Urbanexus Update - Issue #136
This selection of economic, real estate, and community development news and information comes to you via H. Pike Oliver. Some items may be behind a paywall.
The economy
Civilian unemployment rate in the USA
The screenshot below reflects the overall unemployment rate from November 2001 through November 2021 (downloaded from the US Bureau of Labor Statistics on 3 December 2021.) The overall rate for November 2021 was 4.2%, a bit up from the pre-pandemic rate of 3.5% in February 2020 and dramatically down from the peak rate of 14.8% in April 2020. Click on the chart activate it and then click on each demographic category at the top to highlight the variation from the overall rate.
Why do so many things seem to cost more now?
The rising prices of food, gas, and other things we buy — in other words, inflation — were already a central economic issue of 2021. Those prices are up 6.2 percent over the last year, and shortages and other inconveniences are side effects of the problem. Go to the link below for a walk through the most obvious candidates — and where the evidence looks strongest.
Why high inflation will persist in America into 2022
The consumer-price index increased by 6.8% in November 2021 compared with a year earlier—the fastest pace since 1982. The surge in inflation since the start of 2021 means that it is guaranteed to remain elevated in annual terms for a while to come. A relatively optimistic forecast would have inflation returning to its pre-pandemic norm only at the very end of 2022.
Consider the underlying numbers. In 2019, the year before covid-19 emerged, the average month-on-month increase in consumer prices in America was 0.2%. That was marginally lower over the course of 2020, when activity briefly shuddered to a halt and then roared back to life. But in 2021, as the recovery gained altitude, prices shot up by an average of 0.6% month-on-month.
The inflation surge is now making its impact felt on annual price comparisons. Imagine, for instance, that the consumer-price index in November remained at the exact same level as in October (or put differently, that there had been zero month-on-month inflation). Even then, the year-on-year increase in November would have reached 6.3%, the fastest pace since 1990. In fact, the additional month-on-month gain, of 0.5% (before seasonal adjustment), propelled it higher still.
Build Back Better likely to have muted impact on inflation
Investing more in childcare, education and worker training could also boost the job market, Wall Street adviser Moody's Investor Services. But, the firm also points to a view caveats concerning potential impact on inflation.
Hospitality
U.S. lodging industry and market outlook
Lodging Analytics Research and Consulting expects U.S. RevPAR to increase by 56.2% in 2021, 20.2% in 2022, and increase at a 17.1% CAGR from 2020 through 2025 (5-year outlook). LARC also anticipates U.S. hotel property values to be 10% below 2019 levels by year-end 2021, even with 2019 values in 2022 and 8% above 2019 values by 2025. We forecast ADR and hotel values to recover to 2019 levels by 2022, while RevPAR and Hotel EBITDA reach 2019 levels in 2023 and occupancy stabilizes just below 2019 levels by 2025.
Residential
Redfin predicts more balance in for-sale housing
2022 will bring more balance to the housing market. But they don’t expect a buyer’s market; just more selection, less frenzy, and slower price growth mainly as a result of higher mortgage interest rates.
Trends that could upend the U.S. housing market
IHS Markit has identified four trends that could negatively impact the for-sale housing market in the USA. They are: 1) fewer customers for single-family homes; 2) fewer people to build homes; 3) materials shortages, and; 4) potential for increased cost and restricted availability of financing.
Demographia housing affordability report
The 2021 Demographia United States Housing Affordability Report provides housing affordability ratings, using the median multiple, a measurement of income in relation to housing prices, for 188 major markets (metropolitan areas) in the USA as of the third quarter of 2020. The report was prepared by Wendell Cox and published by the Urban Reform Institute.
Loss of affordable housing near Jackson Hole
Once-affordable towns near Jackson Hole have become real estate magnets since the pandemic hit. As a result, these communities are becoming unaffordable to the workforce that services wealthy residents and visors
Master-planned communities
Settlement Agreement reached in Centennial lawsuit
Tejon Ranch Co. (NYSE: TRC) and Climate Resolve, a Los Angeles-based nonprofit organization have announced an unprecedented agreement regarding the Centennial at Tejon Ranch master-planned community in the far northern reaches of the Southern California megalopolis. The planned development of more than 19,300 homes and 10.1 million square feet of commercial and industrial space, which has received approvals from Los Angeles County, may now proceed to the next steps in the California development process. Centennial, which has committed to include 3,480 affordable housing units as a part of its Los Angeles County approvals, will now also become a greater net-zero project, meeting and exceeding all the state’s goals and requirements to combat climate change.
Retail
The current state of retail malls in the USA
The American shopping mall — long an icon of the nation’s suburban expansion — has for years had to evolve amid changing consumer tastes. Covid-19 has only hastened the disruption by diverting foot traffic away from brick-and-mortar retailers and, to a degree that’s still an unknown, permanently altering the ways in which shoppers buy goods and services. This story is the fourth in a series from The Business Journals that looks at the current state of the American mall, the challenges and big debts the landlords face, and what’s next. Read the first installment here, the second here and the third here.
E-Commerce benefits from real stores Retailers this year are expected to open more stores than they close for the first time since 2017, according to analysis, with most of the growth coming from mass merchants, food, drugs and convenience chains.
Malls across America face uncertain future
Malls across America have for years been facing upheaval, uncertainty and, in the most dire circumstances, financial distress after years of mass stores closures with the onset and rapid growth of online shopping. The Covid-19 pandemic of the past 20 months has put even more stress on the behemoth retail properties, once a staple of American culture.
The most upscale malls, in the fastest-growing cities and submarkets of the country, are rebounding quicker and still hanging on after nearly two years of the Covid-19 pandemic.
For Class B and C properties, though — typically malls 20-plus years old, in small markets or ones comparatively underinvested-in to other malls in bigger metros — the picture is grim. This category comprises 30% of the roughly 1,000 U.S. mall properties in the U.S., according to a mid 2021 S&P Global analysis.
Mixed use
Downtown Phoenix's newest tower sells
Phoenix developer RED Development has sold Block 23, downtown’s newest office tower, to City Office REIT for $150 million. According to JLL, the whopping price tag for the office tower sets a city record for the highest price per square foot ($488) for a multi-tenant office and is the highest-priced office sale of 2021 so far.
Block 23, which completed construction in 2019, totals 307,030 square feet, including office and retail space. The development, at 101 E. Washington St., is home to downtown’s first grocery store, a Fry’s Fresh Marketplace, located on the first floor of the building. Other retailers in the building include Ingo’s Tasy Food and Blanco Tacos & Tequila. The office portion of the building is 95% leased to several tenants including Ernst & Young, Western Alliance Bank, and Chase. CVO Holding Company, a transportation technology company, moved its headquarters to Block 23 in August 2020.
Metropolitan and regional dynamics
Africa will become the center of the world’s urban future
By 2100, 13 of the world’s 20 biggest urban areas will be in Africa. Growing at unprecedented rates, and shaped by forces both familiar and new, dozens of African cities will join the ranks of humanity’s biggest megalopolises between now and 2100.
Several recent studies project that by the end of this century, Africa will be the only continent experiencing population growth. Thirteen of the world’s 20 biggest urban areas will be in Africa — up from just two today — as will more than a third of the world’s population.
Despite the pandemic narrative, Americans are moving at historically low rates
New Census Bureau data released in November 2021 shows that despite the attention given to COVID-related migration out of cities, college towns, and other pandemic-impacted areas, overall permanent migration levels in the U.S. plummeted to a historically low level during the first year of the pandemic.
Minorities dominate California’s suburban growth
White Non-Hispanics accounted for only four percent of suburban and exurban population growth in the 53 major metropolitan areas (over 1,000,000 population) in recent years. Hispanics accounted for 50.9% of the growth, followed by African Americans and Asians (“only” or one-race), each at 19.6% and 5.9% in smaller minority groups, or more than one race (Figure 1).
Proptech
Lessen scores unicorn valuation — therealdeal.com
Lessen is a real estate management platform that connects property owners and operators to service providers quadruples its fundraising.
Construction
Integrating design and sustainability into pre-fab housing
Steve Glenn, CEO of Plant Prefab, outlines how his company is infiltrating single and multifamily housing markets with custom-designed prefabricated homes to deliver healthy and sustainable buildings by design and at scale. Glenn highlights the cost and sustainability advantages of prefabrication—including automation and offsite construction—and how innovative technologies are advancing the market for prefab home building in diverse markets across the country.
Leadership
Land Advisors Organization founder Greg Vogel
Greg Vogel talks about his most iconic land deal--Verrado [a master-planned community in Buckeye, AZ]. "I began calling Caterpillar Tractor Co. in 1985. I was 21. Fourteen years later, in 1999, they signed a listing with me. We were given the assignment from Caterpillar Tractor Co. to identify a developer and negotiate the transaction, which has become Verrado. We represented Caterpillar in a structured sale to DMB. We weren't paid in cash up front. As Verrado builds out, revenue goes to the Caterpillar Foundation and continues to this day. That was something that not only put us on the map, but I applied what I had learned at that point and put it all to practice. To this day, we maintain that income stream for the Caterpillar Foundation with DMB as developer. The 8,635 acres owned by Caterpillar turned out to be a 12,000-unit community with 30,000 people living there."
Real estate veteran Thomas Ricci is co-founder of Coretrust Capital Partners, which owns and operates large office properties such as 444 S. Flower St. downtown and Pasarroyo in Pasadena. Over his decadeslong career, he has developed, entitled, or redeveloped more than 30 million square feet of mixed-use property space