recovery mode -- market and economic context for …€¦ · recovery mode -- market and economic...

RECOVERY MODE -- MARKET AND ECONOMIC CONTEXT FOR THINKING ABOUT LIVABLE COMMUNITIES

COMMUNITY BUILDERS 2012 Adam Ducker | [email protected] | October 25, 2012

Community Builders 2012

A FRAMEWORK FOR THINKING ABOUT GROWTH EMBRACING “ALTERNATIVES” IN WESTERN COLORADO

1

• Work Environments • Energy Economies • Mixes of People • Regionalism • Place Character


STRONG MIGRATION PATTERNS PRIMARILY FROM SUNBELT STATES

2

FL

OH

OK

NV IL

MA

UT

NM

WY

TX

AZ

CA

CO

0 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

2002 2003 2004 2005 2006 2007 2008

Mig

rant

s

2002-2008 WESTERN COLORADO MIGRATION

In Migration Out Migration Net Migration

SOURCE: ACS PUMS, IRS


HEALTHY DEMOGRAPHIC EVOLUTION AGING, BUT ALSO GROWING IN WEALTH AND WORKFORCE

3

3.1% 5.6%

-1.5%

3.0% 4.2%

-1.7%

3.4%

-5.9%

6.4%

Income Ranges

ANN. CHANGE IN HHs BY INCOME 2000-2010 WESTERN USA

1.1% 1.0%

-0.4%

2.3%

4.8%

1.8%

Age of Householder

ANN. CHANGE IN HHs BY AGE 2000-2010

WESTERN USA

-1.1% -1.3%

0.4% 1.1%

3.9%

5.9% 7.0%

4.2% 3.0%

Income Ranges

ANN. CHANGE IN HHs BY INCOME 2000-2010 WESTERN COLORADO

1.0% 2.0%

-0.5%

2.3%

5.5%

2.6%

Age of Householder

ANN. CHANGE IN HHs BY AGE 2000-2010

WESTERN COLORADO

SOURCE: Esri


TOURISM AS A SEED INDUSTRY 12% OF REGIONAL ECONOMY, BUT GATEWAY TO GROWTH

4

Mountain Resort Totals ($Million) 2008 2009 2010

Total Direct Spending 3,015 2,640 2,857

Total Industry Earnings 929 860 860

Total Industry Employment (Ths) 30.1 28.0 27.9

Total Local Tax Revenues 104 90 97

Total State Tax Revenues 76 67 71

SOURCE: Dean Runyan Associates


AGRIBUSINESS AND CLEAN ENERGY INDUSTRIES CHANGING THE CHARACTER OF GROWTH

5

Region Pop Growth 2000-2010

Jobs/Economy

9. 15%

45% public land and 17% tribal land; largely rural; telecommunications is a high priority

10. 16%

Agribusiness: sweet corn and wine production in Montrose; "boutique" agriculture and ranching; tourism; retiree-related expenditures; clean/green energy segment is growing with many small solar hot water and photovoltaic installers

11. 24%

Agribusiness in Moffat and Rio Blanco; mining (except Routt); manufacturing and business services in Mesa; tourism and the retiree market

12. 20%

Tourism and accommodations; food service; retail; arts, entertainment, and recreation; second home construction SOURCE: Colorado Planning and Management


ACKNOWLEDGING ECONOMIC DISTRESS W. COLORADO NOT IMMUNE FROM NATIONAL TRENDS

• Natural gas prices are nearing all time lows, affecting many small Western Colorado towns in the Piceance Basin reliant on energy

• Unemployment still above 7.8% statewide average in five counties, including 10.1% in Montrose and 8.8% in Mesa.

• Migration rates slowing 2009-2010

• Home foreclosures rising in Western Colorado (falling elsewhere)

• 7 our of 10 of the top 10 Colorado counties with the highest foreclosure rates are in Western Colorado

6

0.61% 0.56% 0.55% 0.54%

0.46% 0.45% 0.43% 0.42% 0.41% 0.39%

Gilp

in

Gar

field

San

Mig

uel

Gra

nd

Linc

oln

Sum

mit

Gun

niso

n

Arc

hule

ta

Eag

le

Our

ay

COLORADO 4Q 2011 TOP 10 FORECLOSURE RATES

Western Colorado Counties

AUGUST 2012 1 YEAR AVG UNEMPLOYMENT RATES

12% or higher 10.0%-11.9%

8.0%-9.9% 6.0%-7.9% 4.0%-5.9%

3.9% or lower

Community Builders 2012 7

CENTRAL PLACE THEORY HOW CAN IT BE APPLIED TO A MOUNTAIN ENVIRONMENT?

There are different hierarchies of centers with different market areas

Centers are regularly spaced Centers tend to form in a hexagonal

pattern, the most efficient pattern for travel between centers


Orlando

Daytona Ocala

Lakeland Melbourne

Sanford

New Smyrna

Mt. Dora

Citrus Ridge

Clermont

Kiss/St Cloud ?

Bithlo

Umatilla

Apopka

Celebration

?

Cocoa

Winter Haven

? Taft

Maitland Tavares

Deland Port Orange

? Holopaw Haines

Leesburg

Groveland

Destiny

Bartow

Frostproof Lake Wales Mulberry

Viera

Titusville

Longwood

Pierson

The economic crystalline structure of regions shows clearly in the distribution of towns in places like Central Florida

Areas shown in purple are where new centers would be predicted, based on the historical spatial pattern

Deland

ACTIVITY IN NON-CONSTRAINED LAND AREAS MOSTLY DEFINED BY THE INFRASTRUCTURE NETWORK

8


WESTERN COLORADO SETTLEMENT CLUSTERS DEFINED BY GEOGRAPHY. . .BUT STILL NEEDS HEIRARCHY

9


WESTERN COLORADOS UNFORTUNATE REALITY SUBURBAN SPRAWL A LOT LIKE THE REST OF AMERICA

Strong Urban Cores

Well Preserved Natural/Ag Spaces

Undifferentiated Low Density Suburban Zone

10


CONTRONTING REALITIES OF SPRAWL REPAIR THREE GATEWAY QUESTIONS TO LIVEABLE COMMUNITIES

Does the market want it?

Who is going to pay for it?

Will Wall Street underwrite the deal?

11


GETTING AROUND “WALL STREET”

12


A CASE STUDY

13

Existing stabilized asset has a discernible value For this example: $10M

To use the bank’s money to control and redevelop the asset, the underlying land value has to prove to be more than $10M


EMERGING MARKET REALITIES 1/3, 1/3, 1/3 SEGMENTATION

I consider myself:

33%

35%

21%

11%

City Person

Suburbanite

Small Town Person

"Country" Person

32%

43%

15%

9%

City

Close-in Suburb

Farther Out Suburb

Rural Comm.

I would choose to live:

Source: RCLCO Consumer Research, Fall 2007, ULI/Lachman Associates Survey, Summer 2010, 2011 National Community Preference Survey, National Association of Realtors, March 2011 , 2004 National Community Preference Survey, National Association of Realtors, October 2004

2010 2007

31%

42%

11%

14%

City

Suburban

Small Town

Rural Area

2011

I would choose to live:

17%

36%

18%

28%

City

Close-in Suburb

Farther Out Suburb

Rural Community

2004

I would choose to live: (18-39 Yr Old)

14


HOW BIG IS THE MARKET FOR “LIVEABLE PLACES”? EMERGING DESIRE FOR HIGHER DENSITY SUBURBS

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Prefer Downtown Prefer City, Residential

Prefer Small Town Prefer Rural Prefer Suburb, Mixed Use

Prefer Suburb, Residential Only

Gen Y

Gen X

Boomers

Eisenhowers


RESPONDING TO NEW DEMOGRAPHICS > 85% GROWTH IN HOUSEHOLDS WITHOUT CHILDREN

16

Single female with children, 4,680,913 Other Family,

1,758,377

Nonfamily, 3,416,246

Married with children, 1,376,788

One-person households, 11,825,702

Married, no children, 5,476,979

Single male with children, 2,165,939

Absolute Change in Households, United States 1980 – 2005

SOURCE: U.S. Census


1,300,000

170,000

1,500,009

4,100,000

5,400,000

5,000,000

3,500,000

-400,000

-1,900,000

-1,500,000

1,000,000

2,600,000

1,600,000

-200,00020 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

70 - 74

75 - 79

80 - 84

85+

`

Projected Total Population Growth Rate by Age 2010–2020

DRIVING CHANGING HOUSING DEMAND BUILT-IN SHIFT TO HIGHER-DENSITY LIVING

Apartments and Condos: Entry-Level and First Move-Up Condos, TH First time SFD

Townhomes and condos Single family TND and clustered, smaller lot single family

Senior Living

SOURCE: U.S. Census Bureau


THE BAD NEWS WE ARE NOT REALLY GETTING DENSER. . . YET

18

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1 Unit 2 to 4 Units 5 + Units

New Residential Building Permits Issued United States of America; 1980 to 2010 Source: U.S. Census Bureau


BUT. . . LOT SIZES ARE GETTING SMALLER

1/5

1/4

2/7

1/3

2/5

4/9

1/2

1999 2001 2003 2005 2007 2009

Acre

s

New Construction (4 Yrs) Owner Occupied Renter Occupied

Median Lot Size of New Housing Delivered United States of America; 1999 to 2009 Source: American Housing Survey


AND CONSUMER PREFERENCE REALLY IS EVOLVING TOWARD SMALLER HOMES

20

0

500

1,000

1,500

2,000

2,500

3,000

Preferred Home Size United States of America; 1994 to 2010 Source: Trulia-Harris Interactive Survey; July 2010


Rural

Suburban

Urban

Close-In (Urban-Lite)

Where They Will Move

14

45

41

Move to Another Metro

Not Moving

BUT. . . “URBAN LITE,” OR REPAIRED SUBURBS ARE THEIR MOST PREFERRED DESTINATION

Move within Current Metro

Desired Residential Context in Next Move; Gen Y Renters United States of America Source: RCLCO Survey; 2007


GEN Y CONSUMER STILL LARGELY INTERESTED IN SINGLE-FAMILY HOUSING

Fall 2007 “Home Type Likely

to Choose”

Summer 2010 “Anticipated

Housing in 2015”

March 2011 “Home Type Preference”

Apartment/Condo 12% 25% 15%

Rowhouse/ Townhome 12% 6% 6%

Single-Family 70% 64% 74%

Other 5% 5% n/a

Gen Y Stated Product Type Preference United States of America Source: RCLCO Survey 2007; ULI/Lachman Survey 2010; NAR Consumer Preference Study 2011


TRADE-OFF QUESTIONS

Suburban

Home

Ideal Home, Farther

Less SF, Higher Finish

VIEWPOINT PERCENT RESPONDENTS WHO AGREED

Would like to walk more than they do 55%

Would like to run errands on foot, walk to stores 63%

Walking is too inconvenient and things are too far away 61%

Presence of sidewalks and other places to walk and exercise are important in deciding where to live 79%

Interest in Walkable Neighborhoods United States of America Source: Surface Transport Policy Project Survey 2003

23


LET’S NOT KID OURSELVES, CONSUMERS ARE STILL MOVITVATE BY PRICE AND SIZE

0% 10% 20% 30% 40% 50% 60% 70% 80%

Purchase price/mo. rent

Interior space/sq. ft.

Interior design/layout

Building/home security

Parking availability

Building/prop. amenities

Green features/sustainability

Age of home/building

Key Housing Market Decision Factors (Top 3 Factors) United States of America Source: ULI/Lachman Associates Survey, Summer 2010

24


BUT, WALKABLE IS NOW THE MOST IMPORTANT COMMUNITY FEATURE TO GEN Y

48%

29%

55%

45%

55% 52%

71%

45%

55%

45%

Green Walkable Near Transit Wellness Learning

No/Limited Role Important/Vital Role Source: RCLCO Consumer Research, Fall 2007

Key Housing Market Decision Factors United States of America Source: ULI/Lachman Associates Survey, Summer 2010

25


WALKSCORE.COM IS NOW ACTUALLY A WALL STREET UNDERWRITING TOOL

Suburban

Home

Ideal Home, Farther


26


NEW CUSTOMER WILL TRADE LOT SIZE AND HOME FACTORS TO BE NEAR SHOPPING

Suburban

Home

Ideal Home, Farther


Key Housing Market Trade-Off Priorities United States of America Source: RCLCO Consumer Research 2007

51

71

55 52

49 47

62

46 43 42

Urban Setting Smaller lot/walk to work

Smaller lot/walk to shopping

Less than ideal home, closer to

shopping

Less than ideal home closer to work

Gen Y

Gen X

27


RESULT = GREATER LONG-TERM VALUE

28

Financial Characteristics of Mixed-Use Areas with Critical Mass (Blue) versus traditional Suburban Development (Red)

0%

50%

100%

150%

200%

250%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time (years)

Valu

e C

reat

ion

/ Cas

h Fl

ow ($

)

+

SOURCE: The Brookings Institution


Costs

Parking

RESIDUAL LAND VALUE - CONCEPTUAL

29

Revenues

Capitalized Value of What Gets Built

Entitlements

Site Costs

Construction

Financing

Profits

Residual Land Value

Marketing


Costs

Parking $5m

RESIDUAL LAND VALUE – HYPOTHETICAL (IDEAL)

30

Revenues

Capitalized Value - $50M

Entitlements $2M

Site Costs $1M

Construction $20M

Financing $2M

Profits $3M

Residual Land

Value = $16M

. . .Higher than the

$10M for the

existing asset

Mrkt’ing $1M

Cost to Deliver=

$34M


IN REALITY, PROJECTS OFTEN LOOK LIKE THIS

31

Revenues Costs


Potential for Premium Pricing

Land Entitlements Site Costs

Construction

Financing Profits Feasibility

Gap

Parking


THERE ARE TWO FACTORS WITHIN OUR CONTROL FOR THIS AUDIENCE TO FOCUSING ON

32

Revenues Costs


Potential for Premium Pricing

Land Entitlements Site Costs

Construction

Financing Profits

Parking

How real is it? How can we prove it? Can Wall St underwrite it?

We need to figure out how to build it more cheaply

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