ARES Urbanexus Update #170
The American Real Estate Society (ARES) distributes this monthly compilation of real estate-related news and information curated by H. Pike Oliver.
Metropolitan and regional trends
High-paying jobs in the USA
A report prepared by payroll Company ADP shows that the San Francisco Bay Area “vastly outranked” every other metropolitan region in the proportion of jobs paying high annual salaries at every level—over $500,000, over $1 million, and over $2 million. That said, the relative income ranking of metropolitan areas has changed little over the past four decades, as highlighted in the chart below. Learn more here.
2024 STEM job growth index
Since 2016, RCLCO has published the STEMdex, an annual analytical ranking of U.S. metropolitan areas that evaluates their potential for future growth in Science, Technology, Engineering, and Mathematics (STEM) industries. These rankings identify markets with the strongest prospects for STEM employment and industry expansion, providing valuable insights for stakeholders across sectors.
STEM industries are vital drivers of innovation and economic growth. These jobs are among the highest-paying and most impactful, attracting a diverse, highly educated workforce. Nationwide from 2019 to 2023, employment in STEM roles grew by 2%, outpacing the 0.9% growth in non-STEM jobs. Salaries in STEM fields averaged $112,800 annually, nearly double the $61,600 average for non-STEM roles.(1)
RCLCO’s STEMdex rankings focus on the 50 largest Metropolitan Statistical Areas (MSAs), which account for nearly 70% of U.S. STEM jobs and 60% of all employment nationwide. The analysis forecasts the concentration of STEM job growth over the next five to ten years, making it a critical tool for policymakers, urban planners, real estate developers, and corporate leaders.
Learn more here.
Where residential construction thrives in the U.S.
The NAHB analysis of the Quarterly Census of Employment and Wages (QCEW) data provides an insight into employment and establishment concentration1 of the residential construction industry across metro areas (MSA).
Location quotients (LQ)2 are ratios3 that compare the concentration of the residential construction industry within a metro area to the concentration of the industry nationwide. LQs are used in this article to evaluate the employment and establishment concentration of the residential construction industry in local areas.
The March 2024 QCEW data indicate that while employment in the residential construction industry was found throughout the country, it was more concentrated in some metro areas than others.
The employment LQs of 387 metro areas ranged from 0.02 to 3.99. Cape Coral-Fort Myers, FL, had the highest concentration in the residential construction industry, with an LQ of 3.99. It was followed by Naples-Marco Island, FL (LQ: 3.47) and Bozeman, MT (LQ: 3.12).
Florida, experiencing rapid population growth, reported a relatively high employment concentration in residential construction. All metro areas in Florida had a higher concentration than the nation’s. Moreover, half of the top ten metro areas with the highest concentrations of the residential construction industry were in Florida.
Various metro areas in the Mountain Division also heavily rely on the residential construction industry for employment. Bozeman, MT (LQ: 3.12), St. George, UT (LQ: 3.03), Coeur d’Alene, ID (LQ: 2.51), and Provo-Orem-Lehi, UT (LQ: 2.35) were ranked in the top ten markets with a higher concentration of residential construction industry.
Learn more here.
Geography and U.S. immigrant deportations
In a recent report, Alan Berube of the Brookings Institution argued that these actions and others would disproportionately impact U.S. cities and urban areas, given that most foreign-born individuals live and work there. This report extends and deepens that analysis, drawing on other recent research to examine the profiles and locations of specific immigrant groups that Trump’s policy proposals may affect in the near term. As the analysis shows, those policies could reach a large and geographically diverse range of places, dramatically disrupting local businesses, schools, public safety agencies, and community institutions. In addition to helping local and state leaders understand the potential impacts of these actions on their residents and communities, the report also suggests essential ways in which these leaders might prepare and respond.
An estimated 72% of unauthorized immigrants in the United States reside in just 11 states, and half live in just 34 major urban counties. Learn more here.
Master-planned communities
New-towns and affordable housing
In an article posted by Planetizen, Justin Hollander argues that “new towns are the answer to affordable housing challenges.
As the entire United States faces immigration pressures and the linked pressure of housing affordability, new towns offer a path for drastically increasing supply while creating places that foster high-quality living, access to community resources, walkable and healthier neighborhoods, and reliable public transit. Because these new towns will be new, they will be relatively expensive places to live when they are first built, so don’t expect them to be cheap, but they will take pricing pressure off of the older stock of homes across the country.
While the post-war suburban American landscape is typified by sprawling, single-use housing developments that are car-centric, this new generation of towns can be built with the pedestrian in mind and support car-free lifestyles that make us healthier and happier.
Learn more here.
Office
Conversion to housing
Office conversion projects in the United States are expected to increase by 63 percent in 2024 over 2023, according to real estate services company CBRE.
Writing in Smart Cities Dive, Nish Amarnath notes that 73 adaptive reuse projects are already completed, while 30 more are expected to be finished by the end of the year. “Office-to-multifamily housing projects account for nearly 75% of the conversion pipeline in Q3, up from 63% in the first quarter, per the report.” In some cases, conversion can cost up to 30 percent less than new construction.
The growth comes as the demand for office space continues to lag far below pre-pandemic levels in most cities, and the housing crisis continues. At the same time, cities and states are adjusting regulations to encourage adaptive reuse and make conversions easier and more cost-effective.
The report adds that office-to-multifamily conversion projects have created 28,000 housing units since 2016. “The growing conversion activity is anticipated to reshape business-centric districts into dynamic mixed-use neighborhoods, the firm says.”
While not all office buildings are appropriate for residential conversion, some are being transformed into life sciences facilities, hotels, and other uses.
Learn more here.
Mixed-use
A fast-growing S.F. Bay Area neighborhood
A 45-acre former light industrial park just north of Levi Stadium, home of the San Francisco 49ers’ is located in Santa Clara, CA, 43 miles south of downtown San Francisco, Santa Clara, home to tech companies like Nvidia, Intel, and Applied Materials, has more than two jobs for every housing unit. The average home price is around $2 million, and the average rent is $3,300 monthly.
The vision for the Clara District — called initially the Tasman East plan — includes 4,500 housing units. However, it’s already being amended to add another 1,500 apartments. In addition to the 1,358 units nearing completion, a 196-unit affordable development has already opened at nearby 2233 Calle del Mundo.
Today, the district is buzzing with safety vests and hard hats. The 509-unit Clara and the 176-unit luxury senior project Ellore are both by Related California. SummerHill Apartment Communities is wrapping up the 347-unit Tasman East, while Ensemble plans to welcome its first residents to Ave Santa Clara in January. USA Properties Fund is underway on a 151-unit affordable development. The tallest of the next wave of buildings to open is Ellore, Related’s 20-story senior building.
Learn more here.
The Clara District in Santa Clara, CA (FKA Tasman East Specific Plan)
Location of the Clara District in Santa Clara, CA, 44 miles southeast of downtown San Francisco
Retail
Two big bankruptcies
Party City stated that it will close all its U.S. stores within the coming months. At the same time, the Container Store formally filed for Chapter 11 bankruptcy protection.
Party City, which filed for Chapter 11 bankruptcy protection in January 2023 to restructure its debt, will now be liquidating. The New Jersey-based entertainment accessories retailer, which does business as Party City Holdco Inc., indicated it intends to close all of its approximately 700 stores and has commenced going-out-of-business sales.
The Container Store issued a statement acknowledging that it had filed for Chapter 11 protection in the United States Bankruptcy Court for the Southern District of Texas. The metro Dallas-based retailer, which has about 100 stores nationwide, will “implement a recapitalization transaction to bolster its financial position, fuel growth initiatives and drive enhanced long-term profitability,” according to the statement.
Party City was founded in 1986. According to Yahoo Finance, the company shed about $1 billion in debt via the 2023 proceedings. Still, inflationary pressures and growing competition from niche online retailers stymied its revenues and cash flows.
The Container Store, which first raised its flag in 1978, also owns Swedish electronics retailer ELFA, but the Chapter 11 filing will not impact those stores. In the last 12 months, the company has opened new stores with footprints of about 15,000 square feet, including one in Miami and one in Princeton.
Learn more here.
Housing
An upcoming battle that could roil mortgage costs
he first Trump administration tried to remove two mortgage giants, Fannie Mae and Freddie Mac, from government control. The second one might finish the job., which could roil the mortgage market and throw an unsettled real estate industry into more turmoil.
The new administration is widely expected to resume a push to remove Fannie Mae and Freddie Mac. These two national mortgage behemoths buy up huge quantities of loans from government control. That initiative was a priority during President-elect Donald Trump’s first term, but the pandemic thwarted those plans. Now, though, economists and housing experts say the government has to be especially careful not to reshuffle the companies in a way that raises uncertainty or spooks investors, with high mortgage rates and affordability at a crisis point.
Learn more here.
Climate
Reflections following COP 29
While debated more than ever, sustainability matters now more than ever—he increasing need for an urgent step-up in action to meet key climate goals was a common refrain around COP29. Three illustrative facts were often cited:
This is the first year we are on track to exceed 1.5 degrees.
The costs of climate change are already piling up, and global insurance losses from natural catastrophes are on track to exceed $135 billion this year. Beyond financials, these costs are now being counted in lives affected and lost. The Spanish Prime Minister spoke about the tragic floods in Valencia, one of the many examples discussed in Baku.
Most countries and companies are behind on their plans and targets set for 2030. Countries working on their nationally determined contributions (NDCs) ahead of COP30 in Brazil need to take an honest look at how they can accelerate their plans and where the financing for this will come from.
There is a strong sense that urgent action is needed and a deepening worry that we will be left having to do “too much, too late” in the coming years. There was an equally strong sense that, 29 years after the first COP, some basic requirements are debated more than ever, especially financing. Urgent action is needed, but this is not transmitting into actions on the ground at scale. Go here to learn more from an article posted by McKinsey & Company.
