REAL ESTATE
The Countdown to the End of Extend and Pretend
In 2023, special servicers–companies that manage commercial mortgage-backed securities (CMBS loans)–reappraised office properties that transferred to its oversight at prices 50-60 percent lower than their appraised value when the loans originated, according to Lonnie Hendry, chief product officer at Trepp, who added that properties transfer to special servicing when owners “haven’t made their mortgage payment, or they’ve broken some other significant covenant with the lender.” Rather than sell at significant losses or refinance into interest rates that currently stand at 23-year highs, many office owners are clinging to backward-looking valuations calculated during cushier times by asking lenders for extensions—often granted only in the short-term—on loans that would otherwise mature. The volume of loans extended recently and coming due this year is so high that the Mortgage Bankers Association recently revised upward its estimate of commercial real estate mortgages maturing in 2024 from $659 billion to $929 billion, or 20% of all commercial real estate debt. The surge denotes the renaissance for so-called “extend and pretend” strategies, an approach that rose to prominence during the Global Financial Crisis (GFC) of 2007-2008, where a lender extends the maturity date on a borrower’s loan, allowing owners to pretend the value of the property hasn’t diminished.
https://urbanland.uli.org/the-countdown-to-the-end-of-extend-and-pretend (ULI Membership Required)
Vacant Office Buildings in the United States: An Opportunity for Public Investment?
There are convincing reasons for the public sector to buy and repurpose properties. Cities can use repurposed offices to jumpstart innovation districts – clusters of research institutions, startups, and business accelerators. Concentrating knowledge activities downtown can drive economic growth and attract skilled talent. Keeping commercial property public means steering rents and amenities toward inclusive growth rather than maximum profit extraction. Acquiring vacant offices near public transit could also allow the development of affordable housing in prime locations. Buildings could also be converted into recreation centers, libraries, startup incubators, and other amenities that bring value.
https://www.archdaily.com/1014010/vacant-office-buildings-in-the-united-states-an-opportunity-for-public-investment
What We’ve Learned by Assessing More Than 1,300 Potential Office-to-Residential Conversions
Our data reveals that only 25% of the buildings scored make for suitable candidates for conversion. Context, building form, location, floor plate size, and several other factors all play a crucial role in assessing a building’s aptness for conversion. That analysis has also revealed something surprising: all the features that result in an unpleasant office make for an excellent multifamily product. For example, a floor-to-floor height that’s typical of a Class C building is approximately 12 feet. Today, that’s considered oppressively low, as it translates to 8-foot ceilings in the office. With all the office ducts, lights, and ceilings removed, it can create a soaring 11-foot clear height in a residential building, which is considered luxurious.
https://www.gensler.com/blog/what-we-learned-assessing-office-to-residential-conversions%20
The Once and Future Shopping Mall
The last major innovation, the lifestyle center, an open-air development often built around a horseshoe, flourished in the early 2000s as developers realized that an increasing number of customers wanted to do their shopping outside. Twenty years after its introduction, the outdoor lifestyle center remains the most viable competitor to big-box stores and Internet shopping. But it has not halted the decline of the traditional shopping mall as a pervasive societal institution, and all of this history points us to the nagging question of what the social consequences of American mall culture have been. ONE NON-COMMERCIAL CONSEQUENCE was the redefinition of middle-class teenage life. Loitering in the corridors of enclosed malls became a ubiquitous feature of the teen experience in the 1980s, and came to structure teenage self-identity. Sometimes this meant a strengthening of social bonds. It meant the emergence of the human species we came to call the mall rat.
https://www.governing.com/urban/the-once-and-future-shopping-mall
A New Surge in Power Use Is Threatening U.S. Climate Goals
Over the past year, electric utilities have nearly doubled their forecasts of how much additional power they’ll need by 2028 as they confront an unexpected explosion in the number of data centers, an abrupt resurgence in manufacturing driven by new federal laws, and millions of electric vehicles being plugged in. Many power companies were already struggling to keep the lights on, especially during extreme weather, and say the strain on grids will only increase. Peak demand in the summer is projected to grow by 38,000 megawatts nationwide in the next five years, according to an analysis by the consulting firm Grid Strategies, which is like adding another California to the grid.
https://www.nytimes.com/interactive/2024/03/13/climate/electric-power-climate-change.html
REAL ESTATE AND MOBILITY
Navigating EV Infrastructure Oedinances: A Decveloper’s Guide
According to PwC research published in September 2022, an estimated 27 million EVs will be on U.S. roads by 2030. However, as EV use gains momentum, the need becomes critical for accessible and efficient charging infrastructure. According to the same PwC research, the number of charging ports across the country will increase from 4 million to a stunning 35 million by 2030.
https://www.naiop.org/research-and-publications/magazine/2024/spring-2024/development-ownership/navigating-ev-infrastructure-ordinances-a-developers-guide/
MOBILITY
Responding to Public Transit Criticism
Public transit plays a unique and important role in an efficient and equitable transportation system. Planners must communicate the benefits that public transit provides and respond to ill-informed critics.
https://www.planetizen.com/blogs/127714-responding-public-transit-criticism
Want to generate economic growth? Start with transit.
We know that transit plays a critical role in getting people to work and stimulating economic growth: APTA estimates that for every $1 invested in transit, communities see $5 in economic returns. Much of our cities’ infrastructure is built to facilitate movement to and from areas dense with jobs: commuter rail lines taking suburban passengers into the heart of cities, highways built to accommodate rush hour traffic. But what happens when job concentrations change, and traditional transit infrastructure struggles to catch up to new demand patterns? Communities across the country are turning to a more flexible transit option: microtransit services to connect workers to jobs in lower-density areas, or jobs with overnight shifts.
https://ridewithvia.com/resources/economic-regeneration-starts-with-transit
Dollars for Driving: The Congestion Pricing Dilemma
The concept of congestion pricing, though controversial, is gaining traction as a means to manage traffic congestion, reduce greenhouse gas emissions and fund transportation infrastructure. It involves charging drivers for road usage, especially in congested areas, to incentivize alternative modes of transportation. Traditional funding sources like the gas tax are becoming insufficient due to factors such as increased fuel efficiency and the rise of electric vehicles. Policymakers are exploring alternative revenue sources like vehicle miles traveled (VMT) fees to sustainably fund transportation infrastructure projects.
https://www.govtech.com/podcasts/dollars-for-driving-the-congestion-pricing-dilemma
AFFORDABLE HOUSING
Office-to-residential conversion proposed south of Denver
The office building, located near the interchange of Interstate 25 and Interstate 225 on the west side of I-25, has been vacant for at least the last five years, according to Peter Culshaw, executive vice president at Shea. Atlanta-based investment firm Invesco previously occupied the building, which dates back to 2000. The building’s adjacent neighbors include another office building at 4350 S. Monaco St. that currently has tenants, as well as an apartment complex at 4300 S. Monaco St. that Shea also developed. “We’re providing an affordable option in a market that’s expensive. This will provide an affordable alternative (for residents) to live where they work,” Culshaw said. In its plans, Shea has proposed converting the 124,000-square-foot office building into 143 units, targeting future tenants making between 30% to 70% of the area median income.
https://www.bizjournals.com/denver/news/2024/03/04/shea-properties-office-conversion.html (Paywall)
Church pews are sitting empty. Can they become affordable housing?
The biggest effort has come in California. In October, Gov. Gavin Newsom (D) signed a law allowing faith institutions and colleges to build affordable housing on their property even if local zoning prevents it. The law, which state officials say is the first of its kind, could slash the zoning process from years to months, said Philip Burns, principal of the Arroyo Group, an urban design and planning firm based in Pasadena, Calif. “If you’re someone who does affordable housing, it’s a game changer,” said state Sen. Scott Wiener (D), who spearheaded the law. It could speed up housing construction on more than 171,000 acres of developable land owned by nonprofits and faith-based organizations across the state, he said.
https://www.washingtonpost.com/dc-md-va/2024/03/08/churches-affordable-housing/
Building Stability Through Resident-Owned Mobile Home Parks
There are many advantages to becoming a resident-owned community, according to Bullard. “The first one is the stability of cooperative land ownership. They own an equal share of the whole community, and they elect a board of directors to make decisions and manage,” he said. “They have an annual meeting where they’re voting on the big things, like everybody, all the members get a vote on the big things like adjustments to the rent, the budget, community rules.” He’s noticed other advantages, too: the communities tend to become tight-knit and supportive, and people seem happier. But there are other issues that complicate manufactured housing. The homes themselves are frequently in need of updates or replacement, which can be expensive on the market dominated by a single company, Clayton Homes. Berkshire Hathaway, which owns Clayton Homes, is also the majority stockholder in one of the only companies that finances mobile home purchases.
https://dailyyonder.com/building-stability-through-resident-owned-mobile-home-parks/2024/03/11/
Want to own your NYC apartment? This nonprofit is helping renters buy their units.
The East New York Community Land Trust bought the 21-unit, rent-stabilized apartment building on Arlington Avenue for just over $3 million late last month and plans to help tenants convert to co-op units in the coming years. Under the “community land trust” model, residents own or lease their homes at permanently affordable rates while the nonprofit owns the land below. But there’s a caveat: Residents can’t sell their apartments for big gains down the road, which ensures that the units remain affordable for the next occupants.
https://gothamist.com/news/want-to-own-your-nyc-apartment-this-nonprofit-is-helping-renters-buy-their-units
Citywide ADU project would allow ADUs in all residential areas of Denver
This project implements proposed state legislation (House Bill 24-1152) by allowing administrative approval of Accessory Dwelling Units in all residential districts. If approved by City Council, the project would result in an update to the language of the Denver Zoning Code as well as a change to the city’s zoning map. The proposal is expected to go to City Council for a vote this summer.
https://denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Community-Planning-and-Development/Denver-Zoning-Code/Text-Amendments/Citywide-ADUs
