REAL ESTATE
Chicago to Offer Most Generous Subsidies in U.S. to Save Its Downtown
Three-quarters of the mortgages backing its office space that were converted into securities are either in default or are at risk of default, the highest of any major metropolitan area in the nation, according to credit research firm KBRA Analytics. Chicago’s office-vacancy rate has soared to 16.3% from 11.9% in early 2020, and it is notably higher than the U.S. average of 13.8%, according to data firm CoStar Group. Some downtown office buildings have sold for less than one-quarter of what they were valued at a few years ago. Average asking rents haven’t fallen much, but partly because so many landlords are facing financial difficulties, the available supply is shrinking.
https://www.wsj.com/real-estate/commercial/chicago-to-offer-most-generous-subsidies-in-u-s-to-save-its-downtown-700a0076?mod=hp_lead_pos3&mod=djemRealEstate_h
In the post-COVID Twin Cities, it’s clear urban planner Jane Jacobs was right about downtowns
Jacobs was worried about downtown centers where land use was both simplified and enlarged. With few exceptions, cities razed blocks of their central cores and replaced them with large-scale skyscraper complexes with ample parking. The vast majority of the land use was devoted to office space, occasionally interspersed by often-subsidized “urban mall” complexes, nearly every one of which is now abandoned. Seventy years later, the elephant in the room is what is to become of the superblock skyscrapers? Each of them is theoretically worth tens or hundreds of millions of dollars, and form a huge part of their cities’ tax bases. But without nine-to-five daily office work, there’s little hope for most of these buildings returning to their former solvency. It’s a dramatic sea change from the past, when building a new office tower was the fever dream for most mayors, chasing their iconic combination of prestige and tax base.
https://www.minnpost.com/cityscape/2024/06/in-the-post-covid-twin-cities-its-clear-urban-planner-jane-jacobs-was-right-about-downtowns/
Why Downtown Won’t Die
Can America’s iconic downtowns survive this shift? Yes, and for a basic reason. Great downtowns are not reducible to offices. Even if the office were to go the way of the horse-drawn carriage, the neighborhoods we refer to today as downtowns would endure. Downtowns and the cities they anchor are the most adaptive and resilient of human creations; they have survived far worse. Continual works in progress, they have been rebuilt and remade in the aftermaths of all manner of crises and catastrophes — epidemics and plagues; great fires, floods and natural disasters; wars and terrorist attacks. They’ve also adapted to great economic transformations like deindustrialization a half century ago. The rise of remote work today won’t kill off our downtowns, but they will be forced to change once again. And with smart strategies and perseverance on the part of city leaders, real estate developers and the civic community, they can become even better than they were.
https://www.bloomberg.com/news/features/2022-08-17/as-remote-work-endures-downtowns-are-adapting?itm_source=record&itm_campaign=The_Downtown_Dilemma&itm_content=Why_Downtown_Won%E2%80%99t_Die-2
Demand Shortfalls and the Floorplate Mismatch: What’s Happening with Downtown Retail
Arguably, however, the most impactful trend—and the one least discussed—involves tenant demand, specifically shifts since the mid-2010s in the retail brands that are popular and the kinds of floorplates that they favor. Unlike the other challenges, this one predates the pandemic and might endure well beyond it. In the early 2000s, major retailers started opening multiple flagship stores on high-profile urban shopping streets around the world. These massive, multistory showcases were intended primarily as marketing vehicles where consumers could “experience the brand,” thus creating a halo effect that would drive sales on digital channels, in branch locations, or through wholesale partners. Alas, such flagships, situated along some of the highest-rent corridors on Earth and requiring constant infusions of capital to retain consumers’ attention, were expensive propositions. When many legacy brands began to struggle amid the so-called retail apocalypse of the later 2010s, these stores became obvious targets for cost-cutting.
https://urbanland.uli.org/issues-trends/demand-shortfalls-and-the-floorplate-mismatch-whats-happening-with-downtown-retail?utm_source=realmagnet&utm_medium=email&utm_campaign=HQ%20Urban%20Land%2006%2E03%2E24b
“It’s like two mortgages”
Today, existing mortgages for homes in areas that are threatened by rising waters and wildfire were handed out, overwhelmingly by nonbanks (which are subject to little oversight), to people who probably didn’t understand what they were getting into. In particular, they may not have understood that their property insurance costs might climb steeply. Regulators at the federal level could lower systemic risks by looking more carefully at climate data and refusing to allow Fannie Mae and Freddie Mac to soak up mortgages from too-risky areas where they can already tell buyers won’t be able to afford homeownership in the future. But stopping the circus will have a big effect on lower-income would-be homeowners living in those areas.
https://susanpcrawford.substack.com/p/its-like-two-mortgages
The Groundscraper: A Building Typology to Decentralize Cities
A ground scraper is essentially the opposite of a skyscraper – a large building that sprawls outward horizontally instead of soaring vertically into the sky. Though no strict definition exists, groundscrapers are generally described as extremely long but low-rise buildings with over 1 million square feet of space, sometimes called sidescrapers or landscrapers. The term came into the spotlight with Google’s plans for their massive $1.3 billion London headquarters. Designed to be only 11 stories tall but over 1,000 feet long, this vast office block epitomizes using horizontal expansion to create immense space for thousands of employees.
https://www.archdaily.com/1016771/the-groundscraper-a-building-typology-to-decentralize-cities
The Music Has Stopped For Once-Booming Real Estate Crowdfunding Platforms
These capital calls have become more common over the last year in deals that raised money on platforms and through traditional syndication, investors and experts say. When deals start to go south, the first step sponsors take is to stop making distributions to investors because they need the money to make their debt payments. Then, as their financing gaps keep widening, sponsors ask investors to put in more money, typically a set percentage of their initial investment. Investors are then left to determine whether they believe the additional funding will bail out the deal and save their initial money, albeit with a lower return than first projected, or whether they would be “putting good money after bad,” Ippolito said. “Either enough of them do it to save the deal, or if they can’t, they basically lose the property to the debt holders,” he said. “It’s a catastrophic event.” These situations aren’t unique to crowdfunding. High interest rates have squeezed the finances of many developers and buyers who syndicate money from investors, forcing them to seek more money to save the deal. A number of real estate syndicators — those who raise money from individual investors without using an established third-party crowdfunding platform — this past year have faced the need to raise additional capital to salvage deals, The Real Deal reported in December.
https://www.bisnow.com/national/news/capital-markets/many-once-booming-online-crowdfunding-platforms-now-at-a-cliffs-edge-124373
AFFORDABLE HOUSING
DU Executive Certificate in Affordable Housing
The new DU Executive Certificate in Affordable Housing – the first of its kind in the Rocky Mountain region – will draw on a network of DU faculty experts and industry insiders in real estate, construction management, law, social work, and public policy. The 8-month program, with classes beginning Fall 2024, will be jointly offered by the Burns School of Real Estate & Construction Management at the Daniels College of Business and the Rocky Mountain Land Use Institute (RMLUI) at the Sturm College of Law.
https://www.du.edu/affordable-housing
A new American Dream? With home prices out of reach, ‘build-to-rent’ communities take off
In 2023, builders completed an estimated 97,000 build-to-rent residential homes — including those outside of build-to-rent communities — an increase of 45% from the prior year and a record for the sector, according to estimates from John Burns Research and Consulting, which provides independent research on the U.S. housing industry. The properties remain a relatively niche sector of the housing market, making up a record 7.9% of all single-family housing starts in 2023, according to Arbor Realty Trust, a real estate investment trust company. Even so, some experts view any addition to the housing supply — including more rental properties — as positive, especially when homeownership remains out of reach for many. Renting is now more affordable than owning a home in nearly 90% of U.S. counties, according to a January report by research firm ATTOM Data Solutions.
https://www.courier-journal.com/story/money/2024/06/04/build-to-rent-communities-growing/73953898007/
Governor Jared Polis has signed several housing-related laws in Colorado. Here are some notable ones:
Prohibit Residential Occupancy Limits (HB24-1007): This law, signed by Governor Polis, eliminates discriminatory occupancy limits in Colorado. It expands housing opportunities by allowing Coloradans to live in communities of their choice, near jobs and transit hubs. Librarians and public library employees are also protected from retaliation for refusing to remove library resources.
https://www.colorado.gov/governor/news/more-housing-now-colorado-eliminates-unfair-occupancy-limits-under-new-law-signed-governor
Preventing Evictions and Homelessness: Governor Polis signed legislation that outlines conditions under which landlords can file for evictions or “no-fault” lease terminations. The goal is to prevent evictions and ensure Coloradans remain safely housed.
https://www.cohousedems.com/news/signed!-gov.-polis-signs-bill-to-prevent-evictions%2C-homelessness
Elimination of Most Occupancy Limits: Governor Polis signed a bill into law that officially eliminates most restrictions on how many unrelated roommates can live together in Colorado. House Bill 1007 prohibits local governments from enacting occupancy limits, which were considered discriminatory and outdated.
https://www.denverpost.com/2024/04/15/colorado-jared-polis-occupancy-limits-housing/
Polis signs law helping local governments buy properties
Under the new law, local officials can match accepted offers made by a third-party buyer to the building’s owner. The law also gives city and town leaders a weaker right-of-first-offer privilege on market-rate apartments that are headed for the auction block, but those offers don’t have to be accepted. The main goal, supporters have said, is to ensure that the millions of dollars of tax credits invested in subsidized housing properties don’t go to waste — and that their tenants aren’t displaced because of increased rents — once their affordability requirements expire.
https://www.denverpost.com/2024/05/31/colorado-jared-polis-affordable-housing-apartments/#:~:text=Colorado's%20local%20governments%20will%20soon,Thursday%20by%20Gov.%20Jared%20Polis
Will Colorado’s new land-use laws kickstart housing? Experts laud changes, but now the real work begins.
In the coming years, Colorado will unroll five land-use measures that will allow for more density in areas with frequent transit service; more accessory-dwelling units, such as backyard cottages and garage apartments, in neighborhoods with single-family zoning; more unrelated roommates living together; and fewer parking requirements in some areas. Local governments also will face requirements for more strategic planning and housing studies. By and large, the reforms are targeted at the state’s heavily populated Front Range region.
https://www.denverpost.com/2024/05/20/colorado-jared-polis-zoning-land-use-reform-laws-housing/
Zoning Reforms to Mitigate America’s Affordable Housing Crisis
“Zoning created the affordable housing crisis by being laser-focused on low-density, auto-centric, single-family houses,” says Toccarra Nicole Thomas, director of land use and development at Smart Growth America, a nonprofit based in Washington, D.C. “Zoning is inherently designed to be inflexible.” Piecemeal zoning reform can be easier to achieve but will probably be less effective to address the affordable housing shortage. “Some jurisdictions play around with zoning by allowing ADUs [accessory dwelling units] or upzoning so you can put several units on one property, or allowing ‘missing middle’ housing that looks like a single-family home but has multiple units,” Thomas says. “But to be effective to preserve or generate affordable housing, zoning must be reformed in a comprehensive way.”
https://urbanland.uli.org/issues-trends/zoning-reforms-to-mitigate-americas-affordable-housing-crisis
Want affordable housing? Take the chassis off manufactured houses.
Housing officials justified the permanent chassis requirement by saying it made the homes safer — but it has done the opposite. The permanent chassis regulation is intended to increase the structural stability of the home and reduce the likelihood of high winds turning the home over or damaging the home. Forced to leave the base on their houses, most buyers “tie them down,” fastening the chassis to anchors buried in the ground. Homes on chassis have proved to be susceptible to severe weather risks such as tornadoes, as they are much more easily ripped off a chassis than off a permanent foundation. Analyzing U.S. tornado deaths from 1996 to 2023, the Associated Press found that 53 percent of people who died at home — 815 people — were in manufactured houses.
https://www.washingtonpost.com/opinions/2024/05/21/affordable-mobile-homes-law/
REAL ESTATE AND MOBILITY
It’s time for development around Denver’s airport to take off, region’s officials say – Paywall
Notably, both Adams County and Aurora argued that Denver should return undeveloped land that had initially been acquired for creating an airport back to Adams County, according to previous DBJ reports. Officials from both entities later showed support for the general concept of growth surrounding the airport, but they also asserted a clause in a 1988 intergovernmental agreement that states any development on land that Denver annexed from the county at that time must be confined to aviation purposes. By 2018, those localities had agreed to work with Brighton, Commerce City, Denver and DIA on the Aerotropolis Regional Committee to coordinate land use, infrastructure and marketing for the area.
https://www.bizjournals.com/denver/news/2024/06/07/colorado-aerotropolis-open-for-business.html
MOBILITY
Colorado’s Bold New Approach to Highways — Not Building Them
Within a year of the rule’s adoption in 2021, Colorado’s Department of Transportation, or CDOT, had canceled two major highway expansions, including Interstate 25, and shifted $100 million to transit projects. In 2022, a regional planning body in Denver reallocated $900 million from highway expansions to so-called multimodal projects, including faster buses and better bike lanes. Now, other states are following Colorado’s lead. Last year, Minnesota passed a $7.8 billion transportation spending package with provisions modeled on Colorado’s greenhouse gas rule. Any project that added road capacity would have to demonstrate how it contributed to statewide greenhouse gas reduction targets. Maryland is considering similar legislation, as is New York.
https://www.nytimes.com/2024/05/31/headway/highways-colorado-transportation.html
