Urbanexus Update - Issue #124

Industrial production increased 0.4 percent in November. After having fallen 16.5 percent between February and April, the level of the index has risen to about 5 percent below its pre-pandemic (February 2020) reading. In November, manufacturing output advanced 0.8 percent for its seventh consecutive monthly gain. An increase of 5.3 percent for motor vehicles and parts contributed significantly to the gain in factory production; excluding motor vehicles and parts, manufacturing output moved up 0.4 percent. The output of utilities declined 4.3 percent, as warmer-than-usual temperatures reduced the demand for heating. Mining production increased by 2.3 percent after decreasing 0.7 percent in October.

These indicators are mostly for travel and entertainment.  It will interesting to watch these sectors recover as the COVID-19 vaccines are distributed.  

The ability to find debt and equity financing for acquisitions and new development has been deeply affected by the coronavirus. Heading into 2020, there was plenty of inexpensive capital available to real estate investors and developers. The once wide field of potential lenders has shrunk significantly over the past nine months. And as for equity availability, it will be important in the coming months to be patient and diligent.

In the 1970s, new downtown hotels often boasted soaring atrium lobbies, filled with glass elevators, bars and restaurants. What’s inside this uniquely American building style? 

A trend of higher demand for housing in lower-density areas reported in the second quarter National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) has persisted into the fall, as single-family and multifamily construction continued to over perform in lower cost markets like suburbs and exurbs. The third quarter HBGI reveals that a suburban shift for consumer home buying preferences in the wake of the COVID-19 pandemic is accelerating as telecommuting is providing consumers more flexibility to live further out within large metros or even to relocate to more affordable, smaller metro areas.

U.S. real estate value is concentrated in a handful of urban centers.

Housing policy debates are tortured by the widespread disbelief that supply and demand operate in the market for housing. In our view, its been a growing demand for cities and urban living, running headlong into a relatively fixed, or at best slowly growing supply of urban housing that’s been the principle reason for affordability problems in many cities. But many housing advocates refuse to believe that increasing housing supply will have any beneficial effect on rents.

A new study from Andreas Mense an economist at the University of Erlangen-Nuremberg, using detailed data on housing construction and rents in Germany, documents the direct and widespread effects of new market-rate construction on rent levels. The paper uses variations in the completion rates of new housing units over time to tease out the effects of increments to supply on rent levels. Here’s a typical chart showing how rent increases vary in response to additional housing completions in the month of December (the red line on the chart). In the wake of completions (the period to the right of the red line), rent changes are negative. The core finding is that a one percent increase in housing completions tends to be associated with a 0.4 percent to 0.7 percent decrease in rents.

Around the world cities are adapting. But will the changes last, and which more radical design proposals – be it sewer monitors or “epidemic skyscrapers” – will shape the post-pandemic city?

A new project means islanders can now get documentation proving land ownership in 20 minutes instead of five years.

A civil engineer by training and an entrepreneur at heart, Emile Haddad has spent his career working to improve the built environment. Fresh out of college, he started a business weatherproofing Beirut’s concrete buildings. After coming to the USA at age 27, he worked his way up in the housing industry, eventually becoming Lennar’s Chief Investment Officer. Today, as CEO of Irvine, CA-based Five Point Holdings, he manages a firm that has four significant master-planned communities under development.

Real estate executives discuss the importance of keeping politics out of the office, especially after the 2020 roller coaster of an election.