The real estate recovery will continue to move forward in 2013 but slowly. Global economic turmoil will restrain confidence but overpriced core markets will begin to drive interest in strong secondary markets. Most locations can still not support commercial construction because of the weak tenant demand and employment outlook. Multifamily development remains the only strong sector but is expected to be peak in 2014-2015.
Posts from the ‘Infrastructure’ Category
(1) As the decline changes course it will emerge in demand across gen X, Y and baby boomer generations.
(2) Buyers need what they can afford and what they can finance. Sustainability and energy efficiency is important but buyers are not willing to pay extra – this is the new standard.
(3) Back to the basics before the market become overheated – the basics haven’t changed.
(4) Feasibility of suburban development is questioned in tough economic times but people continue to want yards, good schools and a secure way of life. Urban infill doesn’t work for most production builders. Suburban development is not dead but remote suburbs have lost appeal – closer in locations close to jobs and services will succeed.
(5) Great planning is important in establishing a social infrastructure that will create community.
(6) Inexpensive shifts that positively impact our lives will be the successful breakthroughs. Mini-master planned communities will be 50-100 acres in first and second ring suburbs; they will be 40 year old strip malls and old industrial areas which are close to where things are happening. 20-40 units per acres that still feel relaxed and comfortable; active adult and age-targeted homes will mix into traditional neighborhoods.
(7) Face-to-face conversations and connections are still important. Social media, by itself, is not a tool to sell a community, but rather a way to engage a community and drive lifestyle.
(8) The reality is that millions have damaged credit and potential for financial innovation exists to meet the needs of consumers.
(9) Market uncertainty appears to be transforming the adversarial nature of the builder, developer, and capital relationship to one of collaboration and cooperative alliances, and more creative partnerships are becoming the norm.
(10) New development will not be feasible until distressed lot supply is absorbed.
(11) Successful public/private partnerships will require long developer track records and impeccable credibility.
(12) To secure financing, loans for projects need to be relatively low leverage at 35-40%.
(13) Private equity will be the first to jump back into real estate finance. Banks and institutions will follow reluctantly, but only once a sustained records of growth, in terms of home and land pricing and absorption rates, is established in the market.
(14) We will all be in the business of fixing broken projects for the next few years.
The state will delay widening Independence Boulevard from Albemarle Road to Conference Drive by six months to plan for possibly adding toll lanes in the future.
The Lake Norman Area Transportation Committee (LNTC), along with the four towns (including Mooresville), sponsored an Urban Land Institute Advisory Services Panel study to help align regional interests. The study demonstrated to the State, CATS, and MTC that the towns are willing to collaborate and will participate financially. A consultant is currently studying various economic development models and the results are expected late in 2011. The Red Line now has a significant lobbying body representing its interests and it is estimated the line could be operational between 2017-2020.
The US is behind in its investment in infrastructure. Has anyone heard that before? Australia, Brazil, China and Europe (to name a few) are utilizing public/private partnerships (PPPs) to advance the rate of investment in their country’s infrastructure. The US remains the 5th fastest growing nation and anticipates 120 million new people over the next 20 years. In Charlotte, we anticipate 500,000 new people, roughly 250,000 households and 300,000 new cars. This paints a picture for the need to invest regionally and nationally – not just to accommodate new growth but to address existing ailing systems. Modernization of this infrastructure is also an important component.
Can we sustain similar growth patterns to those seen over the last 50 years and feasibly operate the infrastructure required for this growth over the long-term? No. A study done in Tallahassee demonstrated the cost of infrastructure relative to different development density scenarios. The picture was very clear. We must adapt to higher density development patterns to meet our needs; places that do will remain competitive and sustainable. In Charlotte, we have taken the first step within the public planning realm. Charlotte’s integration of land-use and transportation planning is seen nationally as innovative and has yielded great results. The new Lynx light rail system is one example. This is not enough though to meet the coming demand and future costs. Someone must pay for our future infrastructure needs and the conversation needs to start now. Successful models include a variety of public/private partnerships, toll roads, infrastructure banks, user fees and higher gas tax.
Throughout North Carolina value capture to provide infrastructure has not been well utilized. The City of Charlotte has historically always paid for infrastructure through issuance of bonds. Times have changed. Diversification of industry is occurring and population is still increasing; the demand for new infrastructure and development is building. Value capture can also take the form of tax increment financing (TIF), but this has been widely unpopular and misunderstood in North Carolina. Failures can be pointed to nationally but so can an enormous amount of successes. California was the first to enable legislation in allowing the tool in 1951. North Carolina was #49 in 2004. Arizona is the only hold-out. Regardless what we want to call it, value capture from development which will occur must take place as one component to help build this infrastructure.
In Charlotte, the story of The Charlotte Douglas International Airport is both very promising and one that most Charlotteans are probably not aware of. The airport has a $10 billion economic impact and is poised to become a major economic development engine moving forward. Located just six miles from downtown Charlotte, the airport has the capacity to become an intermodal transit hub, providing passenger and freight rail, air transportation and distribution. The current CSX and Norfolk Southern rail yards are operating at capacity and are not well located to create a synergistic intermodal hub. Relocation of the rail yard to the airport would allow a similar lift capacity as that at DFW with potential airport expansion which would rival Atlanta. This is significant because of the improvements to the Panama Canal that will soon allow additional China traffic through to east coast ports. Charlotte will benefit from this and is positioned to do so.
Charlotte and the region are poised to succeed and great strides have already been taken in terms of infrastructure and land use planning to secure its future. Financing mechanisms must be agreed upon and investment in our required infrastructure must become a “strategic priority” for this success to continue.
This summary provides a recap of discussion between: Tom Murphy – ULI Senior Resident Fellow, Gene Conti – Secretary of Transportation NCDOT, David Howard – Charlotte City Council, and Jerry Orr Executive Officer Charlotte Douglas International Airport