Oversupply – Everywhere

“Buy land, they ain’t making any more of the stuff.”

Will Rogers

Even with the inevitable and growing dearth of housing, one commodity is still in great supply around most cities, land. During the past twenty years every city that could expanded their supply of job-producing lands for everything from retail and commercial acreage to industrial, warehousing and office. Now there is zoned land everywhere for non-residential use and it’s forcing down land prices, all to their own competitive disadvantage. And sadly the jobs aren’t coming either.

Restrictions on housing development, especially in most areas of California’s 50 mile coastal strip, and the foreclosure crisis have pushed prices up and up. Foreclosures have led to higher prices simply because these units have been pulled out of the retail market and are now being rented. As with all things this is temporary but the result is a severe lack of housing and increasing prices. You mess with the demand-supply balance and that’s what you always get. Some builders I know in the Central Valley of California have not built one house in five years.

And that’s what’s happened to commercial real estate in all its various forms, oversupply. Commercial lands in foreclosure are being quietly peddled in bankruptcies at fifty cents on the dollar or even less. Along the freeways there are miles of land zoned as commercial/business/professional and they can’t give the land away at any price. Cities are left scratching their collective heads. There are bright spots such as San Francisco and some areas of the Silicon Valley – but other areas are begging for users and jobs.

Housing always leads, or it used to. More homes means more people resulting in more demand for commercial uses; that was the usual mantra. Now, not so much. Areas immediately to the east of the San Francisco Bay area are now, once again, beginning to supply low-cost housing to the job centers in the East Bay and Silicon Valley. Buy a nice house at a great price and receive, at no extra cost, a daily five hour commute regime. But you’re fortunate. A similar home in the San Jose are will cost you three or four times the price, and to be honest the internal commutes within Silicon Valley are almost just as bad.

We have overbuilt retail, we still have empty office buildings, and signs saying “Available” hang on empty warehouse buildings. Anyone want a million square foot warehouse? No, how about an enclosed shopping mall? Amazon is flying into the logistic centers that surround our major cities, demand secrecy, and then provide jobs at about 1 per 1000 square feet. Cities need four and five per 1000 to even come close to justifying the infrastructure costs. That rebalance won’t happen for a long time.

I see a lot of rezoning of commercial lands to residential in the future. One way or another, the costs of the infrastructure already in the ground will force cities to make these changes – someone has to pay for the bonds.

But the bright side is that these lands are a bank account that can be drawn on when the time is right. During the fifties and sixties a lot of development came from outliers who, like the sod-busters of the late nineteenth century, opened the way for the massive suburban growth and the spectacular rise of the American economy.

And I can see this again in America’s future – I’m hardly a Pollyanna, but when the time is right there will again be another dramatic shift to the suburbs.

Stay Tuned . . . . . .

Is the Government Screwing Up the Electric Car?

The Fisker Karma - very cool but bankrupt

There is nothing stranger and sadder than thinking you can manufacture demand. Sure you can spend millions marketing the “Leaf” with every conceivable cultural bribe you have in your bag, environment, style, design, and sex (electric sex is certainly better than gasoline sex, don’t you think?). You can offer federal grants, tax rebates, and even push for higher gas taxes. All to push the consumer into something they still fear – and I mean fear. I’ve written at least five blogs on the problems and blessings of the electric vehicle:

The Urban Umbilical Cord – Part 1 – August 26, 2010 

The Urban Umbilical Cord – Part 2 – September 3, 2010      

The Electric Dream Car – March, 2011         

and others that looked at batteries and bribes.

My favorite economist Ludwig von Mises famously said in his great book on economic systems Human Action, A Treatise on Economics, “The market is supreme.” And right now the market is saying an emphatic, “NO!” There is too much confusion, an accumulation of never ending poor news, and the overriding sense of an industry that is failing. Battery makers (with government guarantees) going out of business, car companies failing (the Fisker Karma bankruptcy is the most dramatic due in great part to poor construction, software, and price – against its very cool design), and the confusion about hybrids and electrics in general.

This is not an argument against the product, it will be the primary type of urban vehicle at some point in the future but it has to get past this welfare image that tells a buyer that the only way they can come to market is through some sort of government gift or outright grant. They will tell you in marketing perception is everything and right now the electric car is very, very questionable. Visions of an out of work Depression worker with his hand out comes to mind when I think of the industry.

Will I run out of power before I can get home? Will it be safe? Will it explode if the battery overheats? What happens if the battery goes to zero – can it be recharged or will I have to pay $30,000 to fix it? Is this only a product for the rich and ostentatious? Is Tesla really telling us the truth about its mileage or do I have to buy one to find out?

Like everything there is a classic bell curve of acceptance, a long slow climb then acceleration to the level of almost a fad – it happened with everything including the radio, television, computer, even the mobile phone. The time frames were long or compressed but the curve is still there. The electric automobile still has a way to go. And the competition is increasing; look for more cars powered by natural gas (which we have a lot of now and it’s cheaper) and the technology for those vehicles is a lot closer to the gasoline and diesel powered machines.

I have maintained that a vehicle with a replaceable (think refuelable) battery is the future – the extension cord at work and home is all so very DIY, but the electric vehicle’s use as a replacement for the gas-guzzler must meet a different standard. They are two different technologies – car building versus battery making, ask Boeing about that. Build the car with a slot that accepts a battery with a range of options: range (storage amount), price (to essentially rent the unit), and source (nuclear, wind, solar, natural gas). The last is for the touchy-feelies out there.

The government (feds and state) keep trying to pick a winner by throwing cash around like drunks at a strip club. For what was wasted at Solyndra ($535M loan) and Fisker ($529M loan) we could keep the airport towers operating for two years (FAA cut due to sequestration is $600M). That is why the electric car is in trouble – government diddling.

Stay Tuned . . . . . . . . . .

Paolo Soleri (1919-2013) - An Innocent Architect

Back in the day, when I was at Michigan State studying landscape architecture and urban planning, the great architects were Philip Johnson, Mies van der Rohe, and Eero Saarinen. Bold, dramatic, controversial, and if you included Frank Lloyd Wright and Le Corbusier you could enjoy a pleasant evening of arguing and threats of bodily harm. Each had their acolytes and each carried an ego as large or larger than their buildings. Yet none came close to the imagination and utter boundless belief in architecture as habitats as Paolo Soleri, who passed away this week, he was 93.

From the Arcosanti Website:

Paolo Soleri (1919-2013), the founder of Arcosanti

Through his work as an architect, urban designer, artist, craftsman, and philosopher, Paolo Soleri has been exploring the countless possibilities of human aspiration. One outstanding endeavor is Arcosanti, an urban laboratory, constructed in the Arizona high desert. It attempts to test and demonstrate an alternative human habitat which is greatly needed in this increasingly perplexing world. This project also exemplifies his steadfast devotion to creating an experiential space to "prototype" an environment in harmony with man.

In his philosophy “arcology” (architecture + ecology), Soleri formulated a path that may aid us on our evolutionary journey toward a state of aesthetic, equity, and compassion. For more than a half century, his work, marked by a broad-ranging and coherent intellect (so scarce in the age of specialization), has influenced many in search of a new paradigm for our built environment.

If the act of living includes the pioneering of reality through imagination and sweat, Soleri has given us more than enough food for thought in the examples he has left on paper and in the desert wind.

For a young architecture student in 1971, Soleri’s imagination was a source of boundless inspiration. I remember walking through an exhibition of his work at the Chicago Museum of Modern Art during this period of time (a spectacular traveling exhibition of his works), enthralled and frightened. His building concepts included whole cities built into a dam, massive structures where jet planes landed on the 80th floor, models and sketches that used model airplanes as set pieces to understand their scale. To this day I wonder where those models are stored – another generation of architects could use a kick in the pants by just studying these.

In the summer of 1970 I took a pilgrimage from Chicago to California and back. A coming of age thing – and it worked. A year later I was in California, newly married, and a practicing professional. How cool was that! On the trip I stopped to see the Arch in St. Louis (Saarinen), the Grand Canyon (God), Taliesin West (Wright), Los Angeles (smog was in high season), the Marin Civic Center (another Wright), and Soleri’s small encampment in Scottsdale. More than enough buildings and structures to set my malleable mind on fire.

Paolo Soleri was an Italian from Turin, he studied with Frank Lloyd Wright in the late 1940s (was fired), and in 1956 he settled in Scottsdale, Arizona. Wright and the dramatic structures of the desert were to have a profound impact on this man. His career and his artistic works would take books (and they have) to fill. Take a minute and look at his Wiki site (here).

A new documentary called The Vision of Paolo Soleri in the Desert has just been released (I have not seen it), but here is the trailer.

Dreams are the molds that form our futures.

A Change is in the Works

To my loyal readers, thanks.  This is the 143rd  post for Cogito Urbanus, and for the most part I have enjoyed the writing and the research, they go hand in hand (and I never missed a Friday). And it’s actually quite fun. But, as any blogger will tell you, it’s always there, day to day, annoying and demanding. And the simple fact is this: writing two blogs a week (the other is on writing GO HERE), trying to get a 1,000 words a day down in my novels, and still run a design and urban planning shop is, well, a bit much ( ask my CFO).

So something has to change. It’s very obvious that the development world will go on doing its “thing” with or without me, so I’m cutting back. This blog will now be written when I have something brilliant to say, or not say, as the case may be. I am concentrating my efforts on two new books that are due out this spring and summer. One, a historical novel called Wars Amongst Lovers, and two, a new Sharon O’Mara thriller called Diamonds For Death. My goals are simple: sell, sell, and sell; write, write, and write. By the way, if you go to my writing blog, you will notice that all my books are free until Saturday night for your ereader/Nook/Kobo etc. Jump on board. Let’s build momentum together.

Keep in mind these Cogito Urbanus  prophecies:

• New home demand will outstrip supply very quickly and, due to the severe lack of forward planning and entitlements, will skyrocket in price. (huge demand + cheap money = higher prices).
•  The lack/reduction of federal spending will free up capital for private sector development - a very good thing.
• The greatest market for development (as a sector) will be senior housing. This will be an across the board menu of active adult urban, active adult resort, housing with medical support, short and long term care, and memory. Many will be infill projects.
• Interest rates must rise back to their norm and this will be sooner than you think.
•  And inflation (due to cheap money) will have dramatic impacts on supplies, land, housing and rents, be careful what you ask for.

 So Long Farewell - for now!

So my friends, it has been enjoyable and fun. Occasionally drop by, check out my latest postings, how often, remains to be seen. And I would love to hear from you.

So Stay Tuned . . . . . . . .

Noodling February

Running to Keep Up

I was not the first and I won’t be the last to point this out (see last week), but there is pressure building on the new home front. Builders are now running behind, and it will be expensive and costly to catch up.

In Orlando, Long Lines for New Home Lots

Rent? Okay but where?

What drives people to rent versus owning and why do they chose a house instead of an apartment, it’s due to income, children, and family size. And by the way it’s also the amenities.

Survey Single Family Renters vs. Multifamily Renters

Now for the Esoteric

In RCLCO’s latest Advisory, the subject of form-based codes is discussed, I have followed this alternative to Euclidian Zoning, or the type of zoning 90%+ of cities use (keep like uses together and don’t allow too much mixing). Form codes use a different relationship basis and can be down right confusing and costly – the administrator has to be a genius to figure it out, but they have their place, sometimes.

For Article:

Market Pitfall of Form-Based or Smart Codes

TED

And here are five TED features (videos and talks) that discuss housing and design, take a look, but I warn you there is silliness going on (masquerading as serious thought).

GO HERE

The First

James Howard Kunstler trashes suburbia in 2004, it’s like, you know, like a, diatribe, that goes and on and on, like you know, whining all the way. The man has proven that he’s just mad at everything. Nice gig if you can get it – and great speaking fees.

The Second

William McDonough in 2005, rambles on and on about design and the intentions of things designed. But there you are.

The Third

Cameron Sinclair in 2006, socially responsible architecture is discussed. It is a broad reach across many horizons and frontiers of design, very little whining. Very cool. It is a very big and complicated world out there.

The Fourth

Majora Carter in 2006, how get it done with a limited budget. New York is the focus on how to deal with cities and get back the city bits that can help people. Good speaker – no whining.

The Fifth

Thomas Heatherwick in 2011, on bio-inspired design and soulfulness of design. Cool architecture unlike the usual stuff we see. The bridge is uber-cool.

Stay Tuned . . . . . . . .