The Backpack Apartment - Coming soon to your city?

With real estate running scarce and increasingly expensive in cities around the world, here's a way to still live in an urban environment - albeit in a very, very small space!  Its all about the backpack apartment which consists of a cube-made element.  The backpack apartment is constructed with a welded steel cage and a light birch veneered plywood interior cladding. The height of the top floor of the cube element is approximately eleven feet and the total weight of the sculpture is about two tons.

What do you think - is this something you would like to see in your city and would you consider living in a backpack apartment?  Note to City Zoning-by-law inspectors: Beware!

Aleem Kanji

Is it just 'academic' ?

Guest Blogger - Aleem Kanji, Creative Class Group

Statistics Canada recently examined where the smartest people in Toronto, Canada live by census tract.  Ironically, we are all in good company, with 46% of folks that are twenty-five years of age and older having a post-graduate degree - apparently the highest percentage across the 5.5 million people that live in the Greater Toronto Area.  Richard and Rana's neighborhood, along with mine and my wife Salma's all closely border this brainy census tract here in Toronto.

What do you think?  Is this just academic ?

Aleem Kanji

Car Sharing to Save Detroit?

In addition to seeing hybrids all over the place, I see a lot of Zipcars and Flexcars in metro areas. (To be honest, it bothers me that they get reserved spots with no meters in many towns, but I digress.) This new model of car ownership/use, the sharing model, seems to be taking off and many innovative organizations are getting on board.

Equity Residential Properties, a huge publicly traded apartment building operator, recently inked a deal with Zipcar to provide cars and spaces at some of its properties. Today's WSJ (sub req'd) features an article by Darren Everson highlighting how Zipcar is 'driving' into the college market by inking deals with Universities to put cars in and around campuses.

Perhaps Detroit's long suffering car makers should think about this new model of ownership in trying to revive US sales/revenues? With many of the user's of car share services in college and just starting their careers, this seems like a growing consumption trend that Detroit would want to take advantage of?

posted by David

Creative View of Real Estate Value

Its hard to avoid talking about housing in the US right now. From the supposed 'sub-prime' meltdown to slow sales and rising mortgage rates; writers, pundits, and traders are having a field day. Check out this fascinating Op-Ed by David Ranson in today's WSJ (sub required). He offers some great economic insights from Milton Friedman and argues that US housing is undervalued right now. Its always nice to listen to  theories that challenge the conventional wisdom. Read the long snippet below and let us know if its time to go house hunting for a bigger place!

posted by David

Big Corporation on Campus

Richard has written extensively on the role of the University in the Creative Economy... (check out the library for pieces by Richard including The University and The Creative Economy by Richard, Gary, Kevin, and Brian). His work has informed my work on the benefits of starting new ventures on campuses.

A recent story in the WSJ by Thaddeus Herrick (available w/out a sub via AOL) shows that corporations are beginning to try new strategies in leveraging the benefits of the university in the creative economy. Express Scripts, Inc., a company that does $18 billion in pharmacy benefits management, is relocating its HQ to the University of Missouri's St. Louis Campus. From the piece,

Creative Class Queen Bucks Housing Market Trends

While many think that tattoos and piercings are typical of all creative class members, Martha Stewart and her empire embody many elements of the creative class theory -- from a focus on design and supporting the creativity of customers to building a career  that allows for one's passion to play a central role. According to a new WSJ article (sub required) by Michael Corkery, creative class Queen, Martha Stewart has been very effective in using her creativity to sell homes in a weakening housing market. From the piece...

"All across the country, home builders are gasping for air as sales plunge, inventories rise and profits disappear. But in one small corner of the housing market, the sales picture is a little brighter: There is steady demand for houses designed in part by Martha Stewart and built by Los Angeles-based KB Home.

Here in the Atlanta area, where new-home sales dropped 20% in the first quarter of 2007, traffic at Martha-KB new-home developments has been steady. The largest Martha-KB Home development has been outselling the average Atlanta subdivision 2 to 1, according to SmartNumbers, a real-estate information and analysis firm, based in Marietta, Ga."

While some core creatives may never be interested in a Martha Stewart home, there are other members of the group who are clearly interested in letting her design a warm, welcoming home for them. (A longer segment of the article is available after the jump).

Posted by David

Google Chases Talent to SF

A little article in yesterday's WSJ, highlights how even the most popular companies are having to alter their plans/strategies in order to attract the most talented. Here is the blurb:

"One trend affecting those markets: Some traditional Silicon Valley employers have been looking for space in San Francisco because they have found their younger work force prefers an urban environment to the sprawling tech campuses. Google Inc., based in Mountain View, Calif., already subleased space at San Francisco's Hills Plaza from Gap Inc."

posted by David

"Falling Star Cities"

Robert Shiller of Irrational Exuberance fame takes on "super-star cities."

In a much-talked-about recent paper entitled "Superstar Cities," economists Joseph Gyourko, Christopher Mayer, and Todd Sinai argue that such high-status cities - not only London, Paris, and New York, but also cities like Philadelphia and San Diego - may show an "ever-widening gap in housing values" when compared with other cities  The authors seem to be saying, in effect, that a housing boom in these areas can go on forever. ... Many people view the superstar city theory as confirming their hunch that, despite the current slowdown in home prices elsewhere ..., investors can expect to make huge long-term gains by buying homes in these cities, even though the homes there are already expensive. But, as I have said in my debates with the authors, if one reads their paper carefully and thinks about the issues, one would see that there is no reason to draw such a conclusion.

(pointer via Mark Thoma). Shiller is a smart-guy, but I line up squarely with Gyourko and company.  Surely, a huge segment of the housing market is in for a blood-bath, but the advent of the spiky world ensures that super-star markets globally will outpace the rest. BTW, Gyourko et al say clearly the super-star cities are not immune from sharp ups and down. But that in the long-run their rate of appreciation far outpaces everywhere else.

Agents See $$ in Green Housing

In marketing circles, green is the new black right? Drive a Prius, buy organic, and now, when home shopping, you must use an 'Eco-broker.' Check out this article by Lauren Tara LaCapra at RealEstateJournal.com. From the piece,

"More than 1,000 agents have taken a $395 course offered by a former U.S. Department of Energy official on the basics of what makes a house green -- one that conserves energy and is close to public transportation, for example. After taking the course, they then can advertise themselves as "EcoBrokers" on their business cards and Web sites. Though that's a tiny 0.3% of all U.S. real-estate professionals, similar initiatives are popping up to raise awareness and take advantage of wider public acceptance of issues such as global warming and growing concern about higher energy costs."

posted by David

Why Bubbles Are Good for the Economy

According to Slate's Dan Gross:

Once you gain a little historical distance from bubbles, it is clear that some bubbles—some, not all—leave behind something that is a little bit boring but extremely useful: infrastructure.

I couldn't agree more. Cities that go through real estate bubbles have all that new infrastructure. Those that don't, well, they don't. I'll be checking out his new book on the subject.

Invasion of the Empty Nesters

A fascinating and fun piece in the WSJ by Ben Casselman titled Animal House Meets the Empty Nest describes the clash of culture occurring in downtown condos throughout the US. New condos developed and targeted towards young, urban singles (with video game lounges etc.) are actually attracting empty nesters. This has led to generational power struggles over pools and condo boards!

What's Happening to Housing

The real estate site, Zillow, announced it's first quarter 2007 housing market survey earlier this week with detailed data on 46 metropolitan areas - and the trends are interesting to say the least.  The overall pattern is down slightly but not yet a blood-bath.  According to Zillow, nationally, home values were down 1 percent in the first quarter, slipping from $256,950 to $254,346. This is "the second quarter in a row in which home values have declined "both on year-over-year and quarter-over-quarter basis," Zillow notes. But there is quite a divergence in housing performance across regional markets. The Northwest, particularly Seattle and Portland, continues to post double-digit appreciation, while the Florida, California and Nevada markets are still taking it on the chin.

Two more interesting Zillow charts after the jump. Click here for the story and even more data.

Instant Office, Anyone?

Business Week's  Michelle Conlin writes:

The age of on-demand projects is creating a need for on-demand offices. Just as executives in the '80s and '90s created flexible workforces by outsourcing jobs, today they are creating flexible workplaces by outsourcing offices. Quick shifts in global business currents mean that during one quarter your team might need to be in Minsk, the next in midtown Manhattan. Projects that were supposed to last a few months sometimes linger for years. The idea of the office as a static thing is crumbling. But corporate real estate remains an old-fashioned affair of three- to five-year leases that come with heavy penalties for shrinking, expanding, or exiting space. Now companies like Google, GlaxoSmithKline, Cisco, IBM, and professional staffing firm Spherion are outsourcing chunks of their corporate real estate portfolios to third-party outfits specializing in providing everything-you-need office space. That includes info-tech departments, phone lines, sleek furnishings, receptionists who speak the local language, support staff, translators, concierges, and catering—for as little or as long as you need them.

We just saw a GSK (Glaxo Smith Kline) office space in Toronto that was eye-popping!

Beyond the Third Place?

Piers Fawkes writes:

Starbucks vision behind the Third Place was to create a space between the home and the office which offered the sort of environment that had always been cherished in the best coffee houses through the years - a place to meet, to read, to debate and discuss, to be on your own. As Starbucks built their chain, independent cafes popped up to offer alternative takes on basically the same principles. . Around the world we all started hanging more in cafes. But maybe that's not going to last. Have you tried to sit in a cafe recently? You can't there are hardly any seats and, certainly, no table space left!

The rise of the Bedouin Worker fueled by easy WiFi could be changing our view on the Third Place. In fact, they could be killing what we see as the Third Place and turning the cafe back to the Second Place. Go to a Starbucks or another cafe and its full of the creative class tapping away on their laptops. The only discussion being made seems to be on the phone with people in other cafes. Maybe it's time that Starbucks saves its Third Place. Instead of developing different brands offering basically the same thing (which will be inundated by the laptopers), maybe they should offer a modern version of the Second Place to keep the Bedouin Workers and the cafe dwellers happy and apart.

My sense is as work becomes less tied to a physical off while become more concentrated in specific cities and regions, the demand for new third-place work environments is rising. Personally, I'm not a huge fan of working in coffee shops. I seldom do actually; I tend to use them for meetings. But I also sense the need for new kinds of third-place like environments for people to are more well suited to this kind of work.  The best analogue that comes to mind is a great hotel lobby.  There is clearly market need: How long and what will it take to fill it.

So how do you think kind of work environment would look and feel?

Jack White, From Motown to Nashville

Richard has written often on the increasing concentrations of certain types of talent in certain places. A recent WSJ Private Property column by Ben Casselman notes that Jack White, 5 time grammy winner and native of Detroit, has finally been able to sell his Detroit home. From the article,

"Grammy-winning musician Jack White, lead singer and guitarist of rock duo the White Stripes, has sold his Detroit home for $590,000, well below its initial $930,000 asking price. Mr. White recorded his hit 2005 album 'Get Behind Me Satan' in the foyer of the 5,800-square-foot home.

Mr. White bought the property in 2003 for $524,000, records show. Last August, he put the house on the market for $930,000 and later cut the price to $650,000. Listing agent Mike Kramar of Coldwell Banker Callan said the buyers are a retired couple from Maryland, but wouldn't identify them.

Mr. White, 31 years old, founded the White Stripes with his then-wife Meg White in 1997. (The couple has since divorced, but continue to perform and record together.) Mr. White has won five Grammies, both with the band and independently. He also belongs to the rock group the Raconteurs, appeared in the 2003 film "Cold Mountain" and now lives in Nashville, Tenn., where he paid about $3.1 million for a nearly 20,000-square-foot house in December 2005. Mr. White declined to comment.

In Detroit, the average price of a home fell 23.5% in the first two months of 2007 from year-earlier levels, the Michigan Association of Realtors says."

posted by David

The End of Gay Enclaves?

Last week Richard posted a working paper the he and Charlotta Mellander have put together. There Goes the Neighborhood (the paper's title) investigates the role of artists, bohemians, and gays in regional real estate values. One of the theories put forward in the paper is that the aforementioned groups improve supply via an 'aesthetic-amenity premium' and a 'tolerance or open culture premium.'

A really interesting piece put out by AP takes a peak at the Castro neighborhood in San Francisco and the change occurring there as more hetero couples move in (presumably to take advantage of the 'aesthetic-amenity premium' and the 'tolerance/open culture premium'). From the piece,

"SAN FRANCISCO - In just about any other place, the sight of a man and a woman pushing a stroller would be welcomed as a sign of stability and safety. In San Francisco's heavily gay Castro District, some people can't help but think: There goes the neighborhood.

Gay leaders in the Castro and other gay neighborhoods around the country fear their enclaves are losing their distinct identities.

These areas are slowly being altered by an influx of heterosexual couples, the forces of gentrification, and growing confidence among gays that they can live pretty much wherever they want now and do not need the security of being in a "gay ghetto."'

Any thoughts on this transition? Is this article just eye-grabbing or is this a real trend that is occurring throughout gay enclaves in America and Europe?

posted by David

 

Manhattan Apartment Spike Grows Ever Higher

A piece on Bloomberg.com by Sharon L. Crenson and Kathleen M. Howley explains that the apartment market in Manhattan has bucked the national 'bursting real estate bubble' with price appreciation of 3.2% in the fourth quarter of 2006.

Highly creative professionals, namely the finance folks on Wall Street, have helped propel the market forward as aggregate bonuses reached $23.9 billion in 2006.

From the story,

"The average sales price was $1.22 million in the three months ending Dec. 31, compared with $1.19 million in 2005, according to Miller Samuel Inc., the borough's largest appraiser, and Manhattan broker Prudential Douglas Elliman Real Estate. Sales volume rose 15.5 percent from the third quarter to 2,441 units in the fourth."

"Three-bedroom apartments were the biggest sellers in the fourth quarter, surging 30 percent in price to an average of $3.63 million. One-bedrooms held steady at about $695,000, while the price of two-bedroom units fell 0.3 percent to $1.56 million, according to Miller Samuel."                

"Downtown, the average sales price of a one-bedroom jumped 15 percent to about $730,000. On the east side, the cost of the same-sized apartment rose 5 percent to about $668,000 and on the west side the price fell 6 percent to about $651,000, according to the Halstead report."

posted by David

What you get for your money

I'm not saying the authors of this study don't have an ax to grind, but the empirical findings are quite a wake up call. The study released by the Canadian Centre for Policy Alternatives compares the social costs and benefits of taxation in low and high tax countries around the world.

"...Americans bear incredibly severe social costs for living in one of the lowest taxed countries in the world. For a strikingly large number of social indicators, the United States ranks not only near the bottom of the 19 industrialized countries, but it ranks as the most dysfunctional country by a considerable margin: Poverty is widespread. A greater percentage of Americans, and in particular children and the elderly, live in poverty in the United States than in any other industrialized country in the world.
• The income of vulnerable citizens, such as the elderly and those with disabilities, is much lower compared to others in the United States than almost all other industrialized countries.
• Living conditions are shockingly unequal. By any measure, income is distributed more unequally in the United States than in every other industrialized country. In 2004, America’s richest 1% held more of the nation’s wealth than the bottom 90% (34.7% versus 29.9%).
• Ordinary workers in the United States have less economic security than workers in any other industrialized country ."

The full report is here.

Tanking housing markets and the creative class

I'm in the middle of a research project on the relationship between the creative class and housing markets. So I was especially intrigued to find this list of the top 10 metro foreclosure rates from RealtyTrac (hat tip Dean Alexander).  The story reports that: "Nationwide, 318,355 properties entered some stage of foreclosure during the third quarter of 2006, a 43 percent increase from a year ago and a foreclosure rate of one new foreclosure filing for every 363 households. In the next 15 months, more than $1 trillion in loans are due to adjust upward," said James J. Saccacio, chief executive officer of RealtyTrac. "...it is a trend that definitely bears watching."

Here's the top ten: Detroit, Fort Lauderdale, Denver, Miami, Dallas, Indianapolis, Fort Worth, Atlanta, Las Vegas and Memphis.

There is a mix of vacation home spots (Miami, Fort Lauderdale), older metros (Detroit, Memphis) , service economy centers (Las Vegas) and some creative class up and comers (Denver, Atlanta, Dallas).  Note that none of these markets are among the highest priced markets, the majority in fact are inexpensive or moderately priced markets. And also note the absence of any of the leading performers on the creativity index.

The underlying pattern seems pretty clear cut.  It's not the costs of housing that is the key factor, as Joseph Gyourko and others have argued, it's the demand. Yes, housing prices are high in leading creative centers, keeping those markets unaffordable for many young creatives, but the markets are not tanking because their economies contrinue to grow and demand for housing remains high.