Home sales nationally appear to be heading for a slight decline in the immediate coming months, according to the chief economist with the National Association of Realtors. Speaking at the group’s latest Residential Economic Issues and Trends Forum, Lawrence Yun said despite the sales drop-off heading into 2023, home prices are slated to increase by about 1% next year, with a much more robust 5% expected for 2024. Yun added that “half of the country will see minor price gains, the other half of the country will see minor price declines” in 2023. For realtors, this means simply enduring next year’s market conditions. “But after that everything should be in a better situation,” Yun remarked, looking at the probable state of the overall market in 2024. In fact, the NAR is forecasting a decline of 7% in unit sales for next year, along with a 1% rise in the average price of a home. Those numbers improve to 10% in 2024 in unit sales, along with a 5% increase in the average price of a home. Yun also predicted 2023 fluctuations in the commercial real estate market, noting that “nationwide, we are beginning to see some decline in commercial appraisal values.” “Cap rates simply cannot match up with higher borrowing costs, especially among people who need to refinance their properties,” the economist continued. Yun added that “offices are the most vulnerable to these prices decreases. We are seeing a rise in office vacancies in many cities, driven by a preference for remote work.” By Garry Boulard
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Built in 1917, what is popularly known as the El Paso Laundry Cleaners Building is one of the classic structures of downtown El Paso. Measuring more than 36,400 square feet, the two-story brick building is now on the market for $2.9 million. Located at 901 Santa Fe Street, the building sits on a just under 1-acre site and includes a basement. Used for decades as a functioning laundry, the building is being advertised by realtor Sonny Brown Associates for its upgraded, repurposed multi-family potential. In its heyday, with a staff of 200 people, it was noted by the El Paso Evening Post that the El Paso Laundry Cleaners Building was the largest electricity-user in the city for the simple reason that it “uses more steam than any other plant in El Paso.” By Garry Boulard Members of the Las Cruces City Council have voted unanimously to demolish a long-standing motel that was first opened for business in December of 1941. In doing so, council members affirmed a resolution saying that the motel was “so ruined, damaged, and dilapidated as to be a menace to the public comfort, health, peace, or safety.” Located at 1045 S. Main Street, the structure was originally known as the Kilby Kourt, becoming the Kilby Motel in the 1950s. Put up for auction in 1959, the motel was described as having “17 rooms, all air conditioned, tiled baths, carpeting, telephone, TVs and radios.” The motel fell on hard times in the last two decades, with Las Cruces officials noting that due to neglect it was no longer in compliance with city codes. In a presentation before the city council, Larry Nichols, director of community development for the city, said the motel had many structural issues, including a roof that is in danger of collapse. Las Cruces officials also said that the motel has frequently been the scene of both domestic violence calls and shootings, as well as other criminal activity. According to official documents, “the city has exhausted all attempts to compel the owners to bring the premise into compliance through voluntary and municipal summon attempts.” The council vote to do away with the Kilby does not mean it will be immediately leveled. According to the Las Cruces Sun News, the building may still be designated as a historic structure, thus complicating its demolition. The current owner of the motel is based in Salem, some 45 miles to the north of Las Cruces, and has indicated that he would like to pursue a study to determine whether it would be economically feasible to save and upgrade the motel. By Garry Boulard The nation’s architectural firms endured their first overall decline in billings in nearly two years, according to a survey just released by the American Institute of Architects. According to the association’s Architecture Billings Index, the overall score for billings in October was down to 47.7, with any score below 50 representing a decline in firm billings for the month. By contrast, the overall score for billings one year ago was 54.3, with scores for new project inquiries and design contracts coming in at 62.9 and 58.0 respectively. Inquiries into new projects, meanwhile, remained strong with a score of 52.3, while the value of new design contracts saw a decline to 48.6. Said Kermit Baker, chief economist for the AIA, of the October numbers: “Economic headwinds have been steadily mounting, and finally led to weakening demand for new projects.” The index results were remarkably uniform across the country, with the Northeast posting a 50.3 reading, the Midwest at 50.8, and the South at 50.6. The lowest reading was recorded by firms based in the West at 49.6. The strongest sector results were seen in institutional projects at 54.3 and in mixed practices at 50.8. The multi-family sector lagged at 46.1, with commercial and industrial work bringing up the rear at 45.9. Despite the lower October numbers, Baker, in a statement, pointed out that “Firm backlogs are healthy and will hopefully provide healthy levels of design activity against fewer new projects entering the pipelines should this weakness persist.” By Garry Boulard One of the classic shopping centers of Phoenix is now in line for a substantial upgrading. Located at 9617 N. Metro Parkway, the modernistic Metrocenter was designed by well-known Arizona architect Robert Fairburn and opened in the fall of 1973. For decades, the 1.4 million square foot mall was one of the most popular shopping centers in the southwest but began to lose out to competition from other malls by the 1990s. It finally closed completely in the summer of 2020. Now members of the Phoenix City Council have given their approval to a plan that will substantially redevelop the site, seeing the construction of up to 100,000 square feet of new retail space. In a unique arrangement, the City of Phoenix has agreed to purchase the mall’s site in a move that will make it possible for mall owners Concord Wilshire Capital to not have to pay property taxes for the next 25 years. At the same time, Concord Wilshire is giving Phoenix up to $1.5 million to be used for the construction of affordable multifamily housing at the site. It is thought that the project will also see the construction of an amphitheater park. Altogether, the redevelopment of the famous mall is expected to cost upwards of $750 million over a three-phase period. Concord Wilshire is undertaking the project in a partnership with TLG Investment Partners, which is based in Fort Lauderdale, and the Houston-based global real estate investment firm Hines. Work on the Metrocenter project is expected to launch next year. By Garry Boulard A move is on in Colorado Springs to secure the construction of an advanced semiconductor manufacturing plant. The effort, currently known only as Project Garnet, is being conducted somewhat in secrecy in terms of revealing the company involved. But city, El Paso County, and State of Colorado economic development officials have been involved in a protracted process of putting together an attractive incentives package in the hope of securing the plant. To date, Colorado Springs and El Paso County have pledged a combined $111 million for the project. Now, members of the Colorado Economic Development Commission have added another nearly $4 million in incentives for the project. According to published sources, the project would bring with it a potential capital investment of $631 million initially, growing to more than $1 billion during its phase two development. The project, according to local economic development officials, may be eligible for federal funding via the Chips Act, otherwise known as the Creating Helpful Incentives to Produce Semiconductors and Science, which was signed into law last summer by President Biden. While speculation has only naturally been heightened regarding the identity of the company, state officials, according to the Colorado Springs Gazette, have described it as a “world leader in electronic materials and process solutions for the semiconductor, life sciences, and other high-tech industries.” A timeline for when Project Garnet may be officially announced is not yet known. By Garry Boulard The prices paid by builders for a variety of steel products saw significant declines last month, according to new numbers released by the Bureau of Labor Statistics and crunched by the Associated General Contractors of America. Those numbers show that the Producer Price Index for steel mill products was down by 6.6% in October compared with September. The decline from October of 2021 to October of this year was even more dramatic at 22.9%. Copper and brass mill shapes, meanwhile, saw a 4.9% drop between September and October of this year, with an 11.5% drop year over year. Aluminum mill shapes, similarly, were down 3.3% in the last month, and 9.3% between October 2021 and this most recent October. In taking a larger look at Producer Price Index trends, the BLS noted that “prices for diesel fuel, fresh and dry vegetables, residential electric power, chicken eggs, and oil field and gas field machinery also advanced.” Trend lines for other construction materials showed a 3.3% decline in lumber and plywood products, and a large 9.3% drop over October of 2021. Those numbers follow on the heels of double-digit increases in lumber and plywood products throughout most of 2021. Despite the decline in the price of individual materials, the BLS numbers showed that the price contractors say they would bid on any given project was up by 3% from September to October of this year, and significantly up by 20.2% over October of 2021. By Garry Boulard A space just to the southeast of one the oldest and most-used public parks in Flagstaff may see the construction of a skate rink, dog play area, and indoor basketball courts. Additional ideas: an open air market, amphitheater, and athletic courts and fields. The ideas come as part of an ongoing public input process centered on updating the 8.5-acre Thorpe Park annex, space that since the 1950s has been used as a public works yard. Located at the corner of N. Bonito Street and W. Dale Avenue on the west side of downtown Flagstaff, the space became the subject of public comment once the City of Flagstaff moved the public works yard to another location and demolished several structures at the site. That input process earlier this year saw more than 1,000 residents taking part in a community survey asking for ideas on how the annex space should look in the future and what services it should offer. Proposals have also included the construction of an Indigenous Community and Cultural Center within the boundaries of the park, along with more space for community gardens. The public input process has been headed by the Tucson-based Wheat Design Group, as well as the group Southwest Decision Resources, which has offices throughout Arizona. Members of the Flagstaff City Council are expected to review the most recent comments on the annex’s future, with the possibility of taking a final vote on December 6. By Garry Boulard In a rental market among the highest in the southwest, plans in Santa Fe have been announced for the construction of an apartment complex with up to 240 residential units. The project belongs to Lincoln Avenue Capital, which is based in Santa Monica, California, and specializes in affordable housing development across the country. As announced, the Santa Fe project will go up at a site on the south side of the city, off New Mexico State Road 14 and Interstate 25. What is being called the Cresta Ridge will see the construction of one, two, and three-bedroom units, with proposed rents running between $1,022 and $1,175 a month. The project is currently going through the City of Santa Fe’s approval process and could see the construction of 8 three-story buildings. The project will additionally include a community room, fitness room, and yoga studio. The project is scheduled to go before the Santa Fe County Planning Commission on December 15. If all goes well, work on Cresta Ridge could begin next year, with a possible completion date of late 2025. The Santa Fe project represents new terrain for Lincoln Avenue Capital, which has primarily focused its efforts on the East and West coasts, we well as large sections of the Midwest. To date, the company has built more than 19,000 residential units. Earlier this spring, Lincoln completed the rehabilitation of a more than 200-unit project in Orlando called Valencia Park that is also geared for affordable housing. By Garry Boulard A need for office space in some sections of some cities is leading to new retrofitting activity across the country, says a new comprehensive report just released by the Washington-based Urban Land Institute. That report, Emerging Trends in Real Estate, contends that increasingly older office space is being converted into residential units, or in some cases even upgraded into modern offices. This trend, notes the report, has only occurred in places where such projects are actually “supported by the market.” The report also notes that in many places, office space is frequently upgraded and improved if part of a mixed-use picture that also includes hospitality. The observations on new uses for office space are part of a handful of insights included in the study, which was done in conjunction with the firm of Pricewaterhouse Coopers. The study additionally notes that nearly three years after the Covid-19 outbreak, gains for rental property are “moderating as demand returns to more sustainable levels.” Even more, “many indicators suggest that the really good times may be over, at least for a while.” Not surprisingly, the study contends that both for-sale and rental housing has become unaffordable. Among the reasons for the increase: restrictive zoning and building codes that are limiting new supply. At the same time, affordable housing transaction have become increasingly complex, requiring more underwriting, with one developer commenting that the average deal used to take 90 days to close, “and now it’s over six months.” For all of that, investors still like up-market projects, particularly when it comes to the multifamily and industrial sectors. Such niche assets as student housing and family rentals, despite what appears to be a more restrictive economy heading into 2023, remain particularly appealing. An additional cautionary note: the increasing specter of vacancy taxes. “These taxes can take various forms, but the goal is to increase the effective supply of housing by imposing costs on landlords who keep housing units vacant.” By Garry Boulard |
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