ARES Urbanexus Update #154
Publication of this selection of real estate and community development news and information began in 2018. It is now distributed by the American Real Estate Society (ARES). Its founder, H. Pike Oliver, continues as curator, and the update is distributed free of charge.
Land
Land assemblage in the San Francisco Bay Area
We now know who funded a five-year effort by Flannery Associates to gain control of thousands of acres on the northeastern fringes of the San Francisco Bay Area thereby becoming the largest landowner in Solano County, CA. The initial revelation came on August 23, 2023 via an article authored by Conor Dougherty and Erin Griffith of the New York Times.
Two days later, the Real Deal posted an article that contains an image identifying ten individuals as involved. They all have Silicon Valley connections and are (L to R and top to bottom) Jan Sramek, Michael Moritz, Reid Hoffman, Marc Andreessen, Chris Dixon, Patrick Collison, John Collison, Laurene Powell Jobs, Nat Friedman and Daniel Gross.
The investor group has provided more than $800 million to gain control of approximately 140 properties that comprise the approximately 55,000-acre assemblage (see map below).
A survey sent to Solano County residents indicated the plan is to build tens of thousands of new homes, a large solar energy farm, orchards with over a million new tress and over 10,000-acres of new parks and open space, but detailed planning documents have yet to be made available. Whatever the plans turn out to be, it will undoubtedly require a formidable effort to gain approval.
Learn more here, here, here, here and here.
Land ownership in the west of the USA
High Country News (HCN) is a monthly independent magazine based in Paonia, Colorado, that covers environmental, social, and political issues in the Western United States. They have assembled data on land ownership in eleven western states of the USA (Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Utah, Washington, and Wyoming). The U.S. Government remains the largest land owner in the western states, with ownership percentages that range from 30% (Montana) to 85% (Nevada) as noted here. But the HCN analysis shows that billionaires are acquiring significant property. See the map below and learn more here.
Office
Implications of a WeWork bankruptcy
WeWork Inc. (NYSE: WE) leadership disclosed "substantial doubt" about the coworking company's ability to continue to operate last week and warned of potential bankruptcy risk — but the news isn't a surprise for those closely tracking the national commercial real estate market. Still, if WeWork should file for bankruptcy shortly, it would be the latest blow to an office market facing a seemingly never-ending post-pandemic hangover, with vacancy, sublease space, and maturing debt continuing to mount. Learn more here.
Downtown revitalization requires more than office conversions
For city leaders and real estate developers looking to rethink downtown real estate after the COVID-19 pandemic, initiatives, and strategies must go beyond office-to-residential conversions.
Converting unused or dated office space into new uses — particularly much-needed housing — will be important. Still, those who work in real estate and serve as consultants to government officials and downtown business-improvement districts say conversions won't be a silver bullet to revitalizing downtowns. After all, those projects are expensive and risky and often have specific infrastructure requirements even to be feasible.
Learn more here.
Retail
Superstore performance in the USA in 2023
Americans have an enduring love for everything big – from our drinks and meals to our cars and stores. And perhaps nothing is bigger than superstores, with retail powerhouses Walmart, Costco, and Target serving as major shopping destinations for tens of millions of U.S. consumers. These retail giants, which boast a massive nationwide footprint, offer everything from groceries to apparel and household furnishings.
A report posted by Placer.ai leverages location intelligence to analyze the performance of the three brands. Using foot traffic metrics, cross-shopping trends, and visitor demographics, the report explores how Walmart, Costco, and Target have weathered the challenges of the past few years and identifies shifts in consumer behavior. How has the visit share across the chains changed, and what's driving that change? How do the three brands' differing target markets affect their competitors? What does the growing interest in health centers at these stores signify? This white paper explores the ever-evolving landscape of superstore shopping and the factors that drive consumer choices. Learn more here.
Converting underutilized parking
Retail center owners have been carving out parcels for standalone retailers, restaurants, and other uses for years. Still, the trend is accelerating as more and more municipalities ease minimum parking requirements. Parking-reduction advocates have argued that offering fewer spaces reduces environmental impacts associated with heat islands and stormwater runoff. Others contend it promotes mass transit and ridesharing, which can reduce vehicle emissions and, in the case of bars and restaurants, may reduce impaired driving incidents.
In most cases, changing consumer habits no longer justify the once-standard five parking spaces per 1,000 square feet of retail space, says John Alejnikov, PE, an associate in Bohler’s Chalfont, Pennsylvania office. The 5:1,000 ratio was designed to accommodate masses of shoppers arriving by car and lingering on site for hours. Today’s consumers are more likely to browse and make purchases online, visit shopping centers for specific items, or access dining and other experiences.
Learn more here.
Residential
Apartments where Los Angeles didn’t want them
Up in arms over developer Akhilesh Jha’s proposal to replace a single-family home with a seven-story apartment complex, neighbors in the Harvard Heights community in the City of Los Angeles turned to the city for help. The Los Angeles Planning Commission obliged, ordering Jha to scale down the project.
But Jha refused and returned to the planning commission months later, having added an eighth floor. Jha believed he had the law on his side, and after an hour-and-a-half hearing, the planning commission agreed. His 33-unit apartment complex was approved unanimously, and Jha hopes to break ground within a year. And he has several other similar projects he’s pursuing elsewhere in the city.
Learn more here.
Apartment development
In the last three years, the pandemic building boom has brought 1.2 million apartments online, and, by the close of December, another 460,860 are expected to have opened this year, according to RentCafe’s annual Apartment Construction Report.
But almost two-thirds of apartments built during the pandemic boom are clustered in just 20 high-growth metropolitan areas, which make up about 41% of the total population in the USA. Therefore, for many paces the new units barely made a dent in supply. Learn more here.
Missing middle construction is — missing
The National Association of Homebuilders reports that missing middle construction sector includes the development of medium-density housing, such as townhouses, duplexes, and other small multifamily properties.
The multifamily segment of the missing middle (apartments in 2- to 4-unit properties) has disappointed since the Great Recession. For the second quarter of 2023, there were just 3,000 2- to 4-unit housing unit construction starts. This is down from a year prior.
As a share of all multifamily production, 2- to 4-unit development was just above 2% of the total for the second quarter. In contrast, from 2000 to 2010, such home construction comprised slightly less than 11% of total multifamily construction. Construction of the missing middle has lagged during the post-Great Recession period and will continue without zoning reform focused on light-touch density.
Build-to-rent-single family
This new institutional property type’s potential position as either a competitor or complement to single-family home ownership, one of the bedrocks of the U.S. economy and culture, has generated ample conversation. It also appears inevitable, as the demographic and economic drivers for more affordable, lower-density housing are as clear as such trends get, and supply is, and is likely to remain, tight.
But for all the talk about build-to-rent, and though it goes against the conventional wisdom to note it, there is relatively little investment activity in it. For example, though starts of purpose-built single-family homes were up 32.7% year-over-year in 2022, the 69,000 homes started is equivalent to 13.0% of the multifamily units started and just 0.4% of the existing inventory of single-family rentals in the U.S. With apparently solid fundamentals and relatively little investor activity, there is room for growth and opportunity for investment.
Learn more here.
Can Tiny House Villages Be a Homelessness Fix?
Portland, Oregon, has pioneered using the trendy mini-homes as homeless shelters, but debates about the approach's effectiveness persist.
Learn more here.
Electrical microgrids for residential neighborhoods
Microgrids are small-scale-electrical networks operating independently or in tandem with the grid. Once the domain of large, commercial properties, the technology makes inroads into the residential arena, connecting single-family homes to robust backup power.
According to research and consultancy firm Wood Mackenzie, the residential sector has never been a big growth engine of the microgrid industry, but that’s changing. From 2020 to 2022, residential projects comprised only 5% of microgrid developments in the U.S. However, that number could jump to 18% within several years. Learn more here.
Regional and metropolitan trends
Why do people keep moving to the USA’s sun belt?
Despite the heat, the region’s cities are growing fast. They have three factors to thank: 1) cheaper housing, 2) business-friendly environments, and 3) warm winters. Learn more here.
Neighborhood migration and the pandemic
The COVID-19 pandemic caused a massive change in the movement of people at both the neighborhood and the regional levels in the United States. A new series of migration measures reveal that migration rapidly returned to its old patterns in some metro areas, including New York, Los Angeles, and San Francisco. However, in other major metro areas, including Phoenix, Seattle, and San Diego, the pandemic appears to have permanently shifted migration trends, with no return to the pre-pandemic trends in sight. Learn more here.
Do Americans prefer sprawl?
Not so much if they live in a large metropolitan area. Learn more here.
Transportation
From the horseless carriage to the driverless era
Just as Henry Ford once revolutionized travel with his 'horseless carriage', we now find ourselves at the dawn of another monumental shift. We're transitioning from cars steered by human hands to those directed by complex algorithms, the era of Autonomous Vehicles (AVs). Far from being just a dream or a plot in a science fiction novel, this technological revolution is weaving into the fabric of our everyday lives. But as with any major innovation, public acceptance and trust questions loom large.
Learn more here.
Environment and sustainability
Pushing the boundaries of wood design
When Portland, Oregon-based architect Ben Waechter acquired a property that became the site for his firm’s office more than a decade ago, it was not a foregone conclusion that they would be building in mass timber. Wachter wanted to build out of a single material that was as simple and had as few layers as possible.
The material for initial project studies was autoclaved aerated concrete (AAC). “When we started getting serious, we realized that [concrete] is not an expertise of the Pacific Northwest,” he says. “There was a lot of energy around cross-laminated-timber (CLT), and mass timber can be a carbon sink, so it’s much more environmentally sensitive than the concrete products.”
As the general contractor and the architect, Wachter’s firm collaborated with mass timber supplier KLH. “The whole thing came as a kit of parts from the factory,” Waechter says.
Self-healing concrete
It fills in cracks automatically – and this is why significant portions of the Colosseum in Rome (completed in 80 AD) remain standing after nearly 2,000 years. Learn more here.
High-income households and greenhouse gas emissions
This is a conclusion of a peer-reviewed study that found America’s wealthiest 10% are responsible for about 40% of the nation’s greenhouse gas emissions. This imbalance isn’t just because rich people consume more but also because of where their money comes from. How to fix this inequality? The authors suggest: “Results suggest an alternative income or shareholder-based carbon tax, focused on investments, may have equity advantages over traditional consumer-facing cap-and-trade or carbon tax options and be a useful policy tool to encourage decarbonization while raising revenue for climate finance.” Learn more here.
Real estate conflict
A war over air conditioners
Gary Barnett, the developer behind a hotel project in New York City, has been enmeshed in a years-long lawsuit with a neighboring landlord over the Diamond District hotel he’s building. As The Wall Street Journal reports, the heart of the conflict involves a couple of dozen air conditioners that hang off the side of a building on 47th Street.
The air conditioners in question are attached to 29 W. 47th Street, a building that houses several diamond businesses and is owned by Jack Elo, whom the Journal describes as a “smaller scale” landlord. Those AC units hang over the lot where Barnett plans to put a 33-story luxury hotel. Although Barnett owns Elo’s air conditioners, currently occupying 18 inches of land and the air space above that, Elo is trying to claim that strip of air and the air rights that go with them.
Learn more here.
