ARES Urbanexus Update #166
The American Real Estate Society (ARES) distributes this monthly selection of real estate and metropolitan development news and information curated by H. Pike Oliver.
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.