Newsweek asked celebrated architecture firms around the world to posit what our cities will look like in 2030. New York was the first city examined. More recently, Michael Maltzan, Gensler and cityLAB-UCLA were asked to re-think Los Angeles.
Gensler described its vision for the future LA like this:
“In the future, life, work, commuting, and recreation will not be experienced as distinct activities but will blend into one lifestyle. Increased mobility and ubiquitous access to bandwidth for increased global connectivity will optimize use of Los Angeles’ temperate climate to further blur the line between inside and outside. This will expand the spatial boundaries within which multiple activities can occur simultaneously. Individuals will be freer to roam, liberated from the traditional relationship between task and place.” -Gensler
Click here to check out all the proposals.
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From a recent New York Times interview with Stanley Chera, founder of Crown Acquisitions, which owns dozens of retail and office properties across North America:
“We’re very underleveraged. We borrow maybe 35 percent; on some properties it’s 25 percent.
The secret is to stay underleveraged and you can own something forever. I have 100 pieces of property, say, but I could have 1,000 leveraged. I’m very comfortable with having what I have.”
Would you rather have 100 unlevered buildings or 1,000 leveraged buildings?
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Not only is Mayor Bloomberg trying to woo LeBron James to New York, but the president of Halstead Property has now offered to help NBA All-Star “King James” find a castle in the city. And, he’s going to donate the commission to charity.
“Now that Lebron James is finally a free agent, Halstead Property would first like to congratulate Lebron and also truly go out of the way to show how amazing New York City is for him and his family. Our firm is deeply excited to extend an offer to Lebron to make his transition to the Big Apple as smooth as possible. If Lebron decides to become a part of New York, Halstead Property will offer him and his family our award-winning brokerage services and expert local guidance to find his New York dream home. But our pitch does not end here. We also want to give back. We are so taken by Lebron’s philanthropic efforts and community outreach that we will donate our full company portion of the commission from the purchase of his home, which could amount to over six figures, to the charity of his choice. As a result, we can make a difference both on and off the court.”
Check out the proposal at EveryKingNeedsACastle.com.
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Is and has the U.S. been over-celebrating homeownership? A recent piece from the WSJ has raised this question once again here. Since 1918 with the “Own Your Own Home” campaign, the U.S. has long promoted the virtues of homeownership. But as evidenced by the last recession, perhaps some people should just rent.
The above diagram shows the peak ownership rate in each city followed by the current homeownership rate (it has fallen in every city shown) and then the percentage of those owners who actually have positive equity (that is, their home is worth more than the mortgage they’re paying on it). The most alarming city – although maybe not – is Las Vegas. Only about a quarter of the homeowners are in the favorable position of not drowning in debt.
Image: WSJ
Real estate bargain hunters, or vultures (not meant in a negative way), like Barry Sternlicht are moving into hard hit markets like Miami, Las Vegas and Los Angeles. His biggest move was the $4.5 billion acquisition of Corus Bankshares’ real estate loan portfolio. At the peak of the market, Corus was the largest construction lender in the US. So the strategy is simple: buy distressed debt and then foreclose on the properties.
“…Mr. Sternlicht and a group of investors — including TPG Capital, WLR LeFrak and Perry Capital — won the loans in an auction run by the Federal Deposit Insurance Corporation, paying $554 million for 40 percent of the package, valuing the debt at 60 cents on the dollar. The F.D.I.C. holds the remaining 60 percent.
Mr. Sternlicht hopes to foreclose on many of Corus’s errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers. He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing and an additional $1 billion in low-cost loans that can be used to complete unfinished projects.”
This gives Sternlicht access — though not always easily– to the properties of exhausted borrowers (ie. developers). But, according to the New York Times, some developers are asking:
“Why is the federal government offering low-interest financing to Mr. Sternlicht and his private equity partners when it could be helping struggling condo builders finish their projects, which are keeping hundreds of people employed?”
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There’s a real value to having lots of smart people clustered together, this is well known. But there’s a number of different ways of measuring “human capital.” Here’s an interesting study that uses Bachelor & Graduate degrees per square mile to measure smart people density, rather than just population numbers. Which cities come out on top? San Francisco and New York.
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A new study released by CEOs for Cities estimates that because New Yorkers drive significantly less than the Average America, they realize a whopping $19 billion in savings each year — money that, for other Americans, typically goes to auto and auto-related expenses. This represents $19 billion dollars in extra cash that is free to circulate in the local economy. In addition to this, New Yorkers avoid the use of approximately 2.4 billion gallons of gasoline and avoid 23 million tons of carbon emissions annually. This is a big part of the reason why New York has one of lowest levels of per capita energy consumption.
“If New Yorkers drove as much as the average resident of one of the nation’s largest metro areas, the city would have 4.5 million more cars. To store just the additional vehicles would require a parking lot the size of Manhattan.”
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Oxford Properties Group (of Toronto) has just joined forces with Related (of New York) to develop the 26-acre West Side Yards site in midtown Manhattan — the largest contiguous site in the city — according to the Financial Post. Oxford will be lead investor through a committment of US$475M. The mixed-use project is slated to contain 5,000 residences, a 300-room five star hotel, a 1000-room convention hotel, a 750-seat public school and a number of cultural amenities.
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A recent op-ed by Richard Florida for the Toronto Star (that ties into his new book The Great Reset) raises an interesting point for our fine city. Perhaps our success over “the great recession” will actually work against us. As they say, a crisis is a terrible thing to waste. Is our sucess going to make us complacent while other cities fight to reinvent themselves?
Irrespective, there’s little doubt that big changes are needed in Toronto (as is the case with most cities). Here are 3 ideas, from the op-ed piece, that we firmly agree with:
First, we need to get better at promoting entrepreneurship and innovation, and turning ideas into enterprises. Patent levels across the region reveal that we’re not as innovative as we could be.
“The University of Waterloo is outfitting dorms where students can develop inventions and start businesses a part of their curriculum. Why not extend that opportunity to create something of your own — from new tech start-ups to social enterprise — to our primary and secondary schools?”
Second, we need transit. It should be clear by now that the only way to effectively move large masses of people around a dense metropolis (see Tokyo, London, New York and others) is through a well tuned transit network.
‘Traffic here is a nightmare, and it is getting worse. A recent Board of Trade report ranked Toronto worst of 19 cities worldwide in commuting time. At the Martin Prosperity Institute, we estimate the GTA could gain an additional $3.65 billion in productivity and value added with each five-minute reduction in commutes. We are moving forward with Metrolinx, but funding for Transit City was cut. A world-class city requires world-class transit. There need to be even better connections within the city itself, between our subways, streetcars and buses, and seamless routes to the airport. We also need more incentives to get more people out of their cars and into transit, and that means seriously considering congestion pricing.”
Lastly, Toronto needs to better integrate itself across the region. And one perfect way to accomplish that is through high-speed rail.
“Toronto and its extended region need to grow. Our mega-region, which spans Montreal to Waterloo and across the border to Buffalo and Rochester, is home to 22 million people and generates $530 billion in economic output. But we are dwarfed by the truly gargantuan mega-regions surrounding New York and Chicago, which each produce roughly $2 trillion in economic output annually. Bigger cities and bigger mega-regions have faster metabolisms and bigger markets, and they are more innovative. Greater Toronto has to increase its size and scale fast. But adding more people — even 2 million people by 2031, as the Greater Toronto Marketing Alliance anticipates — will not be enough. We have to borrow size by expanding our borders..
We’ll need new infrastructure that can connect the far-flung pieces of our mega-region and make it more of an economically integrated whole. That means investing now in high-speed rail, which would cut travel time from Toronto to Montreal to just over two hours. It would make Waterloo, with its world-class high-tech cluster, a veritable suburb with an easy commute of under a half-hour. High-speed rail could even help reposition ailing Windsor as part of the Greater Toronto economy by cutting travel time to just 90 minutes.”
The case of Windsor is an interesting example. As it stands right now, its economy is entirely dependent upon the sucess of Detroit. Until Detroit comes back, Windsor will likely not come back. We should be taking matters into our own hands and integrating its economy with one that’s poised for growth. Heck, it would likely help Detroit as well. Times like this call for change, not complacency.
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Dense urban centres are more sustainable than sprawling low-density suburbs, this much we know. The issue, however, is that urban infill sites are harder to develop. There’s community opposition, adhoc rezoning and a myriad of other hoops that developers, architects and lawyers need to jump through. The result is a drawn out development cycle, a slower response time to supply changes and, consequently, higher real estate values.
Ed Glaeser recently posted a piece called “Taller Buildings, Cheaper Homes” which discusses this exact problem. He also talks about Jane Jacobs and her quest for the perfect neighbourhood density:
“For most districts …. The ultimate danger mark imposing standardization must be considerably lower; I should guess, roughly, that it is apt to have at about 200 dwellings to the net acre.” -Jane Jacobs
But Gleaser asks, why should there even be a “proper density”? If we restricted all development to 6 storeys, as Jane Jacobs suggested, cities would never be able to keep up with demand and prices would skyrocket. Building up high is one way to meet demand and ease affordability.
One of the issues with affordability, therefore, is simply regulation (perhaps, over-regulation):
“My work with Joseph Gyourko and Raven Saks suggests that perhaps one-half of the cost of a Manhattan condominium can be understood as the price of land-use regulation.”
Construction costs are determined by the market, as are design fees. The big variable in any development project is the land value, which is a direct result of land-use regulation.
In Toronto, there’s a proposal on the table for inclusionary zoning in the downtown core — in other words, a mandate to include affordable housing in all larger projects. The goal, of course, is to create mixed-income communities and increase the stock of affordable units. The problem is that the costs simply gets passed onto the remaining market units. You’re not making the project any cheaper, you’re simply moving around the costs.
If cities really want to improve affordability, they should embrace density and height, and figure out a way to streamline the development process (rezoning, approvals, etc…). It comes down to supply and demand:
“Restricting supply led to higher prices and a city with space only for the rich. In the 1950s and 1960s, middle-income people, like Jane Jacobs and my parents, could afford Manhattan. Equivalent families today can’t afford the city, and that’s a pity. By contrast, Chicago, with its longstanding pro-construction ethos, remains far more affordable even in prime locations.”
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For quite some time now, it has been clear that there was an extremely high probability of Stuyvesant Town defaulting. According to the New York Times, the keys were handed over on Monday.
But it’s not just Tishman Speyer and BlackRock, the general partners, who will lose money. Other investors, such as the Government of Singapore Investment, could potentially lose up to $575M compared to $112M each for both Tishman and BlackRock. Here’s the capital stack (via New York Times):
Also consider the following from the same New York Times piece:
“A partnership formed by Tishman Speyer and BlackRock paid $5.4 billion. The acquisition cost was actually $6.3 billion, because the partnership had to raise $900 million for reserve funds to cover interest payments, apartment renovations and capital improvements.
The rental income did not cover the monthly debt service. But the two partners were betting that they could turn a healthy profit over time as they replaced rent-regulated residents with tenants willing to pay higher market-rate rents.”
Can you think an investor today who would be willing to put up half a billion dollars towards the acquisition of properties whose rental income is insufficient to cover debt service?
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A recent New York Times article, titled “Now at Starbucks: A Rebound” discusses CEO Howard D. Schultz’s move to transform Starbucks from a faceless multi-national into a more local and urban coffee shop, the kind he originally envisioned when he founded the company.
One of the first appearances of this strategy is the new Starbucks-owned shop called 15th avenue Coffee and Tea in Seattle. The NY Times described the scene as follows:
“Young people wearing hoodies and chunky glasses are sipping microbrew beers and espressos, nibbling on cheese and baguettes made at a local bakery and listening to a guitarist strum and sing.”
Now, Starbucks hasn’t been the worst when it comes to blending into local urban environments, but there was still no mistaking that it was a corporate behemoth. The majority of their outposts were, in fact, corporate replicas. So this new strategy seems like a clever move in the right direction.
The issue with this new strategy, however, is that people feel like they’re being tricked:
“But Sylvia Lee, a doctor who lives in the neighborhood, said she was excited when she saw the shop was opening — until she discovered it was owned by Starbucks. “No one wants to be the duped customers won over,” she said.”
Is it really trickery? Is it simply a corporate giant masquerading as a local mom-and-pop shop? Or, is it actually a desirable corporate evolution, one that’s now tapping into our love for perceived customization?
I recently read an interesting article that talked about how industrial production runs in contrast to our desire for individuality; and so companies simply offer the allusion of customization by offering different colours (in the case of an iPod) or different body shells (in the case of new car models).
Now let’s be honest, there are many things to like about chains, such as product consistency, triple AAA credit ratings, and the deep pockets to do new things. And so if each new Starbucks were to use local furniture, local designers, and customize its product offerings to local tastes, would it not simply be a case where one gets all the benefits of a large corporation with the uniqueness of a local mom-and-pop? Or should we hold up our copy of No Logo and say long live the local entrepreneur?
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In an effort to lease-up the tallest building in the world, the government of Dubai has announced that it is “fully prepared to host the UN headquarters on its territory in the event its officials take the decision to move from New York”, says the Globe and Mail.
And apparently, some people, other than the government of Dubai, agree:
“Bringing the United Nations to Dubai makes sense,” wrote Joel Kotkin, a fellow in urban futures at Chapman University, and Robert J. Cristiano, the California university’s “real estate professional in residence.”
“New York gets rid of one of its worst welfare cheats, and Dubai finds new tenants to fill its vacant towers,” they said, describing the UN headquarters as a “pain in the butt” which “pays no taxes and annoys hard-working New Yorkers with its sloth, pretensions and cavalier disregard for traffic laws.”
It’s obvious why Dubai would want the UN. They’re striving for greater global influence, they’re clearly ambitious, and they’re trying to fill the biggest building in the world — thus the invitation.
But does it actually make sense? I mean, according to most accepted research, there are really only 2 truly first tier global cities: New York and London. Why move?
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According to Bloomberg, U.S. home prices in 20 cities rose for a fifth consecutive month in October, signaling that the housing market is on the road to recovery. Tax incentives and record low interest rates, however, are obviously part of the reason for the uptick.
“To help ensure housing doesn’t weaken again, President Barack Obama and Congress last month extended the tax credit until April 30 from Nov. 30, and expanded it to include some current owners.
Existing home sales in November rose to a 6.5 million annual rate, the highest level since February 2007, the National Association of Realtors said last week. They were still 10 percent lower than September 2005 peak levels.
“The tax credit had the intended impact of drawing buyers in and lowering inventory,” Lawrence Yun, the real-estate agents group’s chief economist, said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.”
Mounting foreclosures and an unemployment rate that economists surveyed by Bloomberg News this month forecast will exceed 10 percent in the first half of 2010 remain risks for the housing market and the economy.”
On the commercial side, Bloomberg reports that Midtown Manhattan office rents fell 33% in 2009 as a result of the severe contraction in the financial services industry.
“Financial companies occupy more New York office space than any other non-governmental employer. They cut 25,200 local jobs in the 12 months through November, helping push the city’s unemployment rate to 10 percent, according to the New York State Department of Labor.
“Employment is not going to trend up with any alacrity,” FirstService Williams Executive Chairman Robert Freedman said in an interview. “We’re going to see a very, very modest uptick in demand” for offices.”
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According to Bloomberg, the correction in the UK housing market has also lead to a shift in housing preferences:
“Houses are making a comeback in the U.K. as buyers reject “little box” apartments and investor demand for rentals evaporates.”
Now part of this is due to market forces — the article cites lenders tightening up on buy-to-let loans — but part of it is also because of market demand:
“Most people dream of having a front garden and a back garden, with a little bit of security around them,” said Alistair Leitch, finance director at Bellway Plc in Newcastle, England. “They don’t want to have to park their car 50 yards from home.”
In a lot of markets, apartments/condos are viewed as starter homes–a step on the way to a house. Sure, in some places, such as New York, residents often don’t think twice about raising kids in an apartment, but that’s primarily due to a lack of availability. If available, would the preference be for a house? Is this a natural market outcome?
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