RECOVERY MODE -- MARKET AND ECONOMIC CONTEXT FOR THINKING ABOUT - - PowerPoint PPT Presentation

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

COMMUNITY BUILDERS 2012

Adam Ducker | aducker@rclco.com | October 25, 2012

Community Builders 2012

A FRAMEWORK FOR THINKING ABOUT GROWTH

EMBRACING “ALTERNATIVES” IN WESTERN COLORADO

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

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STRONG MIGRATION PATTERNS

PRIMARILY FROM SUNBELT STATES

2 FL OH OK NV IL MA UT NM WY TX AZ CA CO

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 Migrants

2002-2008 WESTERN COLORADO MIGRATION

In Migration Out Migration Net Migration

SOURCE: ACS PUMS, IRS

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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

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TOURISM AS A SEED INDUSTRY

12% OF REGIONAL ECONOMY, BUT GATEWAY TO GROWTH

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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

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AGRIBUSINESS AND CLEAN ENERGY INDUSTRIES

CHANGING THE CHARACTER OF GROWTH

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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

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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%

Gilpin Garfield San Miguel Grand Lincoln Summit Gunnison Archuleta Eagle Ouray 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

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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

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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

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WESTERN COLORADO SETTLEMENT CLUSTERS

DEFINED BY GEOGRAPHY. . .BUT STILL NEEDS HEIRARCHY

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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

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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? 

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GETTING AROUND “WALL STREET”

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A CASE STUDY

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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

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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)

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HOW BIG IS THE MARKET FOR “LIVEABLE PLACES”?

EMERGING DESIRE FOR HIGHER DENSITY SUBURBS

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

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RESPONDING TO NEW DEMOGRAPHICS

> 85% GROWTH IN HOUSEHOLDS WITHOUT CHILDREN

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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

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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

• 200,000

20 - 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

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THE BAD NEWS

WE ARE NOT REALLY GETTING DENSER. . . YET

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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

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• 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 Acres 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

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AND CONSUMER PREFERENCE REALLY IS EVOLVING TOWARD SMALLER HOMES

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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

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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

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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

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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

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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

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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

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WALKSCORE.COM IS NOW ACTUALLY A WALL STREET UNDERWRITING TOOL

Suburban Home Ideal Home, Farther Less SF, Higher Finish

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

Suburban Home Ideal Home, Farther Less SF, Higher Finish

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

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RESULT = GREATER LONG-TERM VALUE

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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) Value Creation / Cash Flow ($)

+

SOURCE: The Brookings Institution

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Costs

Parking

RESIDUAL LAND VALUE - CONCEPTUAL

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Revenues

Capitalized Value of What Gets Built Entitlements Site Costs Construction Financing Profits Residual Land Value Marketing

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Costs

Parking $5m

RESIDUAL LAND VALUE – HYPOTHETICAL (IDEAL)

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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

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IN REALITY, PROJECTS OFTEN LOOK LIKE THIS

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Revenues Costs

Capitalized Value of What Gets Built Potential for Premium Pricing Land Entitlements Site Costs Construction Financing Profits Feasibility Gap Parking

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

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Revenues Costs

Capitalized Value of What Gets Built 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