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The Changing American Dream

Posted on July 15, 2011 by Jake Dietrich

It is no secret that today’s average American household is different that it was when our parents were our age. Back in the ‘50s and ‘60s, over 75% of American households were married couples. Today, that number is less than 50%. The average American household is no longer a family consisting of a married couple with their three children and a golden retriever living in their suburban home. In fact, the growth of non-family homes versus family homes is staggering. According to a recent report by CNBC, in the past fifty years, non-family households have grown nearly 500%, from 7.9 million to 39.2 million. Meanwhile, family households have increased just 1.7 times, from 45.1 million to 77.5 million.

Family households value sheer size more than any other factor in housing. Non-family households are less willing to commute, valuing location and proximity to work and entertainment. The “McMansions” that were the all the rage 10 years ago are beginning to see their demise. High property taxes, daunting mortgage payments, and long commutes have made this type of living increasingly less desirable. In turn, the downtown condominium or full-service apartment is the piece of the housing sector that has seen continued growth in development and demand from consumers. Suburban “Hummer House” owners will continue to keep for sale signs in their yards while downtown communities will have minimal vacancies or even waiting lists.

The American Dream is changing.

This entry was posted in Housing, Lifestyle, News

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Day Made of Glass

Posted on March 23, 2011 by David Leazenby

Corning Day Made of GlassWe’ve been working on some interior selections for a project recently and I came across this Day Made of Glass video that has over 10,000,000 hits as of today on YouTube. Maybe you have seen it. Its yet another reminder of how fast technology changes and how we have to adapt and incorporate new products and services into the experiences of designing residences for people to live. It was less than four years ago that no one had an iPhone. Think about that… no touchscreen in anyone’s hands, let alone mobile instant communication through social media channels. How many people go around today comparison shopping apartments with their iPhone or iPad? Today, no one has video glass on their countertops (at least not that I have seen). Obviously, there are major implications to residential design if any of these technologies by Corning make it mainstream in our careers. I am still getting my head around the implications for us in apartment design and construction. What most intrigues me is what wasn’t shown in the video. Why not an entire wall of “touch glass” in a living room? What would happen to that space that we so carefully design for furniture placement? If apartment or condo developers can provide every resident’s “entertainment wall,” then have we just created a new income stream and replaced the need for residents to buy a TV? I’m just scratching the surface here. Let me know what you think.

This entry was posted in Design, Housing

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Demographic Need is Fundamental - Mark Zandi

Posted on March 21, 2011 by Tadd Miller

Mark ZandiAt a recent ULI meeting that I attended, economist Mark Zandi painted an optimistic financial future for America based on personal and corporate balance sheets and earnings growth. He stated, “its not if they start investing their cash, its when and how.” Although that gets the developer in me excited, the real takeaway from that discussion was his repetitive point that “demographic need” determines the decision-making in every household. In times of low economic activity, therein lies the opportunity. Figure out how to meet the needs today, not so much the wants.

The often “Field of Dreams” mentality of the development industry should take note of this point, and work toward revamped products to meet these consumer demands. Mark used a personal example: his family’s need for a larger vehicle. It was a recent purchase based on need, and it was inevitable in his mind regardless of economic climate. There are certain needs today that are influencing mixed use and urban infill redevelopments; ie. the need to reduce monthly energy costs, to be closer to employment, to accommodate changing household formation, etc. Combine these needs with a credit spigot that is loosening, and personal balance sheet cleanliness (a drop from 430 million credit cards to 320 million over last 36 months) and it appears momentum toward our industry has some real steam behind it. Now, how do we make sure we capitalize on it for our industry, businesses, and personally?

Photo - Mark Zandi in Time Magazine

This entry was posted in Finance, Housing

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Young people still want to own homes

Posted on February 08, 2011 by Tadd Miller

DeSoto mixed use milhausGen Y – Largest Population Segment in the Market! “In 2010 Generation Y surpassed the baby boomers to become America’s largest generation,” begins Leanne Lachman and Debrah Bretts article Generation Y: America’s New Housing Wave in this months Urban Land Magazine (January/February 2011) www.uli.org. Gen Yer’s now account “for 25 percent of America’s population,” which can be seen as incredibly positive or negative depending on how you envision the associated descriptions of Gen Yer’s as “emerging adults, plugged in, social, connected, high maintenance, outspoken, educated, multi-cultural, high performance, entitled, civic minded, tattooed, pampered.”

As you read the article however, the most striking thing is their desire for home ownership, even though “29 percent are still living at home.” Even after witnessing one of the most severe economic downturns other than the depression, values of real estate being depleted, and record foreclosures and peoples net worths and residences being taken away. The article repeatedly references a ULI survey, which shows a large majority of the respondents want to own their own home:

35% of the respondents currently own their own homes…..[and] within five years, two-thirds of all respondents expect to own their residences, including over half those who will still be in their 20’s in 2015. Almost 80 percent of those who will be in their mid-30’s anticipate owning, [thus] 90 percent of gen-Yers plan on owning a home.

I have not reviewed the survey, nor have I been able to find it online, however, this is a major factor that will affect our business. As a long time homeowner, I have been actually questioning whether the flexibility and mobility of renting could be a good plan. I've also long thought the idea of a second home was a crazy expense in lieu of hotel. This is an interesting dynamic. What does this mean to our current focus on for-rent housing, I don’t know, but what I do know is that it sounds like the future is bright for those of us condominium and for-sale developers as soon as the mortgage market gets itself worked out!

Here are the Current Generations by Percentage of U.S. Population
3.3% Silent generation (age 81+)
9.7% Depression and war babies (65 – 80)
24.6% Baby boomers (46 – 64)
17.2% Generation X (33 – 45)
25% Generation Y (15 – 32)
20.1% Generation Next (<15)

Source: U.S. Census Bureau, 2010

This entry was posted in Housing and tagged generation y, Trends

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Hotel Indigo and Residences at 151

Posted on September 15, 2010 by David Leazenby

The business traveler or casual visitor to the Hotel Indigo in Asheville probably doesn't recognize the complex design decisions that resulted in this impressive 13-story mixed-use structure towering over the freeway on the northern edge of downtown. This site is extremely tight, just wide enough to fit one bay of parking as a podium for the tower itself. It is wedged between the I-240 freeway and busy Haywood Street. You will notice in the pictures below the one-way circulator at the ends of the podium for cars to maneuver between the levels. The 100-room hotel opened in early 2009 along with a restaurant and fitness studio. Unfortunately, it also opened with zero pre-sales of the 12 condos on the upper 4 floors known as the Residences at 151. With prices ranging from $910,000-$1,450,000 for 1,500-2,285 square feet, the units offer the most dramatic views of the surrounding hills and mountains around the city. Of course, there are some lessons learned here for developers. I notice there is no separate elevator for the condos and only one parking space for each unit. Also, a tour of the units revealed some pretty high noise levels coming from the freeway below, presumably due to the type of windows. It all sounds fine for a few nights in a hotel, but could become a nuisance to a $1M+ condo buyer. While the design, layout and finishes of the units are very well done and complement the contemporary styling of the building, the lack of exclusivity and minimal parking at this price point has no doubt challenged the property in this tough market. Currently, the units are also available for 1/10 fractional, deeded, sale at a much nicer price: from $129,000 for 14 days per year at any of the Elite Alliance properties. Monthly dues start at $537/mo. Owners, or their guests, can stay as often as they like here at their home for $20/night. Actual numbers were not available, but some fractionals have been sold. It's really a good option if you need to be in Asheville a significant amount of time, but don't want the hassle of maintaining a home.

This entry was posted in Hospitality, Housing, USA Southeast and tagged Hospitality

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Mixed Use Density Capped by Costs

Posted on August 16, 2010 by Milhaus Development

Mixed use projects in the Midwest are traditionally limited to wood frame construction because of market rents/pricing vs. construction costs. Take into account that 3 story, non-elevator, surfaced parked product costs +/- $65 pnrsf (15 – 22 units/acre), a midrise, underground parked, common corridor, elevatored building +/- $125 pnrsf (22 – 100 units/acre), further dwarfed by the previous example in steel/concrete at +/- $155 pnrsf (75+ units/acre).

Basically, any residentially based steel/concrete frame product in Midwest the market is a viability non-starter, as there is absolutely no way to make an increase in density make up for the 30 – 100% construction cost increase! The argument is often made that increasing density increases value, therefore making it make sense, however, this is like trying to make money in volume in a product that has no profit/margin to begin with. See this comparison (milhaus-construction-type-comparison.pdf) of a project that shows the difference between the three construction types on a specific site.

This entry was posted in Design, Finance, Housing

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Mixed Use Per Unit Price Misnomer

Posted on August 10, 2010 by Tadd Miller

Mixed use development professionals should second guess their per unit valuations for residential product. Combining the numerous components of a mixed use project always seems to become a custom fit solution, thereby, introducing multiple valuation factors into a fair analysis. Per unit valuations have been driven by the industry's commoditized approach of repetitive product, specifically the suburban single family lot, or multi-family land, which cannot be replicated in the mixed use category. These construction costs were known quantities, so all you had to do was figure out the rent/sale price and absorption, punch it into a spreadsheet, and you knew what your per lot/unit price was.

So let's do a quick comparison, suburban lot price vs. a price per unit of air from a retail developer? The suburban lot is very simple, you get a defined land parcel with basic restrictions upon which you build within certain lines and that is it, and most likely, you can easily without substantial architectural and documentation define the basic product of what you are going to build. However, take a mixed use unit pad for analysis. You need to basically design the entire product, define exactly where specific lines are going to be drawn, determine at which point what utilities, access, parking are going to be delivered by what party, deal with use restrictions, venting, utilities, what type of platform and what type of weight intensities and spans must be delivered, etc. All this before you can reasonably understand the true valuation of what that air rights lot should be valued at. Most of this would be a deduct to whatever the standard suburban multi-family per unit price would be. One of the most common issues we see with this is the need for structured parking, of which is usually a deduct to whatever the standard suburban multi-family lot would be, which in turn makes most suburban mixed used infeasible without government intervention, as this per unit parking cost exceeds the per unit value of the land.

However, this analysis isn't all negative, as there are value enhancements that arise within a mixed use product as well. Often times there is a premium price paid by end consumers to live within a mixed use projects, although I have yet to see a solid study that shows these real rental premiums that can be achieved. In addition, the savings of shared maintenance and resources within the project are often substantial. Lastly, you can never underestimate the savings that one experiences within the actual project from a construction standpoint, value to the retail shops, as proximity to the other uses as a savings efficiency.

This entry was posted in Finance, Housing

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Mixed Use Density - the Absorption Cap

Posted on August 05, 2010 by Tadd Miller

Density in mixed use projects are capped by local market absorption rates. In the Midwest, absorption rates approximate 8 - 12 units monthly, with maximum annual absorption arguably 100 units. Suburban projects deliver in 12, 24, and 36 unit increments, allowing immediate occupancy at a rate approximately equal with market absorption. However, this equilibrium is impossible in midrise development. With average Midwest projects hovering around 200 units, and 75 - 100 unit an acre production capacity with wood frame midrise buildings, it is unlikely that high-rise residential product will be viable for the foreseeable future in most Midwest cities. (Note for this I am considering all product that exceeds any wood frame constructibility as a high-rise).

I love the idea and concept of high rise living, and I look forward to the day when my neighborhood in downtown Indianapolis reaches the point where its market is ready to accept that development approach, however, I want to be realistic on what I can accomplish, and I know that the absorption cap is something that we must remember in the design of our urban and mixed use redevelopment throughout the Midwest. Hopefully we will create such a dynamic and attractive market in downtown Indianapolis this will change, however, it is not going to happen overnight.

This entry was posted in Housing

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South Florida's Mixed Use

Posted on July 26, 2010 by Milhaus Development

mixed-use-coconut-point-300x227Growing up in South Florida, I was able to see one of the fastest growing and wealthiest communities in the world first hand. I watched as US-41 transformed from a 2-lane road into a 6-lane highway. I watched as the small immediate care center I was born in was replaced by a gorgeous shopping center, which was quickly overshadowed and outdated by the new mixed-use development The Strada at Mercato. And this has all happened in the 21 years I’ve been alive. Imagine the transition my dad experienced, now a 53 year Naples native.

It seemed that until the recent struggles, every time when I would visit on vacation, new and revolutionizing mixed-use developments would appear. One of these developments, Coconut Point, was formulated by a partnership led by Simon Property Group. This relationship combined the ideals of both outdoor mall style retail shops and restaurants, with high-end condominiums overlooking the shops. The atmosphere surrounding this development is astonishing and it continues to outperform all other area competition.

Don Graves, a successful area realtor, bought into the idea early enough that he purchased a unit strictly as a personal investment. Graves currently rents his unit year-round to area visitors. Since completion, he’s been able get a better understanding of why people love the mixed-use concept so much. Graves believes, “Coconut Point has been a success because people from the Northeast are used to the accessibility it provides, and others quickly take a liking to lifestyle as well.” Tenants of Grave’s are within short walking distance to movie theaters, high-end retailers, and outstanding cuisine. This ease of lifestyle has created a demand unlike other area properties. Grave’s contributed a tremendous amount of the success at Coconut Point to Simon’s ability to secure long term retail tenants. This demand is representative of the change of lifestyle and the changing of people’s behaviors.

Personally I believe that with the struggles Americans have faced in recent years, lifestyle changes will only increase the demand for mixed use project that allow owners and tenants an easier and more cost efficient lifestyle than typical suburban life. Walks to grocery stores, area restaurants, and other daily stops will become the norm as Americans become more aware of the environmental and financial impacts endured by typical suburban practices. South Florida’s mixed-use projects like The Strada at Mercato, Coconut Point, and Bayshore represent the beginning of this transition in one of the nation’s best areas.

In the coming weeks, I will critically approach each of these specific development in an exciting and informative blog series on “What worked, and what didn’t,” interviewing Florida’s key development individuals.

This entry was posted in Housing, USA Southeast

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Mixed Use driven by Mass Media Influences

Posted on July 19, 2010 by Tadd Miller

packard-street-view-300x237Urban lifestyle depictions by the mass media significantly impact the continued urban renaissance. The first TV episodes I enjoyed were Andy Griffith and the Walton’s; then the Brady Bunch and Cosby, and then on to Seinfeld and Law and Order. I saw television personalities starting with the Walton farm, then the Huxtable townhouse, and furthermore into Seinfeld’s New York condo. Quite a lifestyle and storyline transition in prime time television programming for a 20 year span. There is no doubt in my mind that this had an impact on my lifestyle choice of a mid-rise condo near Monument Circle in downtown Indianapolis.

From this personal experience, I would argue that this storyline transition has accurately reflected the rebirth of urban America. Many people choosing their first place to live after college over the last decade help make Friends and Sex and the City two of the most popular shows. Furthermore, look at tonight’s television list on one station, and you see How I Met Your Mother, Big Bang Theory, Rules of Engagement, and CSI: Miami in the 3 hour primetime lineup, which are all very urban based storylines and backdrops.

Of course I am biased as I want to validate my downtown, condo lifestyle, but what blogger doesn’t have some bias. I can only hope mass media continues to have a focus on urban based shows that no doubt help reaffirm that urban lifestyle is definitely cool (and the sustainable option as well if you read “Green Metropolis” by David Owens)!

This entry was posted in Housing, Lifestyle, Our Philosophy and tagged Urban Infill, mixed use, mixed use development, downtown living, generation y, urban living

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Older Posts

06.22.10 - Think mixed use. Think legacy. by Tadd Miller
06.18.10 - What keeps a developer up at night? by David Leazenby
06.01.10 - Less Square Feet – More Value by Tadd Miller