Storing wealth in New York apartments, contemporary art

According to one asset manager, the wealthy are now storing their wealth in apartments and art:

“Historically gold was a great instrument for storing of wealth,” the chairman of BlackRock Inc. said at a conference in Singapore on Tuesday. “Gold has lost its luster and there’s other mechanisms in which you can store wealth that are inflation-adjusted.”…

“The two greatest stores of wealth internationally today is contemporary art….. and I don’t mean that as a joke, I mean that as a serious asset class,” said Fink. “And two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.”…

The median sale price for existing condos in Manhattan jumped to a six-year high of $1.3 million in the first quarter, driven up by buyers seeking alternatives to out-of-reach new developments, according to Corcoran Group, a brokerage. In the U.K., asking prices for property climbed to a record in April as values in London rose 2.5 percent, Rightmove Plc said on Monday.

Three quick thoughts on this:

1. Good thing New York City has a boom in luxury building. Those underground expansions in wealthy London neighborhoods don’t hurt either.

2. What is the point where these apartments turn into a luxury housing bubble? There are only so many uber-desirable locations and only so many people who can afford these luxury places. If this part of the housing market collapses, what happens?

3. I recently read 33 Artists in 3 Acts by sociologist Sarah Thornton and this trend among the wealthy certainly has had an effect on the art world. There are some interesting discussions amongst artists involving money, commodities, and related topics.

Dilemma: replace older housing with “cheesy apartment complexes” or McMansions?

If older housing is going to be torn down, would you prefer it be replaced with apartment buildings or McMansions?

McMansions are going up one after another in my neighborhood on the Burbank hillside. Unattractive boxy additions are being built, leaving little yard space, and houses are being torn down to make way for bigger two-story barns. The reason for this may be because of the need for more room to accommodate today’s lifestyle — computers, media rooms, etc. It does spoil the whole appearance of the neighborhood. However, what’s worse it that ever since the ’60s,charming old cottages have been razed to make way for cheesy apartment complexes. Older apartment buildings with space and courtyards have been replaced by bigger apartment blocks with no outdoor areas. Maybe McMansions are the lesser of two evils.

Of course, these aren’t the only options available in many places. Yet, if land is expensive, McMansions and apartments could be appealing to builders and developers: the first can maximize square footage and have a higher selling price while the second increases the number of housing units (which could also help provide more housing in places that struggle with higher housing values).

If I had to guess, more Americans would choose to live next to a McMansion than an apartment complex. McMansions receive a lot of criticism, particularly in older neighborhoods where the new homes don’t fit the character or architecture. Yet, apartment complexes may be disliked even more by many suburbanites, even in the abstract, let alone next door or down the block. Apartments are perceived to attract different kinds of residents – lower class, different racial and ethnic groups, more prone to crime, more transient, less invested in their housing unit and the community – compared to suburban single-family homeowners.

Thinking more broadly, what housing options might be disliked more than apartments? Maybe trailer parks. Or group homes. Or public housing, whether in larger concentrations or scattered-site.

Chicago area apartment market continues price increases

With homeownership still moving downward in the United States, the apartment market in the Chicago suburbs keeps going up in price:

The median net rent in the Chicago suburbs rose to $1.29 a square foot in the fourth quarter, another record, up 4.7 percent from a year earlier, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm. The occupancy rate was 95.3 percent, versus 95.1 percent a year earlier.

Suburban rents have increased five years in a row—they rose 21 percent over that period—as more people have held off on buying a home, either because they can’t get a mortgage or are wary of owning after the housing crash. More recently, the improving job market has boosted demand for all housing, and apartment landlords are getting their share.

On the supply side, new developments are sprouting up from Naperville to Northbrook. Developers completed more than 3,300 apartments in the suburbs over the past year, the most in a decade, and another 2,700 are under construction, according to Appraisal Research…

Yet the revenue side of the equation is about as good as it gets for suburban landlords. Market revenue performance, a metric that combines the occupancy rate and median net rent, hit $1.23 in the fourth quarter, the highest it’s ever been, according to Appraisal Research.

An interesting housing market these days. Starter homes are not being built. New McMansions are back even as older McMansions sell briskly. People are considering disaster chic. The luxury market is booming in big cities like New York.

If apartments are indeed popular because they offer more short-term flexibility, how many suburbs will allow the construction of many apartments? Historically, wealthier suburbs in the Chicago area tend to avoid apartments and their more transient residents. So, I would guess most of these new suburban apartments are actually higher end, the kinds of places appealing to young professionals or the just retired and often located near cultural or transportation amenities like denser downtowns and train stations. If so, more expensive apartments don’t help many in the housing market who still need reasonably priced and conveniently located housing in the Chicago region.

Some Chicago suburbs welcome luxury apartments

A number of Chicago suburbs have new or recently approved luxury apartment complexes:

Suburbs that have long thought of themselves as bucolic communities filled with houses and families are warmly embracing the very type of residence that used to make them leery: the apartment.

Just don’t call them rentals, a word that conjures up an image different from the projects that municipal governments are selling to their constituents. Almost 4,000 apartments in well-appointed, amenity-filled buildings with rents to match are under construction or proposed in suburbs throughout the Chicago area. They are designed to attract young professionals and empty nesters with roots in the suburbs…

Some, but certainly not all the projects are transit-oriented, constructed near suburban downtowns and train stations or they are being used to create a downtown where there never was one before. But as they move forward, communities are grappling with concerns about density and traffic congestion, and affordable housing advocates worry that low and moderate-income residents who rely more heavily on public transportation don’t have the option of living near it…

“Many of them equated rental housing with low-income property,” Strosberg said. “It’s more recent that they’ve appreciated that rental comes in all different forms. There’s market-rate housing that appeals to a significant portion of their residents who don’t want to make a commitment to buying a place today.”

In wealthier suburbs, apartments often prompt images of transient residents who don’t care much about the community, lower-income residents, traffic, and large properties in communities proud of nice single-family homes. But, luxury apartments help reduce the perceived issues of social class and can bring money into the city (perhaps they can even help boost property values, residents spend money at nearby businesses, etc.). In other words, luxury apartments don’t create the same kind of issues, particularly if seen as part of reviving an area like a downtown. These communities may not go crazy approving such developments all over the place but I suspect many mature Chicago suburbs will continue to approve apartments that do contribute to higher densities but project a higher-end image.

Spain’s global lead in elevators tied to housing policies

Spain leads the world in elevators per 1,000 people and this is the result of certain housing policies:

Compared to other countries, Spain’s elevator supply looks remarkably, well, elevated.

Spain Has Risen to the Top of Global Elevator Rankings
Quartz

At face value, there’s a pretty simple reason why. Spaniards are some of the world’s pre-eminent apartment-dwellers. In 2012, roughly 65 percent of the population lived in apartment buildings, much higher than the euro-area average of 46 percent. (The only other European countries that compare to Spain in terms of apartment-living are Latvia and Estonia, which are both also around 65 percent.)…

Top-down planning gave rise to relatively high-density urban building, often by politically connected construction companies in a building boom that stretched from the 1960s into the late 1970s.

“The dominant form of this housing was estates (apartment complexes) with over 1,000 dwellings,” wrote then Harvard academic Eric Belsky and colleague Nicolas Retsinas, in a paper on the Spanish housing market back in 2004. “These estates replaced many of the shantytowns that developed near cities like Barcelona and Madrid in the late 1940s and early 1950s.”

Thus was the modern Spanish city born.

With the emphasis on agricultural land in the Franco regime, dense cities and elevators were the result.

Given all this, what are the implications?

1. Do all those elevators detract from or enhance walking (taking the stairs versus having denser communities where walking is the norm)?

2. Are there any unique features of Spanish elevator culture?

3. Do the Spanish any sort of edge in elevator technology or maintenance?

Selling smaller yet posh apartments plus an urban lifestyle to younger renters in Tampa Bay

The Tampa Bay real estate market may have picked up again but it includes some new options: stylish, small, urban apartments for millennials.

So last month, the 28-year-old dietitian moved into a stylish flat in downtown’s newest apartment tower, Modera Prime 235. The trade-off? It cost $1,330, double her last rent, for a one-bedroom matchbox spanning 700 square feet.

“I knew I wasn’t going to be in a McMansion. . . . but it’s definitely enough space for me,” she said. “That price was a lot, like, ‘Oh my goodness, I’m going to have to watch my budget.’ But I’ve enjoyed every penny I’ve paid for it so far.”

Developers are racing to build more than 8,000 new apartments across Tampa Bay, sparking one of the biggest building surges since the housing bust. But to win big rents from millennials, the biggest generation in American history, they’re building in a way that looks nothing like the suburban booms of years past.

The emerging apartment complexes are more closely connected to city centers and packed with metropolitan perks, but they’re also surprisingly pricey and getting smaller. While the median new American home swelled last year to a record-breaking 2,384 square feet, Census data show, the nation’s median new rentals have narrowed to 1,043 square feet, the smallest since 2002.

“The younger generation, under 35, they don’t want to own homes. They don’t want a yard. … They watched what happened (during the recession), watched their parents lose their houses,” said John Stone, a managing director of multifamily housing for Colliers International, a real estate brokerage. “They have a different taste, a different value system. . . . These kids are more than happy to pay $1,200 in rent to walk out their door and immediately go to their favorite bar, their favorite restaurant.”

This has been a trend predicted for a while now by a number of people ranging from Richard Florida to James Howard Kunstler. Because of a variety of pressures from the increase in gas prices, the limited possibilities and decentralization of suburban sprawl, a changed job market, and new technologies, younger Americans may just want desire more exciting urban neighborhoods (though these don’t necessarily have to be in the city center or even in large cities) and smaller homes and private spaces. This is happening many metro areas throughout the United States but it is unclear how big the phenomenon might grow or how much other groups of Americans want to join millennials/the Creative Class.

Yet, as the article notes, this is all tending to lead to a segmented housing market with large suburban McMansions (or something like them), trendy yet small urban apartments for those who can afford them, and the lower end of the housing market that is still struggling.

Baseball stadiums of the future to be more integrated with surrounding cities?

Urban baseball stadiums became all the rage after the early 1990s (the new Comiskey Park in Chicago was the last of the old models) but one projection regarding baseball stadiums of the future suggests they will be even more integrated into the surrounding cityscape:

Looking forward, there’s no need for the high-arching concrete and steel that separate today’s stadiums from the city around them. Mirakian anticipates “transformative stadiums that will really build a community.” The glass structures horseshoed around Living Park, for example, aren’t just premium seating, but also serve to combine the city and stadium. A street front on one side that hosts everything from offices and apartments to retail and restaurants turns into a stadium portal on the backside, offering stellar views onto the field. Instead of rising out of the city, the stadium sinks into it.

Trending data suggested increased urban densification, giving Mirakian the idea to create a linear park environment that allows the building to play as the central theme—a place activated during a game, but where the community can gather at any time, during either the season or offseason. In this case, the building itself is defined by the edges of the city, acting as a window into the building on game days. There’s no need for fanciful facades, as the stadium instead flows with the park and city…

You’ll still find a traditional seating bowl tucked below premium glass-enclosed spaces, but with the future of team revenue not as reliant on gate receipts, designers can offer new types of space. A city park overlooks rightfield—a riff on Fenway Park’s famed Green Monster, but this time with a green roof—and an enlarged berm beyond leftfield gives the stadium community-inspired life and public accessibility 365 days a year…

Getting to urban sites often proves tricky, so Populous brought the public transit line straight through Living Park, giving transit users a free look at one of the most stunning views in the city. Mirakian called it a “pretty distinct” element of the design.

Sounds like the goal is to make the stadium more of a lifestyle center than just a place where baseball games are played 81 home dates a year. This may require owners to open their park up more to the community and other events, which should appeal to them in the long run because there is an opportunity to generate more revenue from other events. Think of recent efforts to have football games, rock concerts, and hockey games in baseball stadiums. (The owners of the Chicago Cubs have followed this plan in recent years with Wrigley Field.)

While this kind of park sounds appealing, another aspect of the experience is not addressed in the article: what are the costs for all of this? Can the average fan easily attend a game at this new stadium? Some of the new features may make attendance cheaper – we attended a game a few years ago at Petco Park in San Diego and they had a good number of cheaper tickets in their outfield lawn area. Yet, if the Padres were a better team, those prices might be a lot higher. Additionally, in bigger cities with more ticket demand, prices are higher: the cheapest seats at a summer premium game at Wrigley Field start at $25 (more like $34 when you factor in all the fees and taxes).

Note: although it looks less sexy than the Populous projection, the Lansing Lugnuts, a Class A team, are trying to bring in more residents into the ballpark itself:

The Lansing (Mich.) Lugnuts and the city that owns their ballpark want to take a page from Wrigley’s book and construct perhaps 100 apartments literally inside of the stadium. By way of a $22 million project split down the middle with public and private funds, the Midwest League’s Class A club for the Toronto Blue Jays and the city seek to expand and upgrade Cooley Law School Stadium in downtown Lansing, the state capital.

The plan, called the “Outfield,” would be part of a bigger plan to upgrade parts of downtown as a whole. It’s a similar concept to what Fort Wayne, Ind. has done with its pro team, the Tincaps, and the Harrison Apartments beyond the left field fence.

I wonder how much of a premium such apartments inside, or very near, a minor league baseball stadium in the Rust Belt can command.