ARES Urbanexus Update #163

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

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

Source: The Ludwig Institute for Share Economic Prosperity — https://www.lisep.org/tru

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.