Urbanexus Update - Issue #131
Urbanexus Update - Issue #131
This selection of economic, real estate, and community development news and information comes to you via H. Pike Oliver. Some items are behind a paywall.
The next entrepreneurial revolution
The virus-driven disruption has proved more profound, costing more jobs than in any year since the Great Depression. But there’s also good news, as Americans’ instinctive entrepreneurial spirit is driving growth and innovation: 4.4 million new business applications were recorded by census data in 2020, compared with roughly 3.5 million in 2019. Self-employment, pummeled at first, has recovered more rapidly than conventional salaried jobs, as more Americans reinvent themselves as entrepreneurs.
The most significant changes may be occurring in the industrial sector, which is rebounding faster than at any time in the past two decades. The pandemic clarified for many entrepreneurs that far-flung supply chains expose companies to potentially catastrophic risks. This was painfully clear early in the COVID outbreak when China decided to block health care exports amid the worst days of the pandemic.
Recent changes in the US economy
A new era has arrived of greater worker power, higher housing costs and different ways of doing business. It takes months longer than prior to the pandemic to get furniture, appliances and numerous parts delivered. And there is a great dislocation between millions of unemployed workers and millions of vacant jobs.
There are obvious changes, like the realization that working from home is possible for a sizable part of the labor force and the widespread adoption of online ordering for daily necessities like groceries. These will remain significant parts of work and commerce going forward. Nearly a quarter of workers are likely to work at least a day or two from home each week, the McKinsey Global Institute predicts. And e-commerce, which grew three times faster last year than in prior years, shows few signs of ebbing.
Then there is inflation, which hit a 13-year high in May, and is widely viewed as the biggest risk that could sink — or at least stall — the recovery’s progress. Although the Fed predicts this will be a short-lived phenomenon, businesses and consumers are already changing some behaviors.
Housing
Residential construction inputs Up 23% — eyeonhousing.org
The index for inputs to residential construction, including food and energy, increased more (+4.1%) and is up 22.5%, year-over year. This increase closely mirrors the 26% increase found in a recent NAHB survey.
Building materials prices have increased 9.4% year-to-date (YTD), in stark contrast to the 0.4% YTD seen in 2020. However, the 2021 increase YTD is an outlier when compared to pre-pandemic years as well, more than tripling the largest January-to-May increase since 2015 (the most recent data available).
USA house price-to-rent-ratio surpasses bubble peak An index measuring the ratio of house price to rent has risen to its highest level since 1975. The previous peak occurred during the housing bubble.
Top markets for new for-sale housing in the USA
The top five markets—Dallas-Fort Worth-Arlington, Texas; Houston-The Woodlands-Sugar Land, Texas; Atlanta-Sandy Springs-Alpharetta, Georgia; Phoenix-Mesa-Chandler, Arizona; and Austin-Round Rock-Georgetown, Texas—have all maintained their positions for the past several years. All five saw an explosive amount of new-home growth in 2020, relative both to 2019 and to the rise in closings from 2018 to 2019.
Master-planned communities
Finally, a new community in Southern California
Scottsdale, Arizona-based DMB Development has announced the details of its upcoming Inland Empire master-planned community, Tapestry, set to break ground this summer. The property was formerly known as Rancho Las Flores and a development plan was originally approved by the City of Hesperia in 1990. More recently, it was the subject of a legal challenge brought by the Center for Biological Diversity, the San Bernardino Valley Audubon Society, and the Sierra Club. That lawsuit was resolved in 2017.
The Hesperia, California, community is entitled for more than 15,664 homes and 700,000 square feet of retail and commercial space across 9,366 acres and is expected to draw in more than $7 billion in capital investment over the course of development. The site is situated at an elevation of 3,200 feet in the Mojave River Valley and features a view of the Angeles and San Bernardino national forests. Over half of the total site has been preserved as parks and natural open spaces. DMB says numerous home builders will participate in the project.
Office
Five-day in-person work week may be passé
For many corporations, there's no going back - at least not to the pre-COVID norms of a traditional 5-day in-person workweek and evidence suggests that its market forces rather than discrete decisions driving the shift. A recent survey published by Stanford University economists showed that nearly two-thirds of employees would accept a pay reduction to continue to work from home for at least 2-3 days per week. Another recent survey from Blind was able to put a precise dollar figure on the value of work-from-home, finding that 64% of employees with some of America's biggest companies would turn down a $30,000 pay increase in order to keep working from home indefinitely.
VTS Office Demand Index (VODI)
Cities with more remote-friendly jobs have seen a slower office market recovery to date As the pandemic recedes, it has stopped holding back the demand for office space, but it has left behind fundamentally altered perspectives on the balance between remote and on-site work. While the implications may take years to fully unfold, cities in which remote-friendly work is more common are already seeing a slower recovery of demand for office space.
In Seattle, Boston, and San Francisco the share of jobs that are remote-friendly is among the highest in the nation, and non-coincidentally those markets have also recovered the least from their pre-pandemic level of demand, still down 39, 43, and 46 percent, respectively. In contrast, markets with a substantially lower share of remote-friendly jobs, Chicago, New York, and Los Angeles, are only down 14, 15, and 24 percent from their pre-pandemic values, respectively
Mixed-use development
Mixed-use and mall reinvention
When it comes to mall redevelopment, one of the biggest hurdles is changing the business community’s perception that enclosed malls are only for retail use, says Sean Garrett, president of acquisitions and director of community relations for East Peoria, Illinois-based Cullinan Properties Ltd. “There is no reason an insurance office can’t be right next to a retailer and a neighbor of a dentist,” states Garrett. “Downtowns and Main Streets have been developed this way for generations.”
According to a study conducted in November 2020 by Cushman & Wakefield and WD Partners, when asked what concepts would increase their visits to the mall, consumers’ top three choices were food; health and wellness; and new concepts and experiences. Mall owners are scrambling to incorporate these concepts, as well as non-retail uses such as multifamily and office, into their mall redevelopments.
Each mall reinvention project aims to reflect the surrounding community and its needs. “People look at enclosed malls and see a very similar product from municipality to municipality, but the redevelopment strategies are all tailored to what the market needs and what the market wants,” says Jon Meshel, senior vice president of development for Centennial Real Estate.
Many, many things are happening at Northgate, as light rail service nears and Simon Property Group continues the phased redevelopment of its 55-acre mall property. On the east side of Simon's property, there are apartments — which could ultimately total about 1,200 units.
Northgate opened in 1950 as one of the first modern shopping centers to be built in the post-war United States. The mall was developed by Allied Stores and was initially an open-air facility until being renovated in the 1970s.
Metropolitan and regional dynamics
What remote workers want in a home city
A survey of 541 permanent, unmarried remote workers under the age of 35 — by utilities and television service lookup company InMyArea.com, shows that a new and growing cohort of mobile workers are interested in much the same things as any other worker. Just like older workers, they are interested in cost-of-living and safety. Job opportunities, remote work convenience and access to nature and outdoor spaces came next on the wishlists of remote workers, according to the survey.
And a good chunk of these workers are planning to move in 2021, according to the survey, which found 49% said they were planning to move, while another 21% said they were unsure. The most common reasons for wanting to move were for a change of pace, to improve mental health and to save money, according to the survey.
But these workers are still more interested in urban areas over rural ones, with about 32% of these remote workers interested in moving to large cities and another 27% in suburban areas. Only 14% said they were interested in moving to a rural area, and only 27% said a smaller town
Population decline in US cities
With so much attention focused on the so-called exodus from big cities caused by the pandemic, research shows that "most big cities with populations exceeding 250,000 showed lower population growth in the year the pandemic began than in the previous year, and nearly one-third of them registered their lowest annual growth in the decade," writes William H. Frey for the Brookings Institution. "Still, only a few of these cities—mostly the nation’s largest—showed sharp population losses during the year COVID-19 began. Many of the others either continued population losses or slower gains that emerged earlier in the 2010s decade—or registered growth rises."
Big cities, by far, saw the greatest losses in population as people sought more affordable housing in outlying suburbs, helped along by the growing opportunities for remote work. This trend existed before the pandemic, but "large cities especially showed exceptionally slow or negative growth during the pandemic year."
"The most recent year’s city growth declines gave further impetus to the suburban growth advantage that took root midway in the 2010s decade. Earlier in that decade, a unique phenomenon emerged: a growth advantage for cities over their surrounding suburbs." But this short-lived advantage, "much of it attributable to the impact of the 2007-09 Great Recession and down housing market, which 'stranded' many young adult millennials in urban centers," has yielded back to the "broader suburbanization patterns that have been at work in most major metropolitan areas since the middle of the 2010s decade."
Remote work won’t save the heartland
While aspects of the corporate relocation story may be real, new evidence raises questions about the true potential of the remote-work-driven renewal storyline. The current narrative is that the widespread shift to remote work amid the COVID-19 pandemic has created a massive pool of footloose workers who are rapidly exiting the big coastal tech hubs and heading for the heartland, where they will boost the inland economy. Plenty of anecdotes and commentators have pushed this narrative over the past 15 months.
However, the numbers don’t really add up. An April CBRE analysis on migration patterns—based on frequently updated U.S. Postal Service data—reported that while the outflow of people from dense, high-cost urban metro areas accelerated in 2020, the flows were rather modest in most cases (with the exceptions of the Bay Area, New York, and Seattle). What’s more, most of the moves were short to moderate distances, often to nearby counties—not the nation’s interior.
Planning and design
Pitfalls of planning while bargaining — www.planetizen.com Lots of planning is discretionary. Cities and developers negotiate what builders will do for cities in exchange for the right to build, creating an incentive for bad rules, eroding the public's faith in zoning, and enabling political corruption.
Demolishing two Brutalist buildings — www.archpaper.com
Near the banks of the Delaware River in New Jersey’s capital city of Trenton, two remnants of a bygone Brutalist era are currently being dismantled by the state government. Designed by architects and life partners Alfred Clauss and Jane West Clauss, the pair of buildings was constructed between 1962 and 1965, a period during which New Jersey officials They will be replaced with surface parking.sought to expand the capital campus.
The‘Middle Finger’ building in DC — ggwash.org
A stand-out building near U Street highlights a key debate about housing space: how much should aesthetics matter?
Rediscovered Mies van der Rohe design being built at Indiana University — www.dezeen.com A building designed by Mies van der Rohe nearly 70 years ago is under construction at Indiana University, over 50 years after his death
Now in its 58th year, the Gold Nugget Awards have raised the bar for innovative architecture, planning, and construction concepts that solve fundamental building industry needs. Jurors selected merit winners and one grand winner in over 50 categories, including single-family production, multifamily, affordable, mixed-use, renovations, custom homes, and site planning, out of roughly 600 U.S. and international entries.
Gottfried Böhm dead at 101 — www.archpaper.com
Gottfried Böhm, the son of a celebrated composer and designer of expressionist churches who went on to secure his own indelible and internationally recognized architectural legacy, died on June 9 at the age of 101. In 1986, Böhm became the first German architect to win the Pritzker Architecture Prize.
A trained sculptor who worked for—and later took over—the architectural practice established by his father, Dominikus Böhm in the 1950s, the younger Böhm’s artistic tutelage is strongly apparent in his completed works. Soaring, sculptural buildings executed in concrete, steel, and glass, Böhm’s embrace of concrete firmly placed him in the camp of post-Bauhaus European architects working—and rebuilding—in the Brutalist style.
Construction
As lawyers begin to pick through the rubble, one question looms among the profession and other budding architecture, engineering and construction (AEC) startups: What went wrong? Katerra’s mission to streamline building construction is a worthy aim. But if a company with Katerra’s cash and ambition can’t make it work, can anyone? The most valuable thing to emerge in the bankruptcy of the AEC startup may be the knowledge gained from the hundreds of architects and engineers who saw what did and didn’t work.
A 15-story kit of parts' tower in Seattle
Sustainable Living Innovations (SLI) is finally able to move forward on what it describes as the world's first net zero energy apartment tower in Seattle's Belltown district. More multifamily projects, here and in California, are in the pipeline.
SLI uses its proprietary “kit of parts” method of construction, in which factory-made components (or panels) are trucked to the job site like flat-pack Ikea furniture. Then they're assembled and craned into place within the steel exoskeleton rising around it. Each apartment, depending on its size, required eight to nine panels on average. Think: walls, floor, ceiling, etc. — all with the wiring, radiant heating elements and plumbing already in place.
Lumber prices begin to recover
While prices have begun to decrease, and are trading roughly 40% below their mid-May peak, lumber prices are still up 175% on a year-over-year (YOY) basis, according Business Insider. Analysts project prices will remain “above trend” in the short-term future, despite the recent rapid decline. While the past week has seen a reprieve on lumber prices, supply-side shortages continue to significantly affect the construction industry. A recent report from the NAHB found the shortage of materials was more widespread than any other period since the association began tracking the issue in the 1990s.