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RECOVERY MODE -- MARKET AND ECONOMIC CONTEXT FOR THINKING ABOUT LIVABLE COMMUNITIES
COMMUNITY BUILDERS 2012 Adam Ducker | [email protected] | 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
Community Builders 2012
STRONG MIGRATION PATTERNS PRIMARILY FROM SUNBELT STATES
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FL
OH
OK
NV IL
MA
UT
NM
WY
TX
AZ
CA
CO
0 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
Mig
rant
s
2002-2008 WESTERN COLORADO MIGRATION
In Migration Out Migration Net Migration
SOURCE: ACS PUMS, IRS
Community Builders 2012
HEALTHY DEMOGRAPHIC EVOLUTION AGING, BUT ALSO GROWING IN WEALTH AND WORKFORCE
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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
Community Builders 2012
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
Community Builders 2012
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
Community Builders 2012
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
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0.61% 0.56% 0.55% 0.54%
0.46% 0.45% 0.43% 0.42% 0.41% 0.39%
Gilp
in
Gar
field
San
Mig
uel
Gra
nd
Linc
oln
Sum
mit
Gun
niso
n
Arc
hule
ta
Eag
le
Our
ay
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
Community Builders 2012
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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Community Builders 2012
WESTERN COLORADO SETTLEMENT CLUSTERS DEFINED BY GEOGRAPHY. . .BUT STILL NEEDS HEIRARCHY
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Community Builders 2012
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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Community Builders 2012
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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Community Builders 2012
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
Community Builders 2012
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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Community Builders 2012 15
HOW BIG IS THE MARKET FOR “LIVEABLE PLACES”? EMERGING DESIRE FOR HIGHER DENSITY SUBURBS
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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
Community Builders 2012
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
-200,00020 - 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
Community Builders 2012
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
Acre
s
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
Community Builders 2012
AND CONSUMER PREFERENCE REALLY IS EVOLVING TOWARD SMALLER HOMES
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0
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
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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
Community Builders 2012
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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Community Builders 2012
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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Community Builders 2012
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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Community Builders 2012
WALKSCORE.COM IS NOW ACTUALLY A WALL STREET UNDERWRITING TOOL
Suburban
Home
Ideal Home, Farther
Less SF, Higher Finish
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Community Builders 2012
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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Community Builders 2012
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)
Valu
e C
reat
ion
/ Cas
h Fl
ow ($
)
+
SOURCE: The Brookings Institution
Community Builders 2012
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
Community Builders 2012
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
Community Builders 2012
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
Community Builders 2012
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