ULI North Texas Blog

2014 ULI Fall Meeting Quick Takeaways

Generally speaking, the industry is experiencing a bright recovery and the outlook continues to be positive for real estate development and housing, though there is still a wide abundance of caution and avoidance of over-optimism regarding appreciation.  Capital partners seem bullish and are looking for new projects.  The best companies and individuals are making as certain as possible that the industry remains responsive, flexible, and proactive.

From Ken Perlman, SVP John Burns Real Estate Consulting, regarding trends and demographics:

  • Difficult to trend the MPC/Housing industry nationally.  Market is ‘lumpy’ with red-hot growth and demand in some specific regions (Austin, Houston, Raleigh, San Francisco, Denver, Southeast US, among others) and little demand or growth in others (Midwest, Northeast).
  • The retiree market is still very strong as well as that for the near-retiree – still facing the bulk of the boomers as a market but need to begin shifting focus to subsequent generations and buyers.
  • Student Loan debt is hampering the sub-30 market from ownership.  Approximately 414k units per year are not being absorbed due to this.
  • Multi-generational housing is an increasingly important segment and is desirable to both ends of the age spectrum.  This underscores “experiential” and “legacy” values permeating the market today.
  • The investing side has seen an increase in capital share from foreign national individuals, foreign investment firms and local ‘flippers’.
  • Supply is low, particularly in hot markets but even in the less active markets.

 

From Nick Lehnert, Ktgy Architecture & Planning

  • Buyers are trending towards smaller homes, more private outdoor spaces, indoor/outdoor connectivity, high personalization, incorporation of “idea spaces” (flex rooms not necessarily attached to the home and that are unfinished), media rooms, spa-like master baths, covered outdoor rooms, larger garages (for projects and storage), high-technology incorporation, multi-generational options (MIL suites), and Super-Kitchens (large, finely finished, acting as center of home).
  • The home, across current buying spectrum (all ages) has evolved into a refuge-a location to disconnect from the busy world and to connect with family.  Space design must continue to evolve toward meeting these needs as they are not likely to disappear.  Causality is the high-tech connected world with little down time.
  • Sense of community is important in the MPC and cannot be faked.
  • Alternate density solutions with grouped homes in small numbers around common area or common street areas will be an emerging planning and design trend.

 

From Scott Heiferman, CEO of Meetup

  • There is a general consensus, even from those outside the real estate industry, that meeting spaces, gatherings, quality of life experiential-focused neighborhoods are what people are looking for.

 

From Best 2014 MPCs, moderated by Gadi Kaufmann, CEO of RCLCO

  • It is clear that cutting edge MPCs must incorporate the above information and/or product specifics into their projects while also finding something to differentiate their product – by focusing on geographic/historic ties, pushing innovative concepts, and creatively incorporating new trends in lifestyles.  Worthwhile noting that Laura Cole (VP Marketing, Willowsford) budgets marketing dollars at a not-to-exceed 2% of total projected sales revenues.
  • The second-home market recovery is lagging approximately 2 years behind the primary home market on the upward side of the bell curve, which could be an opportunity.  The primary market is approximately half-way up the same curve, with significant room for growth before the plateau.

 

Discussions with various individuals from capital investment firms (Aimee Martin at Rockpoint, Hector Calderon at Encore) indicate that there appears to be relatively abundant capital (bullish outlook on housing and MPCs), with larger projects somewhat easier to fund than small (i.e. it is easier to ask for $100MM than $10MM based on volume and projected outlook for sales.)  Capital partners prefer not to exceed 10 year looks (with 5-8 preferred) on MPC/Mixed Use product, and are looking for IRRs of appx. 20%.  They also prefer to see the developer be a co-investor at 5-10%.

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