Urbanexus Update - Issue #140
This selection of real estate and community development news and information is curated by H. Pike Oliver, co-author of a soon-to-be-published book -- Transforming the Irvine Ranch: Joan Irvine, William Pereira, Ray Watson, and THE BIG PLAN (Routledge: June 2022.)
Please note that some items in this compilation may be behind a paywall.
The economy
The USA's GDP decreased in Q1 2022 — eyeonhousing.org
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) decreased at an annual rate of 1.4% in the first quarter of 2022, after a 6.9% increase in the fourth quarter of 2021. This quarter’s decrease reflected a deceleration in private inventory investment, decreases in exports and government spending, and an increase in imports. It marks the worst quarter since the pandemic recession in the second quarter of 2020.
Inflation hit another 40-year high — eyeonhousing.org
Driven by higher food, gasoline, and housing cost, consumer prices continued to accelerate in March. This marked the sixth straight month for inflation above a 6% rate and was the fastest annual pace since December 1981. Though gas prices have fallen slightly from their March highs, the pace of inflation will likely stay high in the months ahead as lockdowns in China threaten more global supply chain disruption.
The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.5% in March. The indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) both increased by 0.4% over the month. Monthly increases in OER have averaged 0.4% over the last three months. More cost increases are coming from this category, which will add to inflationary forces in the months ahead.
Office
New York City office leasing down in Q1
According to property consultant JLL, as COVID cases subsided in early 2022, corporate occupiers officially set return to office dates and implemented hybrid work policies in Q1. Physical office occupancy subsequently rebounded from the dip in January 2022, following the Omicron wave, nearing the pre-Omicron peak of 37% in early December. After leasing velocity gained momentum at year-end 2021, a lull in large occupier activity resulted in lower volumes q-o-q. About 5 million s.f. of leases closed in Q1, falling 25% below figures recorded in Q4 2021.
Why not buy rather than lease?
In some hot U.S. markets, developers have started selling office “condos” to employers, betting that high lease prices and inflation may make the idea of owning small office spaces an increasingly attractive proposition. One other economic factor might be pushing companies to buy: a change in GAAP accounting rules that means publicly traded companies have to put their whole lease obligations on their balance sheets, instead of just one year. A long-term asset might look better to shareholders than a ten-year lease liability of the same price.
Hospitality
Travel is finally seeing the rebound hotel operators have been waiting for since the onset of the Covid-19 pandemic more than two years ago.
The week ending April 16, saw U.S. hotel occupancy at 62%, still 5.6% less than the same week in April 2019, according to data from Hendersonville, Tennessee-based hospitality data company STR Inc. But the average daily rate was $147.25, a 14.4% increase from the same time in 2019, and revenue per available room was $91.25 — 8% higher than the same week three years ago.
The dichotomy in recent transaction pricing shows how office demand — and, subsequently, corporate-meeting demand to fill local hotel rooms — remains unknown for a place like midtown Manhattan. That could then weigh on those markets' hotel sales activity and pricing. Premium hotels in recreational destinations are proving hot with investors and commanding top dollar.
Residential
Why rental prices will continue to increase in the USA
Nationwide, rent for a one-bedroom apartment between March 2021 and March 2022 rose an average of 12%. Jarring double-digit rent spikes are happening all over the country. In Henderson, Nevada, rents rose 26% between 2021 and 2022, according to rental platform Zumper, and in New York City they leapt 30%. Folks in Miami will likely see rents rise by 39%.
The cause: Housing construction has moved slowly since 2008, but the rate slowed even further during the pandemic, while widespread remote work policies have precipitated massive influxes of renters to traditionally affordable locales. It’s also a top-down problem: as home prices rose 17% last year—the highest year on record—many would-be buyers were forced to remain in the rental game. With a gap of 4.6 million new apartments requiring completion by 2030 in order to meet demand, and 10-plus million more needing renovations, according to the National Apartment Association, the problem of rising rents doesn’t appear to be a short-term blip.
Living space for $1,500 monthly — www.statista.com
This chart shows the average apartment size for a monthly rent of $1,500 in selected U.S. cities/boroughs in 2022. A RentCafe analysis of Yardi Matrix data has revealed the U.S. city where renters get the most space on average for a monthly outlay of $1,500. Wichita, Kansas offers the most square feet of real estate, at 1,597. The city, with a population around the 400,000 mark, is accompanied in this part of the ranking by places like Oklahoma City (1,431) and El Paso, Texas (1,305).
On the other end of the scale, the New York borough of Manhattan would yield the least space for renters in 2022 - a small but still very livable 262 square feet. If it has to be NYC, Brooklyn may be a slightly better option with 357. The west coast is also in a similar league - San Francisco would offer an average of 345 and Los Angeles 454.
Signs of brewing U.S. housing price bubble
There is growing cause for concern that U.S. house prices are again becoming unhinged from fundamentals. For prospective buyers and sellers as well as policymakers, knowing the state of housing markets is imperative.
Using a novel statistical toolkit for assessing the health of the U.S. housing market in real-time, analysts at the Dallas Federal Reserve Bank argue that the underlying causes of the run-up differ from those during the last housing boom, which preceded the 2007–09 Global Financial Crisis. However, there is growing concern that U.S. house prices are again becoming unhinged from fundamentals.
New home sales fall on higher rates — eyeonhousing.org
New single-family home sales declined in March as mortgage rates jumped to the highest levels since the start of the pandemic. Per Freddie Mac, the 30-year fixed-rate mortgage was 3.89 at the end of February and had climbed to 4.67 at the end of March.
U.S. foreclosures on the increase According to ATTOM's newly released Q1 2022 U.S. Foreclosure Market Report, there were 78,271 U.S. properties with a foreclosure filing during the first quarter of 2022, up 39 percent from the previous quarter and up 132 percent from a year ago.
The cost of new housing influences the cost of existing housing
If we want our cities’ older homes to cost less, either to buy or rent, we need it to be less expensive to create a new home. Why? This article offers an explanation, via hamburgers.
Master-planned communities
Another large suburban Phoenix area community
Austin-based Castle Hill Partners paid $106.58 million to acquire about 5,200 acres in the Phoenix area City of Peoria near Taiwan Semiconductor Manufacturing Co.'s $12 billion plant under construction in north Phoenix. Originally planned back in the 1990s as Saddleback Heights it is the largest remaining undeveloped master-planned community project in Peoria, according to Greg Vogel, founder, and CEO of Scottsdale-based Land Advisors.
Judge halts 3,000-home San Diego area master-plan
A California court has temporarily blocked a long-planned effort to build thousands of homes in Santee, a victory for environmental groups who argued the city hadn’t done enough to guard against wildfires. San Diego Superior Court Judge Katherine Bacal ruled this month that the Fanita Ranch project failed to fully consider how an influx of people could affect a region at risk of fire.
The ruling comes as cities struggle to balance climate change risks with a lack of housing. Several recent proposals throughout the county have been struck down, including one last year in Otay Ranch. The long-planned Fanita Ranch community is overseen by HomeFed Corporation and a project leader said the ruling was only a setback. The next hearing is scheduled for March 25, although the case could effectively be rendered irrelevant if voters reject the proposed development this November.
Learning from popular master-planned communities
The features that make the top-selling communities desirable to home buyers may change from year to year, but demographics suggest big changes are set to sweep through the segment. Baby boomers want a community that gives them opportunities to remain active, while older millennials are looking to step into larger homes in communities that offer a range of amenities that keep their children away from screens. Read this article to get the highlights of why these communities are so successful. They are: The Villages in Florida, Lakewood Ranch in Florida, Summerlin in Nevada, Ontario Ranch in Southern California, and Cane Bay Plantation in South Carolina.
Regional and metropolitan trends
Homebuyers relocate to more affordable areas Nearly one-third (32.3%) of Redfin.com users looked to move away from their hometown in the first quarter, an all-time high, often from expensive to affordable areas.
Tax incentives for real estate development
Are opportunity zones just a windfall for the rich?
Napster founder Sean Parker had a vision and proved more politically savvy than his Silicon Valley billionaire contemporaries. But things went sideways when California's dreaming met Washington DC's deal-making.
Construction
Transforming trees Into skyscrapers — www.newyorker.com
In Scandinavia, ecologically minded architects are building towers with pillars of pine and spruce. The environmental, aesthetic, and even potential physiological benefits of mass timber architecture are inspiring a new movement that puts traditional methods to cutting-edge modern use. It’s all very exciting—just don’t think about Jenga.
Levittown’s ‘cellarless’ homes
On May 27, 1947, a town board meeting was held in Hempstead, New York, on Long Island. First up on the agenda was a request to repeal section 809 in Article 8 of the local building code, which required that all homes be built with basements. The code amendment was approved, most of the attendees exited the small meeting room, and the town board carried on with Hempstead’s affairs. What seemed to be a simple amendment changed the face of building in America. It allowed the first 2,000 homes (of an eventual 17,441 total) to be built in the town later named “Levittown.”
Planning and design
An urban village planning checklist
Urban villages can maximize accessibility and inclusivity, helping residents be healthy, wealthy, and happy. Here are specific targets for planning them from Todd Litman of the Victoria Transport Policy Institute.
Barcelona redesigns 21 streets to prioritize people
It’s a light version of the city’s revolutionary car-free neighborhood superblock program. In central Barcelona, one in three streets will soon become “green axes” that prioritize people on foot and bikes instead of cars. On those streets, 21 intersections will be converted to public squares, so no one in the area is more than around 650 feet from a small park. Thanks to Alex Holtze for calling attention to this program
A passing
Kisho Kurokawa's capusle hotel — architizer.com
RIP Nakagin Capsule Tower. A television, a reel-to-reel tape deck, an integrated sound system, a personal refrigerator and an alarm clock by the bedside were all radical features of an individual capsule within the Nakagin Capsule Tower when the properties of the iconic structure became available to the residents of Tokyo and beyond in 1972. In its day, The Nakagin Capsule Tower epitomized certain visions for the future.