Rental Trends

In a recent report by Axiometrics, rental trends are segregated into age groups for the years 1982 - 2013. The left hand y axis is the percentage of renter households to total households. The right hand y axis is the difference in the employment-to-population ratios for 25-34 year-olds compared to that of 20-24 year-olds (the yellow dotted line). From this chart, we can see that trends in recent years have shifted upward to include a more proportionate share in renting. Additionally, from the yellow dotted line we can see that "the ratio of employed older millennials has been increasing faster than that of younger millennials". 

Source: 

Axiometrics December 3, 2014 Mailing

Outlook for the Texas Economy

This is a plug for the Texas A&M's Real Estate Center's publication called the "Outlook for the Texas Economoy". This is a monthly report which provides a dashboard type view to various indicators and trends in the Texas economy. Texas as a whole, major MSA's, border cities, and the US are graphed for easy comparison and insight into what is happening.
Major sections of the report include:

• Economic Activity
• Manufacturing
• Housing
• Services
• Energy
• Employment
• Prices
• Trade

Each month a chart is highlighted and the source and interpretation is discussed. The "Outlook for the Texas Economoy" is produced by  Dr. Luis Torres and Dr. Mark G. Dotzour and assisted by Wayne Day. 

The report can be viewed at the following link: http://recenter.tamu.edu/econ/

EB5

In a recent article by Fortune, EB-5 funds are discussed and a world of dark and secretive capital alternatives is revealed. EB-5 is an employment based visa program that essentially sells citizenship for investment in the US. $500,000 in an investment creating 10 full-time jobs in a qualifying investment and area will get you citizenship in the US. The article discusses that EB-5 funds and the industry for obtaining these funds is largely unregulated and amatuers are chasing these dollars. Of specific interest, are that these funds have been used in real estate developments. Many questions of ethics and national pride stem out. From the article:

From the law’s inception in 1990, selling potential citizenship to the rich struck many as a corruption of American ideals. “Have we no self-respect as a nation?” asked Texas congressman John Bryant on the House floor that year. “Are we so broke we have to sell our birthright?”

Considering real estate market and appraisal fundamentals, is there a necessary or even calculatable adjustment for real estate assets funded with EB-5 capital? It is possible that participants invest their money for the right to obtain citizenship, not so much to earn an investment return. Something to consider....

For your further reading please read the sourced Fortune article and look forward to works produced by Texas A&M's Real Estate Center regarding this subject.

Source:
http://fortune.com/2014/07/24/immigration-eb-5-visa-for-sale/
http://recenter.tamu.edu/

Island Market Analysis?

In the fabulous life of the rich, Mark Zuckerberg recently purchased 700 acres of Kauai for approximately $100 million. When considering market analysis, you've got to wonder what competition and market analysis can you do for a purchase like this? What is the highest and best use of this property? At some point theoretics get thrown out the window with land as unique as this and with pockets so deep that they want what they want and will pay whatever to have it. For what uses is land valued economicaly well above it's discounted cash flow value for aesthetic and sentimental value? 

From the article: "His 700 acres on the north shore will include a pristine white sand beach, a former sugarcane plantation, and an organic farm." 

Not too long ago Larry Ellison purhcased Lana'i, Hawaii's sixth largest island, with intentions of "transforming this sleepy tourist backwater into a global pioneer of sustainable living". David Murdock listed the property at $1 Billion. It is estimated that Ellison purchased it for $500 million. 

Sources: 

http://www.businessinsider.com/mark-zuckerberg-buys-700-acres-in-hawaii-for-more-than-100-million-2014-10

http://www.telegraph.co.uk/luxury/travel/33945/lanai-hawaiis-serene-and-sustainable-private-island.html

http://www.forbes.com/sites/clareoconnor/2012/06/21/larry-ellison-hawaii-lanai-island-david-murdock-dole/

Small Living

An interesting and fun area is looking at how small living spaces can be. Numerous articles and examples can be found on the internet of small area apartments that are meant to make housing more affordable and more functional without requiring too much space. 

In San Francisco, a 216 sf apartment was put for rent on Craigslist for $1,425 which still seems steep. The apartment only has one window, a tiny restroom and has an efficiency style layout which essentially means one room. Any more than one room is difficult to comprehend with 216sf. A picture and link to the article can be found below. 

http://sf.curbed.com/archives/2014/12/08/the_smallest_apartment_for_rent_in_sf_is_just_216_square_feet.php

Probably my favorite is a 360sf apartment in Hong Kong which has been modified with modular units which shift and move to transform the space into whatever you need: a bedroom, kitchen, living room, or dance room even! See a video below for this awesome concept. 

Resilient Cities

Recently, the Rockefeller Foundation announced it's next round of world cities to participate in its 100 Resilient Cities Challenge. Awesomally, Dallas made the list. Resilience in mosts minds deals with response to and ability to recover quickly from economic disasters. It is actually much more broad than that and Michael Berkowitz, President of 100 Resilient Cities, states that “When you think about what makes a resilient city, you have to think in holistic terms. The reality is that resilience building is a multi-sector, multi-level kind of enterprise.” 

Some of Dallas identified challenges are:

• Aging Infrastructure
• Chronic Energy Shortages
• Flooding (Coastal and Rainfall)
• Infrastructure Failure
• Terrorism (???)
• Growing income inequality
• Limited water supply
• Lack of affordable housing
• And others...

It will be interesting how the public and private sectors respond to this challenge and how resiliency becomes a new tenant of Dallas city development. 

Sources:

Archdaily article

http://www.100resilientcities.org/cities/entry/dallas#/-_/

REITs

Recently, Marcus & Millichap’s Hessam Nadji appeared on CNBC’s Fast Money to discuss some of the recent trends on REITs. They give a quick insight into what REITs are but also talk about the performance in light of recent economic troubles and his projections into the future. In short, he views that REITs got hit hard during the recession from an over-selloff but have since rebounded and outperformed the S&P 500. He does not expect interest rates to dramatically increase which do have an inverse effect on property values, but if it does he believes it will be coupled with both job growth and some inflation which both provide upward pressure on real estate values. Most notably, he makes reference to Dillard's offering a REIT which had me look elsewere for commentary. In an article by Bloomberg, Marcato Capital Management LLC is urging Dillard's to sell it's corporate real estate to a REIT and perform a lease-back. This shows an interesting scenario if companies like Dillard's that are real estate heavy do sell-off and financing is brought to the public market. Additionally, what happens with underlying assets that have a specific purpose (ie. Dillards being a department store). 

Sources:
http://www.marcusmillichap.com/about-us/news-events/videos/2014/11/20/cnbc-fast-money
http://www.bloomberg.com/news/2014-11-20/marcato-urges-dillard-s-to-spin-off-real-estate-into-reit.html