This is the last post in the Real Estate Trends and Issues series. It covers the last three days of topics since we toured Wednesday, we discussed on Thursday and then we have topics for today (Friday) but no class.
All those topics are residential markets, multi-family, single family residences, appraisal, valuation, development, construction, adaptive re-use, redevelopment, transportation, TOD, architecture and facilities management.
Out of all of that we mostly talked about residential which is the hottest market right now. Multi-family is still selling well as residential prepares for another wave of foreclosures. Then we talked about adaptive re-use (for which there is another entire class later this semester) and finished with transportation. Obviously I still have some thoughts about architecture so I’ll include those at the end.
If you can believe it, we actually watched Jay’s Tiny House Tour as part of our class. While I don’t think that’s a major trend, I think it does fit in with the trend of changing living situations. Accessory dwelling units (ADUs) are becoming more popular and many cities have issued guidelines on how they can be built. Call them what you want – granny flats, mother in law suites, guest cottages… or tiny houses.
The trend is that more families are moving back in together to save money and recover from the recession. And as the Baby Boomers start needing more medical care, we’ll see a lot more of them either move back in with their kids or have their kids move in with them to provide care.
And then many more Millennials are moving back in with parents to save money. They don’t feel the need that previous generations did to go out and buy a home – especially in this economy. They’re more interested in socializing, traveling and collecting experiences. A mortgage on a house that may or may not appreciate is low on the agenda.
As for development, the trend seems to be that private-public partnerships are slim pickens given the budget shortfalls that most cities seem to be experiencing. I tried to argue the case that developers would do better for themselves to avoid adopting a business model that depended on government help. I saw one article that major developers like Trammel Crow have opted out of the mixed use development trend because they concluded that most of them required public funds to be successful.
Think of it this way. If you can generate a product that stands on it’s own, then you can do even better with public funds. If you can only create a product that requires public funds then you’re at the mercy of public funds being available. While there does seem to be a trend of government getting more involved in everything, I think there’s still something to be said of learning to be profitable.
Also in development is foreign investment. I read earlier that a gambling company in Malaysia had bought up ocean front property in Miami to build the world’s largest casino even though gambling isn’t legal there. No matter though, they’ve also hired 13 lobbyist to get that fixed.
Turns out the same company is building the world’s largest convention center for NYC and – wait for it – another huge casino. The government is all for it because they get a convention center out of it. And… it’s all privately funded.
In appraisal it seems that they recently (past 2 years) passed laws to separate appraisers from lenders. Some claimed that part of the real estate bubble was from appraisers and lenders having too cozy a relationship and inflating prices. The result we have is that often appraisals are done by non-local appraisers and they’re turning out to be less accurate due to not knowing the local market.
In construction, costs are going up due to higher demands for medical coverage and insurance fees. A significant portion of the residential demand for construction is going to remodels. When people can’t sell their homes, they fix up the one they have.
Adaptive reuse is getting a lot of press. Some of these are privately funded and some are public-private partnerships. This is like rehabbing for the commercial market. A lot of the value in a commercial property is in the leases it has. If a slightly run down building is sitting vacant, it can be bought for a lower price, updated and then find good tenants. Many green building projects are being featured as redevelopments too.
As for transportation and TODs (transit oriented developments), that’s a big trend too. Of course cities want to build in density and promote public transportation. Market trends though are that everyone still wants to drive their own car where feasible. We watched the Japanese bullet train go by at 300 mph.
There’s no question that train stops help shape future development. Whether they’re so important that the future will be cities around these nodes is to be seen. What’s important at the moment is that there are opportunities to be had where transit oriented development is done well.
Another point of interest is that there have been rumors of high speed rail coming to the DFW/Austin/San Antonio/Houston corridors. If you were able to work in Dallas but commute 45 minutes to live in Austin, that would be a significant game changer.
Finally on to architecture. I have strong feelings about this one as I recently had a fairly unpleasant experience with my architecture department. As I’ve continued to read and study, I’ve come to figure out why.
I came to architecture with a builder’s perspective. I built on spec and then wasn’t able to sell for as much as I’d anticipated. Having studied marketing and been a Realtor previously also informed my background.
What I’ve come to learn about the current state of architecture is that it’s still functioning under faulty premises. If you’ll allow the comparison, modern architecture is like Newtonian physics while our better understanding is now quantum mechanics. Things are much more connected than our simple aesthetic of architecture as art trying to communicate something.
There’s fantastic article on a permaculture site regarding the state of architecture:
The trend for architecture will be to adapt to design for people, not for industry. Terms such as “evidence-based-design” and “biophilic design” are coming more into play.
Architecture must design within the context it finds itself and strive toward functionality. Profitability is an intermediate step that most architects haven’t made it too yet.
I’d say we’re a ways away from it yet. If you tell an artist that their work needs to be functional, you’d probably be scoffed at. But then that’s probably why architects in general are having a hard time finding work these days and that they only design something like 3% of buildings.
Either they need to learn to design for people or stop designing buildings that people will inhabit. If you want to build art, build art and keep that separate.