I just finished reading the 2010 Emerging Trends in Real Estate. Now in its 31st year, this report is jointly produced by PricewaterhouseCoopers and the Urban Land Institute (ULI). This is the first time I have read this report, but I am very impressed. According to the PricewaterhouseCoopers webpage this report:
is the oldest, most highly regarded annual industry outlook for the real estate and land use industry and includes interviews and survey responses from more than 900 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.”
The report is downright bearish on real estate development for 2010.The report goes on the say that real estate developers are “largely dead” and that “builders can leave on long sabbaticals”. They don’t foresee construction picking up until 2012, but when it does, most construction will be focused on urban infill development.
This is great news for those of us that believe that our cities are our future. Below are some of my favorite excerpts from this report:
Next generation projects will orient to infill, urbanizing suburbs, and transit-oriented development. Smaller housing units-close to mass transit, work and 24 hour amenities-gain favor over large houses on big lots at the suburban edge. People will continue to see greater convenience and want to reduce energy expenses, shorter commutes and smaller heating bills make up for high infill real estate costs.” (Page 12)
Infill vs. Suburbs. Road congestion, higher energy costs, and climate change concerns combine to alter people’s thinking about where they decide to live and work. ‘It’s a fundamental shift.’ The lifestyle cost-of-living equation starts to swing away more dramatically from bigger houses on bigger lots at the suburban edge to great convenience and efficiencies gained from infill housing closer to work. These homes maybe more expensive on a price-per-pound basis, but reduced driving costs and lower heating/cooling bills provide offsets. And time saved avoiding traffic hassles moderates stress and enhances productivity. ‘Two-hour commutes reach a tipping point with higher energy costs’ and ‘near-in suburbs will do well especially if they link to business cores by mass transportation.” (Page 32)
Investors tend to favor the following:
- Global gateway markets on East and West coasts- featuring international airports, ports and major commercial centers.
- Cities and urbanizing infill suburbs with 24-hour attributes-upscale, pedestrian-friendly neighborhoods, convenient office, retail, entertainment, and recreation districts; mass transit alternatives to driving; good schools (public and/private); and relatively safe streets.
- Brainpower centers-places that offer dynamic combination of colleges and universities, high paying industries-high tech, biotech, finance, and health cars (medical centers drug companies)- and government offices.” (Page 27)
Denver metro area wins points for building out its light-rail network, encouraging transit –oriented mixed-use projects around stations.” (Page 35)
So what does this mean for Miami’s future?
- We should hold the Urban Development Boundary, this report confirms that 2 hour commutes are out of vogue.
- Miami 21 should be implemented immediately and not delayed any further.
- A large scale light rail system, including Baylink, is long overdue
- If Miami wants to become a competitive city we need to diversify our economy as much as possible in order to become a brainpower center. A service economy based predominantly on tourism will not attract educated people seeking high paying jobs.
15 Responses to The Future for Real Estate Developers
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Miami 21 is a dog and it will prove impossible to implement. Its salespeople offer pretty pictures but that is not reality.
Developers and cities need to concentrate on urban infill. Developers need to buy urban properties and renovate them. Existing properties get renovated and people get shorter commutes.
But who wants to live in a ghetto?
Miami 21 supports real infill development. Don’t confuse bad decisions being made by the city as reflecting the entire code. Don’t be silly.
That’s wonderful news, indeed. What’s interesting, though, is that Richard Florida has been “preaching” about this for, at least, a decade. The fact of the matter is that most of the United States’ built environment is unsustainable. Everyday, when I walk through my neck of the woods in Miami Gardens, I’m astonished by how horribly and wastefully our suburbs were designed, i.e.: large front lots that are rarely used and that wastes water and land space; side walks that can only fit pedestrians single-file; long streets that lead to nowhere and the list goes on and on. It really is sad. I have a question, though: what do we say to the T.O.D naysayers, such as Wendell Cox, and other assorted haters who insist that “densification” leads to higher taxes and increased crime and so on?
Oh… And another thing I wanted to add is when does development become “over development”? This is one of my concerns, even though I may not have to worry to much, since the report revealed that “developers” will become less and less relevant to the whole scheme of things.
None of these conclusions are a surprise, the suburbs are overbuilt to the extent that property values will stay depressed for many years to come , and those areas that are further from the city center will in many cases face decline, both in property values, as well as in quality of life. Remember, developers above all are driven by property values; They build not where there is demand, but where there is demand for the most profitable type of product, and that will be in the cities to a much larger extent in coming decades, for the reasons cited.
As badly as downtown Miami is overbuilt, I see things turning around sooner here than in other areas of Florida I travel to, where they built entire new towns with no economic base, industry or educational institutions. I do strongly disagree with his Phillipe’s conclusions about light rail, however, and perhaps we’re splitting hairs, but as I’ve said many times before, Miami’s population density justifies the investment in heavy(metro) rail, even with it’s obscenely high cost, it will carry the loads, at the speeds we need. In a perfect world, we would have Baylink, the Miami streetcar AND 100+ miles of metrorail; long experience makes me believe that we will only get one or the other. The plans for the East-West subway from 5th street in south beach to the airport, via port of Miami are still on the shelf, and the Port tunnel now gearing up for construction will be worth watching. If that project is done on time and budget, then perhaps the many naysayers who say a subway can’t be built in Miami will finally be silenced. Perhaps the real fear is having such a complex and costly project under the thumb of the MD County Commission, and I can’t really argue with that concern………That’s probably why the Port Tunnel project is a a public/private partnership.
You’re right, this should not be a surprise to anyone, but a lot of people still haven’t realized it yet. A decrease in the tax base will severely affect the suburbs and aid its decline. The urban tax base will benefit as migration back into the city increases, aiding positive development in the urban core. More money, people (eyes on the street) and police will make it safe to live in the city.
As for Wendell Cox, I just read an article of his and most of his arguments don’t hold any water. Do people actually take him seriously?
There was a time when Wendall Cox’s arguements would have made plenty of sense to me, before I realized that metrorail was quicker than driving and parking to work in downtown Miami. Even so, the fact that Metrorail was also cheaper than driving and parking downtown was not the tipping point, and Cox still makes a compelling argument when he notes that projects don’t have a hope if they’re not going to reduce commuting times. (Light rail versus metrorail comes to mind) His auto bias is obvious, but to call him a hater is the same type of bias (or worse) than he exhibits. His arguments are valid, and they will only be successfully overcome by logic and facts. Arguments in favor of Transit must start with enhancing the quality of life to EXISTING urban areas, and also include other, more tangible factors such as shorter commuting times, TOD Investment (not incentivized) and other tax base enhancement benefits. Car and transit advocates should realize that both have a role to play in transporting people, and neither is going away soon. It’s just that, transit is going to play an increasing role in our future. We need to find solutions to help make it happen sooner, and advocate for the solutions we believe in, which should be a balanced, rather than biased set of alternatives to get from point a to point b.
The thing that rings most true to me is the lack of Colleges and Universities in the South Florida Metropolitan area. It may be too late, with the golden age of College and University building in our past, but how can South Florida connect its existing College and University structures with local communities to form even more public-private partnerships, spur growth, encourage additional interesting places in the South Florida landscape, etc. Certainly, many more people would be interested in coming to South Florida for their educations, I think we need to give them more options, more reasons, and educate as to our existing College and University infrastructure.
Agreed Jason. The fact that South Florida lags behind in higher education is a detriment to it’s future competitiveness as a major metropolitan area. This report points out that the strongest real estate markets going forward will be Wasshington DC, NYC, and Boston. Although there are many other factors that make these cities succesful, the fact that good higher educationcan be easily found is no coincidence. These cities attract and retain brainpower.
Miami has many universities: FIU, UM, Barry, St. Thomas, Nova, Johnson and Wales, MIU, Florida Memorial, and even MDC if you want to count it.
Problem is, most of those, besides FIU and UM aren’t ranked highly nationally. A small public liberal arts college like New College of Florida in Sarasota would be nice for Miami. MDC could convert their Wolfson Campus into a separate liberal arts college. That’d be cool.
Imagine, “Wolfson College” – Miami’s public liberal arts college in the heart of the city. Sounds pretty sweet lol.
Damn good indea, Luke.
err, idea, that is….
While I can understand your desire for more colleges in Miami and the resulting educated, intellectual populace (if they stick around after school), I think in the future the percentage of people going to college will dramatically fall. The enormous amount of people going to college today is the result of government grants and loans, which simply won’t exist in the future (the gov. at all levels is serious bankrupt and will be more so in the future). Some people will, of course, continue to go to college (probably the traditional colleges, mostly private), but most people will gain their education they way they use to: through non-paid working experiences where they’ll not only be better prepared for that line of work, but they won’t be saddled with a lifetime of debt. What will definitely end is the young man or woman who drives long distances daily to commute between morning classes, afternoon/evening work, and home with ma and pa.
Miami 21 is a little different but yes I see your point.