ARES Urbanexus Update #162
The American Real Estate Society (ARES) distributes this monthly selection of real estate and community development news and information curated by H. Pike Oliver.
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.
