Category Archives: Gen Y

What’s Next Portland? Real Estate in the New Economy

A version of this blog first appeared in the Portland Business Journal shortly after the ULI What’s Next event on March 7, 2012.

The Oregon Chapter of the Urban Land Institute promoted their breakfast seminar based on ULI’s most recent publication: “What’s Next? Real Estate in the New Economy“: A paradigm shift is unfolding over the course of this decade, driven by an extraordinary convergence of demographic, financial, technological and environmental trends. Taken together, these trends will dramatically change development through 2020

Walking over to the event at the Nines Hotel, I thought about what I hoped to learn.  ULI is a national, even international, thought leader in the real estate industry.  The advertised intent of the seminar was to examine how our region is postured to remain competitive in the 21st century.  I had more short term goals.  I wanted to know how ULI and local business leaders foresee the Portland region and the state getting out of the building slump (and consequent unemployment for planners, urban designers and other built environment professionals) we have been in since 2007.

From an examination of name tags, the audience for this event were largely lawyers, a few planners and a few commercial real estate consultants.  I didn’t see any developers that I recognized—albeit my recognition field is limited.

After a string of men from ULI’s national office in Washington, DC offering their wisdom over the past two years, it was refreshing to have a woman as keynote speaker.  Maureen McAvey started off her talk with the proposition “This is not just another real estate cycle but a fundamental change.”  She went on to make her case through a litany of demographic factors she claims are leading to new trends, e.g.:

  • Gen Y is the largest generation in American history—80 million strong and still growing and
  • The Boomer generation is living longer–“If I retired at 65 and lived to my mother’s age—98—I’d have more than 35 more years to do what?”

I had been wondering when ULI would jump on the jobs bandwagon in a big way. This was the event!  Both in her presentation and in the book, McAvey asked “Where the hell are the jobs?” (resisting her editors plea for more sedate wording).  Even lawyers are outsourcing parts of their business as never expected.  Social Security in 1945 each worker was supported by 42 workers, in 2009 just 3.

Lumina Foundation found that young people in US do not have enough education to compete.  Between now and 2018 Oregon is expected to create 59.000 jobs – but there will not be enough workers with post secondary education to fill those job needs.  America is significantly de-funding its education.

McAvey believes there are some bright spots.  Business and professional sectors and education of all types as well as health care and medical have grown phenomenally. “America is still wildly entrepreneurial and leads in venture capital” she claims.  This is partly due to the creative culture and substantial capital reserves.

The Housing Outlook she presented was similar to what I have heard for the past few years: Apartment living is on the rise. Six million new renter households may be formed between 2008 and 2015, requiring 300,000 new units annually compared with just 100,000 produced in 2010. “But can the industry deliver that amount for the rents at which people looking to rent can afford?” she asked.  Meanwhile, more single-family homes are being occupied by renters, changing the feel and politics of suburban communities.

Seventy-five percent of households in Portland do NOT have children under 18; 47% are non-families, she said. Twenty-somethings on tight budgets prefer places to congregate with friends—in parks, bar scenes, restaurant clusters, and building common areas—and can tolerate smaller living spaces, McAvey claims.

The Regional Panelists consisted of Jill Eiland, Corporate Affairs Manager, Intel Corporation; Keith Leavitt, General Manager of Business Development and Properties, Port of Portland; Sandra McDonough, President and CEO, The Portland Alliance, Wim Wiewel, President, Portland State Universtiy

McAvey went on to ask a softball question of most of the panelists—and most  responded in predictable ways, e.g., Keith Leavitt feels that we need to continue and expand efforts to export wheat and other grain to the world as well as electronics.  “There is a boom in new port developments along lower Columbia River,” he said.”

Sandra McDonough believes that we are hampered by tax policy, physical infrastructure and regulatory framework – a lot of it from the 70’s [referring to Oregon’s land use laws]. “We do not have enough sites for new industrial users,” she maintains.

Wim Wiewel feels we need to move beyond the sad state of education funding from legislatures (not only here, but across the country) and partner more with industry—and with local government.  He was excited to announce “We are working with the Mayor and the County on an Urban Renewal Area for Education.”

McAvey’s question for Jill Eiland was a little more challenging.  “Is Intel going to follow Amazon’s lead and start building highly urban campuses?”

Although I spaced out during Eiland’s answer, she later told me that “Intel has now invested more than $20 billion in Oregon since 1974.  We continue to invest and grow our manufacturing and R&D capacity here.  The Hillsboro site remains Intel’s largest and most comprehensive site anywhere in the world.”  I interpret that to mean don’t expect Intel to move into downtown Portland, or even downtown Hillsboro, anytime soon.

I heard recently that Metro Council Members were cautioned not to talk about climate change.  Governor Kitzhaber and Mayor Adams didn’t mention it in their recent State of the State/State of the City speeches at City Club either.  It seems that ULI got that memo too.

I was a bit baffled to attend an event on trends that made no mention—only guarded allusion to—the two big trend topics of the day in my world: climate change or growing income inequality!  While ULI played up this event as being about a paradigm shift, their Oregon panel members gave only predictable answers that did not reflect much awareness of that shift–none of that Oregon leadership that we witnessed in the last century.  It would seem that we are resting on our laurels rather than embracing the shift. I left with more questions than answers—but eager to read the copy of “What’s Next? Real Estate in the New Economy” that ULI so generously provided to attendees.

Mary Vogel is founder and principal of PlanGreen, consultants on walkable urbanism.  She is a Board Member and Advocacy & Alliances Chair of the Congress for the New Urbanism Cascadia Chapter where she helps to shape climate change policy.  She is also a member of the progressive business alliance, VOIS.

Reshaping The Housing Market?

Oregon Metro expands its urban growth boundary for more suburban development

This article originally appeared on my Sustainable Industries blog site

The Urban Land Institute (ULI) Oregon[1] recently advertised a workshop to the Oregon development community:

In the wake of the financial crisis and the great recession, sweeping structural changes are reshaping the housing market.  Generation Y and the retiring Baby Boomers will be the catalysts for the next wave of housing development.  The workshop promoters asked “Are you ready to meet this demand?”

Speakers from the development community all pointed to the market demand being urban and transit-oriented; and, for the time being, rental rather than homeownership.  Some quotes:

They have less money than any generation, but are well-educated, well connected and very urban. The cities that do it best for young creatives will thrive.  John McIlwain, ULI

Gen Y has no interest in the suburbs!  They value being close to friends and don’t want to commute.  You can bet on transit-related locations.  Clyde Holland, Holland Partners

Gen Y wants smaller, greener housing.  They want to live in the city and take responsibility for their carbon footprint.  Jim Winkler, Winkler Development

A few months earlier, ULI’s Young Leaders Group had attested to this same wave in its own sessions.  And it focused all its conference field trips close to the urban core along transit corridors of Portland, Oregon.  At least one of that conference’s participants brought his suburban developer dad along as well—perhaps to learn new skills.

In April 2011, ULI Oregon sponsored two of its national leaders at talks held at Metro on such impressive topics as: Carbon, Development & Growth: Navigating New Frameworks for Real Estate, Planning, Transportation, and the Economy and Finding Certainty in Uncertain Times.  Ed McMahon and Michael Horst both indicated that the pendulum is swinging re: how we invest housing dollars.  The trend is towards walkable, mixed use neighborhoods with transit—and towards green building.

Although McMahon and Horst have strong relationships with the US Green Building Council (their sons play important leadership roles there), McMahon pointed to an EPA study that transit-oriented development may outperform green building in reducing greenhouse gases.[2]  ULI’s Growing Cooler was a mega analysis of the impact of urban form on driving.  “We cannot address greenhouse gases without addressing vehicle miles traveled,” McMahon stated emphatically.

A September 21, 2011 story in the Oregonian reported that Renaissance Homes’ president, Randy Sebastian, a builder long known for its sprawling subdivisions on the fringes of the Portland market, thinks that the days of building on the fringes is coming to an end.  He has taken to doing urban infill instead.

During 2010, Portland’s metropolitan planning organization, Metro, had also pulled together an impressive list of professionals from the development community to serve as its Expert Advisory Group on Centers and Corridors.  Not only did that group tell Metro about the same trends that ULI events have showcased, it also made recommendations that Metro should take a larger long-term role in facilitating the implementation of compact urban development, by playing an enhanced role in education, technical assistance, gap financing, infrastructure financing, and legislative advocacy. These respected local experts in the fields of institutional real estate, financing, development and planning also volunteered their time to carry their message out to communities in the region and work with them to make changes.

Despite these strong messages from the real estate industry, the Metro Council, on October 20, 2011, decided to add another 1,985 acres to the Portland region’s urban growth boundary in areas of Hillsboro, Beaverton and Tigard.  About 330 of those acres will be brought in as industrial land.  The other 1600 plus acres is to accommodate projections for needed housing.  State law requires Metro to maintain a 20-year perpetual land supply.

Bob Stacey, candidate for Metro Council, thinks that the Portland area had more than enough land within its UGB to meet its needs.  He argues that Metro planners think that developers won’t choose to build enough housing on the land already in the boundary because its harder. The planners fear that if we don’t add land for housing to the UGB, developers will build outside Metro. . .”

Stacey maintains that residents within the existing UGB will pay by seeing needed improvements in their neighborhoods deferred or cancelled while highways, schools and transit are expanded to the new areas.

While none of the three ULI national experts who have visited Portland in 2011 had any answers about how, in the current economy, to actually finance and build development where it is most needed, Metro’s own Expert Advisory Group was more explicit.  Their report “Achieving Sustainable, Compact Development in the Portland Metropolitan Area: New Tools and Approaches for Developing Centers and Corridors” identifies one of the greatest obstacles in centers and corridors development as the current credit market.  Amongst the recommendations of the report are:

  • Develop a new approach to gap financing with creative lending tools and mechanisms for public-private collaboration.
  • Create a mechanism for metropolitan infrastructure investments that supports compact mixed-use development.

Even with Metro’s own role in convening the Expert Advisory Group, it is not apparent that anyone at Metro is paying attention to the advice of these experts.  Instead, while not bowing to ALL of the pressures that suburban communities were putting upon them,[3] some believe the Metro Council is following the old paradigm for growth–expansion, rather than embracing the sweeping structural changes savvy developers are predicting.

Next it will be interesting to see where Metro’s Climate Smart Communities scenario planning takes it!  Can the Portland region reduce greenhouse gases 75% below 1990 levels by 2050 while still following 20th Century development strategies?

 


[1] ULI is the preeminent think tank for the real estate industry.  ULI Oregon is the “District Council” or chapter for Oregon.

[2] That recognition did not stop them from promoting green building, however: “Stay on top of green or eat everyone’s dust.  There will be differentiation; over the long run—adapt or get crushed.”

 

[3] Wilsonville, Forest Grove and Cornelius had proposals for expansion that were not approved.