Benchmarking uses club data and evaluations to help clubs plan for their capital needs.

At the end of 2019, about 25% of country clubs with golf courses had waitlists. Now, about 49% have waitlists, according to Davis. Meanwhile, the median initiation fee rose from $29,000 in 2019 to about $50,000 at the end of 2022, according to Club Benchmarking data.

Clubs without golf courses — usually urban clubs, yacht clubs, or athletic clubs — did just fine, too, with waitlists rising from 24% of clubs in 2019 to 44% at the end of 2023. Initiation fees rose from a median of $13,000 to $22,000 over the same time frame.

Learn more here.

Residential

Blackstone is taking AIR Communities private

Blackstone (NYSE: BX) and Apartment Income REIT Corp. (NYSE: AIRC) (“AIR Communities” or the “Company”) today announced that they have entered into a definitive agreement under which Blackstone Real Estate Partners X (“Blackstone”) will acquire all outstanding common shares of AIR Communities for $39.12 per share in an all-cash transaction valued at approximately $10 billion, including the assumption of debt.

AIR Communities’ portfolio consists of 76 high-quality rental housing communities containing 27,010 apartments concentrated primarily in coastal markets including Miami, Los Angeles, Boston, and Washington D.C. Blackstone plans to invest more than $400 million to maintain and improve the existing communities in the portfolio and may invest additional capital to fund further growth.

The acquisition price works out to about $370,447 per apartment. Learn more here.

Williamsburg waterfront in Brooklyn

A Brooklyn neighborhood’s residential development boom is nearing an end as a condo tower opens at one of the final sites on the Williamsburg waterfront. The tower’s debut is the latest step in the transformation of the onetime industrial area, made possible by a 2005 rezoning that cleared the way for construction of some of Brooklyn’s most expensive housing.

Earlier efforts in Williamsburg had been focused closer to the Bedford Avenue L train stop or farther north along the East River. Two of those waterfront projects — Toll Brothers’ Northside Piers and the Edge by Douglaston Development — were finished in 2007 and 2009, respectively. Learn more here.

Car-free in Arizona?

Jordan Pandy of Business Insider interviewed John-Robert Rodriquez, a 24-year-old school teacher who moved to Culdesac, a car-free community in Tempe, AZ (Phoenix area), in October 2023. Mr. Rodriquez has never liked driving and believes that fewer cars can foster more community. He says life at Culdesac is great, but he still has to deal with the car-dependent world outside its gates. Learn more here.

Million-dollar house cities in California

When you think of towns with $1 million-plus homes, tony places such as Beverly Hills, San Marino, Newport Beach, and Palos Verdes Estates might come to mind. But as California housing values keep rising, some cities that until recently had reputations for working-class modesty are joining the list of communities with median home values of more than $1 million. The most recent additions include Placentia, Orange, and Tustin in Orange County, Bonita in San Diego County, and Cerritos and San Gabriel in Los Angeles County. Learn more here.

Master planned communities

Dream or nightmare in a Disney town?

In a Californian desert municipality named Rancho Mirage an improbable fantasy world is rising from the parched, sandy ground. It is the arrival of Cotino, a “Storyliving by Disney community.” In this square mile of desert near Palm Springs, there will soon stand a gleaming new world of 2,000 homes arranged around a sparkling turquoise lake, where the entertainment corporation will curate every aspect of life. Storyliving by Disney represents the latest chapter in the expansion of the world’s largest entertainment company beyond the screen. Learn more here.

Transportation

Car harm

A refreshingly clear academic article in the Journal of Transport Geography (vol. 115, February 2024) by five authors from the UK and one from Germany summarizes car-related harm, including crashes, pollution, land use, and injustices worldwide. Rob Delahanty of CityNerd has prepared a well-crafted video reporting on and illustrating the findings of the article.

Key points made in this piece include:

• 1 in 34 deaths are caused by cars and automobility, with 1,670,000 deaths annually.

• Cars and automobility have killed 60-80 million people since their invention.

• Car harm will continue unless policies change.

The abstract of Car harm: A global review of automobility’s harm to People and the environment is worth quoting:

Despite the widespread harm caused by cars and automobility, governments, corporations, and individuals continue to facilitate it by expanding roads, manufacturing larger vehicles, and subsidizing parking, electric cars, and resource extraction. This literature review synthesizes the negative consequences of automobility, or car harm, which we have grouped into four categories: violence, ill health, social injustice, and environmental damage. We find that since their invention, cars and automobility have killed 60–80 million people and injured at least 2 billion. Currently, 1 in 34 deaths are caused by automobility. Cars have exacerbated social inequities and damaged ecosystems in every global region, including in remote car-free places. While some people benefit from automobility, nearly everyone—whether or not they drive—is harmed. Slowing automobility's violence and pollution will be impracticable without the replacement of policies that encourage car harm with policies that reduce it. To that end, the paper briefly summarises interventions that are ready for implementation.

Learn more here.

Regional and metropolitan trends

World’s most livable cities in 2023

Per the Economist Intelligence Unit, living conditions in cities across the world have fully recovered from the deterioration caused by the COVID-19 pandemic as highlighted in their latest liveability index. It rates living conditions in 173 cities across five categories: stability, health care, culture and environment, education and infrastructure. Cities in the Asia-Pacific region have rebounded the most. The index also suggests that life in cities is a bit better than at any time in the past 15 years. The charts below show which cities topped the ranking.

Falling population in parts of the USA

Between 2010 and 2020, the number of people in the USA grew by around 7.4%. That was the slowest decade of growth since the Great Depression (when the population grew by 7.3%). In the 1990s, the growth rate was 13%. The main culprit is falling birth rates.

The total fertility rate—a measure of how many children a typical woman will have in her lifetime—was steady or rising for 30 years from the mid-1970s. In 2008, however, it fell below 2.1, the level needed to keep the population stable, and has since declined to 1.67 (see chart 1). If it remains below 2.1, only immigration can keep the population growing in the long run. Yet net immigration, too, has been falling since the 1990s.

Learn more here.

Where prosperity meets decline

As Josh Stephens notes in a post to the California Planning & Development Report blog, more than half of the cities on a list of the "18 Fastest-Declining Cities in the U.S."are in California. San Francisco took the "top" spot for the most rapidly declining city. Mr. Stephens notes that the report is not scientific and relies on just one metric (population decline) over a brief period — 2020-2022.

Still, it should give Californians some pause because, unlike cities that "declined" in previous generations, California's decline is largely self-inflicted. It is due to a failure to produce an adequate amount of housing to support a strong economy. As Mr. Stephens notes, “California’s future depends on attitude as much as demographics or economics.”

In contrast, places like Toledo, Cleveland, and Buffalo were subject to global macroeconomic trends, such as overseas manufacturing. Learn more here.

Taxation

Property taxes and bees

After almost two decades of relentless colony collapse coverage and years of grieving suspiciously clean windshields, the numbers on the new Census of Agriculture (otherwise known as that wonderful time every five years when the government counts all the llamas) show that America’s honeybee population has rocketed to an all-time high. Much of the explosion of honey producers came in just one state: Texas.

The Lone Star State has gone from having the sixth-most bee operations in the country to being so far ahead that it out-bees the bottom 21 states combined. And it turns out the state amended its property tax law in 2012 to provide an agricultural valuation for plots of five to 20 acres where bees are kept on the land for at least five years. The agricultural value is typically lower than the market value, which results in a lower taxable value. Thanks to David Calloway, author of If Someday Comes, for highlighting this great example of how land taxation can incentivize action! Learn more here.

Entitlements-to-use

Micro-managing development in San Francisco

San Francisco’s top governing body is considering what most residents surely would not consider a major priority for the city: whether Julie Park and Tom McDonald can raise the roof of their $2.1 million Victorian home by 7 feet and 3 inches.

The project complies with city codes, and the San Francisco Planning Commission gave unanimous approval; in many cities, that would have been good enough for the remodel to move forward. But in San Francisco, neighbors wield unusual power over next-door renovations and modest improvements and can appeal even the replacement of rotted front steps.

So 11 members of San Francisco’s Board of Supervisors now serve as judges in home construction, hearing from Ms. Park and Mr. McDonald, their neighbors, lawyers, Planning Department experts, and any members of the public who care to weigh in.

Learn more here.

Around the world

The most populous metropolitan regions

The top eight largest metropolitan areas by population on Earth are home to 214.1 million people. Learn something about each of them here.

Residential

Affordability declines in the USA

In 2023, existing residential property sales fell to their lowest level in nearly 30 years, while the median price surged to historic highs, according to a recent report by the National Association of Realtors. Although personal income has risen since the 2000s, it has failed to keep pace with the soaring housing rates, resulting in a widening gap between income growth and home prices. From 2000 to 2023, median income in the U.S. increased by 63.82%, from $41,990 to $68,786 per year, while the median home price surged by 241.49%, from $119,600 to $408,428, as per the latest data from the U.S. Census Bureau.

New homes are getting smaller in the USA

After years of prioritizing large homes, the nation’s biggest and most powerful home builders are finally building smaller ones, driving a shift toward more affordable housing. Census data shows that the boom in smaller construction has cut median new-home sizes by 4 percent in the past year to 2,179 square feet, the lowest reading since 2010. That’s helped reduce overall costs and contributed to a 6 percent dip in new-home prices in the same period. Learn more here.

Perspective on the Low-Income Housing Tax Credit Program in the USA

Building is expensive, and financing is tight in the current multifamily market. However, as it has for the last 30 years, the Low-Income Housing Tax Credit (LIHTC) program provides solutions that increase the ease of creating and sustaining affordable housing, even when the overall multifamily market faces challenges. The program promotes the construction and acquisition of housing and enforces conditions that help maintain the stability and preservation of affordable properties.

Many assume that low-cost housing faces extreme financial risk, but that isn’t true. With LIHTC credits, developers attract corporate investors whose financial investment is returned through tax benefits with no required cash return from the developer or the project.  The overall arrangement provides a strong economic advantage to the projects, facilitating the creation of more affordable housing.

These properties also benefit from market conditions and the shortage of affordable rental housing for people in the 60-percent-or-lower area median income (AMI) bracket that the LIHTC program serves. Given the dramatic shortage of affordable housing, an economic downturn does not translate into financial weakness in LIHTC deals. Learn more here.

Office

Return to the office in the USA

A Placer.ai analysis of office building foot traffic over the past several years suggests that the office recovery story is still very much being written. After plummeting during COVID, nationwide office visits began a slow but steady upward climb in 2021, reaching about 70.0% of January 2019 levels in August 2023. 

Since then, the recovery appears to have stalled – with some observers even proclaiming the death of return to the office. But looking back at the office visit trajectory since 2019 shows that the process has been anything but linear, with plenty of jumps, dips, and plateaus along the way. And though office foot traffic tapered somewhat between November 2023 and January 2024, this may reflect holiday work patterns and January’s unusually cold and stormy weather rather than any true reversal of RTO gains. Indeed, if 2024 is anything like last year, office visits may experience an additional boost as the year progresses.  Learn more here.

Cities face revenue losses as office values fall

In San Francisco, a 20-story office tower that sold for $146 million a decade ago was listed in December 2023 for just $80 million. In Chicago, a 200,000-square-foot-office building in the city’s Clybourn Corridor that sold in 2004 for nearly $90 million was purchased last month for $20 million, a 78 percent markdown. And in Washington, DC, a 12-story building that mixes office and retail space three blocks from the White House that sold for $100 million in 2018 recently went for just $36 million.

Cities are starting to bear the brunt. Municipal budgets that rely on taxes associated with valuable commercial property are now facing shortfalls and contemplating cutbacks as lower property assessments reduce tax bills. A fiscal report published by the National League of Cities last year found that optimism among municipal finance officials has started to wane amid concerns of weaker sales and lower property taxes coinciding with the expiration of federal funds. Learn more here.

It costs too much to turn most offices into homes

A recent posting by Goldman Sachs points out that converting underutilized office space to residential units is harder than it sounds — in large part because it’s expensive. The costs of acquiring and converting commercial buildings are high.

Prices also have not fallen to reflect vacancy rates. Not many properties are changing hands, which is a function of the limited availability of financing as regional banks pull back. Banks, rather than liquidating defaulted loans, have been modifying them to give time to landlords to figure out their plans.

The cost of regulation is also high. Many cities don’t allow commercial buildings to be immediately used for residential purposes. For developers to make that change could be a multi-year drag, which factors into their costs. The Goldman Sachs team’s research indicates that only 0.8% of US office inventory is currently priced at a level that makes conversion to multifamily housing financially feasible. Learn more here.

Retail

Pandemic recovery for restaurants

Derek Thompson of The Atlantic reports that restaurant recovery is not a simple story of universally positive outcomes. In 2020, the restaurant business as we knew it looked like a goner. Even its own lobbying group said so. As the pandemic crushed bars and sit-downs, the National Restaurant Association made a dire prediction: The business would likely never return to its pre-pandemic state.

Given this gauntlet from hell, it is surprising that in 2024, the restaurant recovery overall is complete by almost any measure. Before the pandemic, about 12.3 million people worked in restaurants. Today, about 12.3 million people work in restaurants. Before the pandemic, Americans spent $1.28 on food away from home (mostly at restaurants and bars) for every dollar they spent on food at home (in grocery stores and supermarkets, for example). In 2022, the USDA reported that the away-home ratio for food spending had sprung back to exactly $1.28. The NRA now forecasts that food and beverage sales will hit $1.1 trillion this year, a new record. Arguably, business is booming like never before. Learn more here.

Car washes

Fueled by private equity and a subscription-based business model, the auto wash industry is flooding the US with new outlets. With 60,000 locations across the US, the sector has been expanding at roughly 5% annually, with some forecasts predicting the market to double by 2030. More car washes were built in the last decade than all the preceding years combined. Learn more here.

Regional and metropolitan trends

Where immigrants go in the USA

Much of the angst surrounding the impact of newly arrived migrants on the US has focused on the biggest cities in New York, Illinois, and Colorado, and immigration court records suggest that those states are indeed among the most affected by the surge. The data also signal that Texas and Florida, which have long complained about the costs of absorbing newcomers, are still among the top destinations for migrants. Learn more here.

Job growth in states of the USA in 2023

Looking at employment statistics for 50 states and the District of Columbia from the Bureau of Labor Statistics, California added workers at the lowest rate—0.87%. While any job growth is good, that hiring pace looked meager in an otherwise strong US labor market. California’s hiring pace was less than half the 2% rate nationally. Second-slowest was D.C. at 0.91%. The fastest job growth happened in Nevada and Florida, where the increase was 3.4%, and Texas rose 3.3%. Learn more here.

The new job hot-spots

Prior to COVID-19, the West led other regions in job growth, and salaries in major cities commanded a hefty premium over those in smaller counterparts. Cities across the Sunbelt are now adding jobs at a chart-topping rate, while the traditional superstar cities such as San Francisco have had many companies pick up and move, with workers and their employers seeking better living and affordability elsewhere. At the same time, the pay bump that once accompanied a big-city posting has, in many cases, come down to earth, while salaries in other regions have risen. Learn more here.

Metropolitan area growth in the USA

According to a Brookings Institution analysis, growth during the 2012-2022 decade was strongest and most widespread in metro areas with populations over 1 million. Of these 54 “very large” regions, 45 (83%) posted gains across three growth indicators and outpaced the nation on these indicators overall. Very large metro areas also posted uniquely strong gains across measures of economic prosperity, keeping pace with the U.S. average on wage growth and outperforming the nation on productivity (output per job) and standard of living (output per person) gains.

In total, 52 (96%) very large metro areas improved across all these three prosperity metrics—a significantly greater share than midsized metro areas (80%) and large metro areas (89%). Southern and Western metropolitan areas powered U.S. growth during this period, as seen by large gains in real GDP, jobs, and employment at young firms. However, there was significant regional variation in the degree to which growth translated to prosperity. Western metro areas led those in other U.S. regions on average measures of both growth and prosperity, whereas Southern metro areas experienced much smaller increases in average wages, productivity, and standard of living. These divergent outcomes in prosperity suggest a more “population-fueled” growth pattern in the South relative to the West, with population gains fueling economic growth more than improvements in productivity.  

Learn more here.

Happiest cities in the USA

Location plays a hand in how bright or gloomy our days are. For years, researchers have studied the science of happiness and found that its key ingredients include a positive mental state, a healthy body, strong social connections, job satisfaction, and financial well-being. However, money can only make you so happy – people who make $75,000 a year won’t get any higher satisfaction from more money.

But not everywhere in the U.S. experiences a uniform level of happiness. WalletHub drew upon the various findings of positive-psychology research in order to determine which among more than 180 of the largest U.S. cities is home to the happiest people in America. They examined each city based on 29 key indicators of happiness, ranging from the depression rate to the income-growth rate to the average leisure time spent per day. Learn more here.

The ten happiest cities

Workers living farther from their employers

A Stanford-Gusto study found that the steadily increasing distance between employees and employers in the U.S. is driven by workers hired after March 2020. In May 2020, after most pandemic lockdowns were put in place, new hires lived an average of 26 miles from their employer. By the end of 2023, that distance had expanded to 35 miles on average. The data includes people who live hundreds of miles away from their employers and likely never make the commute.

The rise in mean distance mainly reflects persons hired since March 2020

Urban design

The urbanist building height myth that won’t die

A video from Oh the Urbanity! YouTube channel dissects the commonly held notion that the ideal building height is a maximum of five stories. It’s Inspired largely by Danish designer and architect Jan Gehl’s landmark text Cities for People, in which he argues that taller buildings are out of scale with the human experience.

But this universal “optimal” or “ideal” building height isn’t based on any objective measure of what urban planners should aim for. Watch the video to view and hear the full critique.

Climate change and sustainability

A green tipping point

According to JLL, real estate is heading toward a “green tipping point.” They say, “The state of play is clear: corporate occupiers must show proof of progress in their commitment to operating more sustainably, and buildings need to catch up.”

On the regulatory side, mandates driving decarbonization are building across all levels of government. The world’s largest economies, including the U.S., California, Canada, UK, EU, Australia, and, most recently, China, have implemented or proposed mandatory ESG disclosure rules, with first reports due by 2026 or earlier. These rules aim to improve transparency and accountability for the biggest companies around the globe while promoting the transition to a net zero economy.

Policy directly requiring emissions reductions from buildings is ramping up. For example, over 30 U.S. cities have committed to passing a Building Performance Standard (BPS) by 2024, like New York’s LL97, requiring building energy use or emissions reductions. In Europe, the EU agreed in December 2023 to reduce building emissions and energy use by developing minimum energy performance standards. Some 16% of the worst-performing buildings will need renovating by 2030 and 26% by 2033.

Learn more here.

Office

A suburban office exit

The suburban Interstate 90 corridor east of Seattle was once a popular outpost for large employers like Microsoft, Boeing, and T-Mobile. But now offices sit empty. An analysis of CoStar data for 2023 showed that six of the 15 emptiest buildings in the Puget Sound region were along I-90. The submarket (see blue dots on the map below), which began showing cracks in the 2010s, was once home to thousands of Microsoft, Boeing, and T-Mobile employees, but today, it lacks the amenities and accessibility that newer offices tout.

You can learn more here.

Office building valuations in Denver

A Denver Business Journal analysis of Denver Assessor’s Office and Board of Equalization data shows high-profile building owners succeeded in knocking down their tax liabilities by millions, especially in downtown, where some older officer towers have been defaulting on loans. Learn more here.

Retail

A small-scale culinary hub

A complex of houses-turned-restaurants is changing this ‘forgotten edge’ of Chinatown in Los Angeles. Victor Heights is a sliver of a neighborhood on the first hill just north of Los Angeles’ downtown core in the shadow of Dodger Stadium. It borders Echo Park, cut off from the greater part of Chinatown by the 110 freeway. The neighborhood is also known as the “Forgotten Edge,” a name coined in the early ’90s because of neglect from local police divisions confused over which district it belonged to.

Today, six small buildings stand out at the corner of Alpine and Centennial streets. An architect named Jingbo Lou is developing the complex into a culinary hub called Alpine Courtyard — with a roster of several L.A. chefs and restaurateurs. In the process, Lou says he’s hoping to preserve a piece of the city’s history by restoring buildings that have been there for more than 100 years in a neighborhood that once brimmed with small retail businesses. Learn more here.

Residential

Homeownership rates in the USA by race and ethnicity

The latest CPS/HVS data shows that the overall homeownership rate was 65.7% in the last quarter of 2023. This was 3.5 percentage points lower from the peak of 69.4% in 2004. In this post, we focus on the homeownership rates by race and ethnicity over the past decade.

According to data from the Census Bureau, homeownership in the U.S. varies significantly by race and ethnicity. In the 4^th quarter of 2023, the homeownership rate among non-Hispanic White Americans was 73.8%, followed by Asian Americans (63%), Hispanic Americans (49.8%), and Black Americans (45.9%). You can learn more here.

The great compression

Several colliding trends — economic, demographic, and regulatory — have made smaller housing units the future of American housing, or at least a more significant part. Over the past decade, as the cost of housing exploded, home builders have methodically nipped their dwellings to keep prices within reach of buyers. The downsizing accelerated last year when the interest rate on a 30-year fixed-rate mortgage reached a two-decade high, just shy of 8 percent.

Mortgage rates have fallen since, and sales, especially of new homes, are beginning to thaw from the anemic pace of last year. Even so, a move toward smaller, affordable homes — in some cases smaller than a studio apartment — seems poised to outlast the mortgage spike, reshaping the housing market for years and changing notions of what a middle-class life looks like.

The shift is a response to conditions that are found in cities across America: Neighborhoods that used to be affordable are being gentrified, while new condominiums and subdivisions mostly target the upper end of the market, endangering the supply of “starter homes” in reach of first-time buyers. That developers are addressing this conundrum with very small homes could be viewed as yet another example of middle-class diminishment. But buyers say it has helped them get on the first rung of the housing market.

Stalled project being supersized in San Francisco

It took nearly five years for MX3 Venturesi to win approvals to transform a Mission District parking lot across the street from a historic Armory building into 60 apartments. That was in 2019, and the site remains a surface parking lot, likely a victim of the pandemic fallout in the real estate market. Almost a decade later, Mosheydi is essentially starting over, taking advantage of recently enacted housing density bonus legislation.

MX3 Ventures proposes to boost the height from 7 stories to 11.  The firm is also proposing ground-floor retail and 164 rental units — nearly triple the number of units to which his project was entitled. A majority of the apartments, 99, would be studios. A total of 26 units would be designated as affordable to low-income and middle-income households. As previously entitled, a seven-story building at 344 14th St. would have yielded eight affordable units. 

An analysis of homelessness in U.S. cities

The Brookings Institution has posted an updated analysis of homelessness in U.S. cities using the most recently published Point-In-Time (PIT) count data from 2023 (data collected in January 2024 will not be released until the end of the year). A nuanced patchwork of trends across cities and regions reveals stark new challenges in some cities (e.g., New York) and bright spots of success in reducing homelessness in others (e.g., Austin, Texas, and Indianapolis). These findings make it clear that cities have the evidence and tools to reduce homelessness—there needs to be the political will to invest in and scale them.

In nine out of the 44 major cities that completed full PIT counts in 2023, homelessness rates either remained stable or declined between 2022 and 2023, with rates in Austin, Texas, Raleigh, N.C., Indianapolis, and Colorado Springs, Colo. declining over 10 percentage points. On the other hand, New York, Albuquerque, N.M., Portland, Ore., Atlanta, and Boston saw sharp increases in total homelessness. You can learn more here.

Europe’s most expensive cities for renters

The Economist ranking includes the 35 cities for which the data are available, ranging from London to Ankara. Using a popular guideline that states that no more than 30% of an individual’s pre-tax income should be spent on rent, they calculated the wage needed to afford the average one-bedroom flat in each city comfortably, what they call our “recommended renters’ wage.” Learn more here.

Master-planned communities

PBS News Hour looks at California Tomorrow

A group called "California Forever" wants to build a livable, affordable, and eco-friendly community near San Francisco. However, some local officials and residents are skeptical about the proposal. Paul Solman visited the area for PBS News Hour to examine whether the developers' dreams could come true. Learn more by viewing this nearly nine-minute video.

Twelve planned community trends

Popular features in master-planned communities range from water elements to work hubs and include overarching themes such as affordability and wellness. According to Mollie Carmichael of housing marketing firm Zonda, these trends characterize the top 25 selling communities and are essential to driving more sales and creating value for the residents. Learn more here.

Regional and metropolitan trends

Millennials are fleeing cities

Millennials are officially getting old. They’re having children, buying houses, and getting replaced by Gen Z in urban areas. As one article from Business Insider puts it, “Millennials are getting priced out of cities” and are starting to leave the urban neighborhoods where they’ve been building their lives. According to the author, since the cost and types of housing available in urban areas aren’t conducive to family life, millennials are forced to flee to the only place they can afford to live: the exurbs. Learn more here.

Housing affordability shapes migration in the USA

The affordability search has led to a strong migration flow into states like Florida, North Carolina, South Carolina, Tennessee, and Texas, said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.

In 2023, consumers moving interstate tended to pick new metropolitan areas where housing costs and competition are less severe, and construction is keeping up with demand, according to a recent Zillow Group analysis of United Van Lines data. The Zillow analysis shows that the most inbound moves include Charlotte, North Carolina; Providence, Rhode Island; Indianapolis, Indiana; Orlando, Florida; and Raleigh, North Carolina, according to the Zillow analysis. You can learn more here.

Firm founders who launch where they studied

Switch On Business searched for the U.S. colleges that see the most business founder graduates launch companies within their college’s city or state. According to LinkedIn's college profile pages, they first retrieved the 250 U.S. colleges that have produced the most business founders, adding the most enrolled colleges locally to their seed list for states represented by just one university. Using Crunchbase, they then retrieved the number of business founders from each college who launched a business between 2014 and September 2023 within the same state or city of their alma mater. They could then calculate the proportion of their graduate founders who launched a business locally for each college.

Key Findings

• Hunter College has seen more graduate founders (54.55%) start a business in the local city (New York) than any other college in the U.S.

• But 80% of Utah Valley University alums who have founded businesses have done so in Utah — more than any other state.

• 61.6% of the time, business founders who graduated from a college in California have started a company within California — the highest rate of any state.

• California is the top state where graduate founders from 14 other states start a business.

You'll be able to learn more here.

A surprising comeback in San Francisco

Whenever a global economic transformation occurs, a single city usually drives it forward. In modern-day Belgium, Ghent was at the core of the burgeoning global wool trade in the 13th century. The first initial public offering took place in Amsterdam in 1602. London was the financial center of the first wave of globalization during the 19th century. And today, that city is San Francisco.

California’s commercial capital has no serious rival in generative artificial intelligence (AI), a breakthrough technology that has caused a bull market in American stocks and which many hope will power a global productivity surge. Almost all big AI startups have their headquarters in the Bay Area, which includes San Francisco and Silicon Valley (largely based in Santa Clara County, to the south). Openai is there, of course; so are Anthropic, Databricks, and Scale AI. Tech giants, including Meta and Microsoft, also spend heavily on AI in the city. According to Brookings Metro, a think-tank, last year, San Francisco accounted for nearly a tenth of generative AI job postings in America, more than anywhere else. New York, with four times as many residents, was second.

You can learn more here.

Resilience and sustainability

Climate-adaptive building materials

In an era marked by climatic extremes, 2023 was the hottest year, with global temperatures soaring to 1.18 degrees Celsius above the 20th-century average. This alarming statistic underlines the urgent need for climate-resilient buildings. The United Nations Environment Program (UNEP) emphasizes five strategies to bolster buildings against climate change. Two approaches, “building resilience to heatwaves” and “building resilience to cold,” address the need for structures to accommodate wider temperature swings and the increased energy demand accompanying these fluctuations.

At the forefront of these efforts are phase-change materials (PCMs), which offer a novel approach to managing building temperatures. These materials are thermal media that can store and release significant energy by capitalizing on a material’s phase transition, such as from a solid to a liquid or vice-versa. The building facade has long been considered a promising application for PCMs, given their potential to enhance facades’ thermal performance. PCMs help control the thermal load of building envelopes—thus reducing operational energy—and assist in achieving and maintaining optimal thermal comfort levels. There are three classifications of PCMs: organic (e.g., paraffin wax), inorganic (e.g., salt hydrates), and eutectic (e.g., sodium chloride and water).

You'll be able to learn more here.

Environment and sustainability

Golf courses gone wild.

According to the National Golf Foundation, the United States has more golf courses than McDonald’s locations and more than any other country, accounting for about 42 percent of all courses worldwide. Oversupply and development pressures have led more golf courses to close than to open since 2006.

A return to nature, or a version of it, is still relatively rare for former golf courses, most of which end up in the hands of commercial or residential developers, according to the National Golf Foundation. One recent example was a former 36-hole golf facility in New Hampshire that Target bought for nearly $122 million in 2023 to build a new distribution center.

A few shuttered golf courses around the country have been bought by land trusts, municipalities, and nonprofit groups and transformed into nature preserves, parks, and wetlands. Among them are sites in Detroit, Pennsylvania, Colorado, the Finger Lakes of upstate New York, and at least four in California. Learn more here

Graffiti and real estate

Art or vandalism?

The sky-high graffiti covering dozens of floors of the Oceanwide Plaza development in downtown L.A., a $1 billion project abandoned in 2019, has captured the world’s attention. It’s created eye candy for Instagram. It’s become fodder for conversations about urban blight and foreign investment. And despite graffiti’s undeniable rise to the mainstream, it’s reignited an old debate over whether it is art or vandalism. Learn more here.