Urbanexus Update - Issue #147
This selection of real estate and community development news and information comes to you from H. Pike Oliver. Please note that some items may be behind a paywall.
The economy
U.S. workers are less productive
The productivity plunge is perplexing because productivity took off to levels not seen in decades when the pandemic forced the switch to remote work. But that growth spurt was short-lived, even as companies shifted to hybrid models, in part because employees argued that the flexibility helped them work more efficiently.
BACKGROUND: How is productivity measured?
World's biggest employers — www.statista.com This chart shows the employers with the largest workforces worldwide in 2022.
Real estate investment
Pension funds scale back on real estate investing U.S. public pension funds have started to scale back on their investments into the commercial real estate industry, The Wall Street Journal reports. The U.S. public pension funds have started to scale back on their investments into the commercial real estate industry.
Undertaken jointly by PwC and the Urban Land Institute, the 44th edition of Emerging Trends in Real Estate® , provides an outlook on real estate investment and development. It addresses trends in real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the United States and Canada.
Interest rates are rising, economic clouds are darkening, and real estate deal flows are sinking because buyers and sellers cannot agree on pricing. But for all that, most commercial real estate professionals interviewed for this year’s Emerging Trends remain reasonably upbeat about longer-term prospects.
There troubling risks ahead for the industry. But the consensus mood is one of cautious optimism that we will ride out any near-term slump. The longer-term perspective is that the industry is well-positioned for another period of sustained growth and strong returns.
Retail
Simon Property survives the disruption of retail
Simon Property Group has the ability to drive massive cash flow with its continued generation of revenue.
As a retail mall owner and operator, the firm was originally viewed as a victim of the decline of malls as consumers increasingly moved to online shopping.
SPG's involvement in converting properties to mixed-use real estate is growing substantially, allowing for diversification across several real estate product groups.
The company continues to pay a dividend yield of more than 6%.
Office
Why office buildings are still in trouble — www.nytimes.com
Hybrid work, layoffs, and higher interest rates are leaving lots of office space vacant and hurting the commercial real estate business. Landlords are finding that some tenants are making do with much less space. For example, KPMG recently signed a 20-year agreement to move to Two Manhattan West, a New York City skyscraper opening in 2023 on the edge of Hudson Yards. KPMG, which has adopted a hybrid work model, is leaving three older buildings and reducing its lease space by 40 percent.
Residential
Presidential City apartments in Philly — rebusinessonline.com
Post Brothers has sold Presidential City, a 1,015-unit luxury apartment community in Philadelphia. KKR and Mack Real Estate Group (MREG) purchased the high-rise property for approximately $357 million.
Presidential City was originally built in 1950. Post Brothers acquired the asset in 2012 and extensively renovated it to Class A standards. The property comprises four apartment buildings as well as the 41,000-square-foot Sora Pool Club and Spa amenity center and an office building.
LeFrak apartments in Brooklyn — rebusinessonline.com
A&E Real Estate has acquired 14 multifamily buildings in Brooklyn’s Gravesend and Sheepshead Bay neighborhoods for $248.7 million. The LeFrak Organization sold the portfolio, which spans 1,212 apartments, 306 parking spaces, and five commercial units. The LeFrak family developed all 14 of the buildings between 1957 and 1961. Since 2015, LeFrak has invested more than $18 million in capital improvements throughout the portfolio.
Haven Realty Capital and institutional investors advised by J.P. Morgan Global Alternatives have formed a joint venture to acquire and develop more than $1 billion in new build-to-rent communities throughout the United States. The $415 million equity joint venture will provide long-term capital for Haven to continue to execute its business plan in the build-to-rent space, working with home builders.
YieldStar rent setting software controversy
Texas-based RealPage’s YieldStar software helps landlords set prices for apartments across the U.S. With rents soaring, critics are concerned that the company’s proprietary algorithm is hurting competition. Of course, what role RealPage’s software has played in soaring rents — which in the decade before the pandemic nearly doubled in some cities — is hard to discern. Inadequate new construction and the tight market for homebuyers have exacerbated an existing housing shortage.
Top five advantages of HUD construction financing
HUD loans typically have some of the best terms for multifamily properties — and they’re not just for affordable housing. Here is a review of how a HUD 221(d)(4) loan works.
Proposed Austin residential skyscraper — www.planetizen.com The skylines are starting to catch up to the hype about everything being bigger in Texas.
Background on the "Builder's Remedy" in California
Under the Builder’s Remedy, a California city with a non-compliant housing element of its state-mandated general plan cannot block the development of a housing project with at least 20% affordable housing. (The Remedy, originally enacted by the California Legislature in 1990, can be found in Government Code Section 65589.5)
In explaining why the law hasn't been applied until now, UC Davis law professor Chris Elmendorf points out in a recent paper, the Builder’s Remedy “is so poorly drafted and confusing that developers of ordinary prudence haven’t been willing to chance it.” And at the time the Builder’s Remedy was passed, the housing element law was not nearly as powerful as it is today. All that changed with the wave of housing production legislation that began in 2017.
Regional and metropolitan dynamics
In urban 'activity centers, job density pays off
A lesson for cities and business owners still trying to lure workers back to the office: Productivity surges in places where people, amenities, and jobs cluster together, bringing a higher Gross Metropolitan Product per job.
Construction
A carbon negative home building firm
Incubated by Innovations Endeavors with Western Technology Investment and Stanford University, Aro Homes will design and build carbon-negative, precision-engineered homes faster and more cost-effectively than traditional homes. The sustainable homes will aim to save more than 11 tons of CO2 annually per build, the company states.
To address the lack of innovation seen in residential home building, Aro Homes will compress the building process using machine learning to identify optimal properties. Regarding design, machine learning also informed Aro’s plans as its algorithms ingested scores of property data to assess local zoning requirements plus sustainability and livability goals.
Beginning in the San Francisco Bay Area, the four-bedroom, roughly 3,000-square-foot homes are designed with National Renewable Energy Laboratories (NREL) modeling that establishes everything from the R-value of windows to the insulation type. The weather-proofed exteriors are expected to last over 70 years including the roofs and cladding. Built to take on natural disasters, the homes also come equipped with a high fire rating and automatic sprinklers.
High-velocity HVAC systems, Span electrical panels, low-voltage lighting, and solar and battery systems have been chosen to achieve the highest green certifications including LEED Platinum, passive house, and Living Building Challenge. With energy efficiency and sustainability in mind, the systems should equate to 50% less energy use and 6,000 gallons of water saved per year.