Urbanexus Update - Issue #126

New federal data offers comprehensive snapshot of a year marred by staggering job losses, waves of small-business closures and mounting inequality.

Twice a year, RCLCO polls its network of clients and collaborators to ask what they think about the current and future state of the real estate industry - the results are now in for year-end 2020.

Over the past few years, RCLCO Sentiment Surveys had indicated continued confidence in real estate market conditions. The mid-year 2020 results highlighted the speed and intensity of the economic downturn sparked by COVID-19 with a significantly more pessimistic outlook than usual. The year-end 2020 result is still much lower than previous years but demonstrates an increasingly optimistic outlook as the economy and real estate markets enter a new year and head toward recovery. 

U.S. equity markets climbed to fresh record-highs during the week of the presidential inauguration amid relief over a peaceful transfer of political power and on economic data showing continued momentum behind the critical housing sector.A confluence of near-term positive factors and long-term tailwinds converged over the last eight months that have generated a highly favorable environment for the housing industry. Not to be overlooked, policymakers have prioritized support for the economically-critical U.S. housing markets throughout the COVID crisis and early indications are that the Biden Administration’s policies will be particularly supportive for first-time homeownership and new home construction, seeking to address the effects of the substantial undersupply of housing units after a decade of depressed construction activity.

The post- COVID era likely will usher in new opportunities for the development, redevelopment and repositioning of all property types across markets. The next real estate cycle will require changes to the design and construction of space. CBRE’s U.S. Development Opportunities report analyzes existing real estate supply, current construction costs and past performance to identify markets and property types that offer the best opportunities. Key findings include:

The coronavirus pandemic hasn’t just created massive unemployment and economic hardships for millions, it has also inflated real estate prices across the country. A recent report by Redfin found that the national median home price climbed to $335,519 in November, 14 percent higher than a year earlier — the biggest annual gain since July 2013. A record 35 percent of homes sold for over asking price, and sales were swift, with homes averaging just 27 days on the market, a record low.

Median home prices rose in all 85 of the large markets (population 750,000 or more) that Redfin tracks. This week’s chart shows the 20 markets where the prices changed the most. (Some markets are named for the major cities they encompass and incorporate surrounding commuter areas. Others are defined more broadly, like the Nassau County, N.Y., market.)

Brookfield Asset Management announced a proposal to buy Brookfield Property Partners’ remaining shares for nearly $6B.

San Francisco is expected to have the worst-performing office market in the USA during 2021 and New York City also is forecasted to perform poorly.

New Seattle office space boomed this past decade. Then the pandemic hit. Will the shiny, tall towers built for the city’s growing workforce ever be filled? In February, Seattle had an index score of 86. By December, it had fallen to 17 according to a report from New York-based VTS, which provides leasing and asset management software for commercial real estate landlords. That’s an 80% drop, which is the largest among the seven markets included in the study.

Nordstrom will leave the office tower at Seventh and Olive where it has occupied space on 15 floors. In a statement, the company framed the move as a chance to rethink office work post-pandemic.

The 1700 Seventh Ave. office tower has nearly 500,000 square feet of space. Nordstrom said it occupied 360,000 square feet on 15 floors of the building. Nordstrom said it will still have 700,000 square feet of other office space in two downtown Seattle buildings.

One year into identification of the first COVID-19 case in the USA, this once-in-a-century worldwide pandemic has caused a swift, wide, and deep economic recession that decimated key travel and leisure related industries including airlines, car rentals, cruise lines, ridesharing, tour operators, and transient lodging facilities. The U.S. hotel industry continues to experience negative stress as all segments of travel demand experience a sharp and sustained decline which continues to significantly lag pre-pandemic levels. 

For the year 2020, the LWHA Major U.S. Hotel Sales Survey includes 79 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled $5.3 billion and included approximately 19,400 hotel rooms with an average sale price per room of $273,000. By comparison, the LWHA 2019 Major U.S. Hotel Sales Survey identified 164 transactions totaling roughly $17.7 billion including 48,800 hotel rooms with an average sale price per room of $364,000. Comparing 2020 with 2019, the number of trades decreased by approximately 52 percent while total dollar volume declined roughly 70 percent and sales price per room decreased by roughly 25 percent.

As the nation enters 2021 with hopes of healing divisions, Vox published a story with the drop headline, “Young families and wealthy people are decamping for the suburbs — which might make cities more pleasant for everyone else.” This is exactly the continued nonsense from the left that continues to polarize our discourse, and it needs to stop.

Why is it acceptable to suggest that families and high-income earners — groups who support many institutions and public infrastructure projects, pay taxes and fees, and contribute to the socio-economic and cultural life of cities — should get out of cities and that their kind, views, preferences, and needs are simply not welcome? Such a view is the antithesis of real diversity and inclusion, and it is willfully ignorant of the real benefits of socio-economic diversity which develops from those families and those with capital as much as any other group.

The co-living company Common has announced the cities vying to host the company’s “Remote Work Hub,” aimed at snaring digital nomads fleeing more expensive markets. 

The COVID-19 pandemic—and its associated economic effects—has upended much of the conventional wisdom around determining where, and how, families want to live. 

The advent of working from home has led to an exodus from “gateway” markets, as many folks who no longer need to commute seek out larger, cheaper options in the suburbs and exurbs. While not everyone is making the leap, the promise of strong job growth, lower costs of living, and lower-density environments have pushed a few markets into the single-family housing spotlight. 

Working with Zonda chief economist Ali Wolf, BUILDER magazine has selected five single-family markets—all of which appear on their  Local Leaders list of the top 50 new-home markets ranked by closings—with demand fundamentals, economic conditions, and job activity worth watching in 2021.

Pete Saunders has analyzed how metropolitan areas in the USA compare in the areas of prosperity, inclusion, racial inclusion, and geographic inclusion. To do so he established a ratio of growth rankings with the other four factors for each metro. Then he grouped each metro in one of four regional categories – Northeast, Midwest, South, and West – to see if there are any regional variations in growth patterns. When you add it all together, Southern and Western metros at the smaller side of the large metro scale generally outperform others. Raleigh, NC leads the way with a score of 4.60, making it the only metro that ranks in the top ten in all five categories. Denver, Austin, Seattle, San Jose, and Salt Lake City are also in the top ten. Beyond the top ten, there’s no discernible size or regional pattern. See the table below:

The Urban Land Institute (ULI) is eager to keep members abreast of the topics and issues on the rise in sustainable real estate. In late 2020, ULI’s Greenprint Center for Building Performance interviewed members of itsSustainable Development Council (SDC) to inform an “outlook” for 2021: What sustainability topics and issues are on the rise, why do they matter, and what should the industry do about it?

On the basis of the knowledge shared by these experts, Greenprint identified ten sustainability topics that will likely affect our decision-making in the months ahead and beyond. These topics include:

The report may be downloaded by clicking on the link below.

Back in the 1990s, when former United States Senator Daniel Patrick Moynihan (1927 - 2003) had the idea to reincarnate New York’s old Pennsylvania Station, tragically demolished in 1963, by transforming the Farley Post Office building across the street into a new train hall, he sent Washburn to make it happen. “My explicit instructions were to ‘make it inevitable,’ ” Washburn recalls. “Those were the words he used.”

A quarter century later, the new Moynihan Train Hall, designed by Skidmore, Owings and Merrill, has finally opened. The $1.6 billion hall, a bright, spacious annex to Penn Station, was modeled on the proportions of the beloved main concourse of nearby Grand Central Terminal. The train hall radiates daylight and the high-tech arches–500 panels of glass in each one–supported by beautiful, industrial trusses (courtesy of the old Farley Post Office), make this new space feel, not like it’s always been here, but like it always should have been here, like it was … inevitable.