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The pace of purchased new homes fell to a 313,000 annual pace, the slowest since October. Though an analyst says there are signs of life in some regions, “we’re not seeing a broad-based recovery.”
(Bloomberg) – Purchases of new homes in the U.S. unexpectedly fell in February for a second month, a sign the recovery in the housing market may be uneven.
Sales dropped 1.6% to a 313,000 annual pace, the slowest since October, from a 318,000 rate in January that was weaker than previously reported, figures from the Commerce Department showed Friday in Washington. The median estimate of 78 economists surveyed by Bloomberg News called for 325,000.
Sales of new homes are struggling to gain momentum amid increasing competition from foreclosures, which are hurting all property values. Nonetheless, a pickup in hiring, growing incomes and mortgage rates near a record low are making all houses more affordable, which may help underpin the market.
“There are signs of life in the market in certain regions, but we’re not seeing a broad-based recovery,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, who forecast a 310,000 sales pace. “Builders are still competing with existing inventories. The spring selling season should show some modest improvement, but it will be limited.”
Economists’ estimates ranged from 310,000 to 350,000. The rate for January was previously reported at 321,000.
The recent slowdown in demand has pushed up the amount of time it takes to sell a new house. There were 150,000 new houses on the market at the end of February, matching the prior month’s record low. The supply of homes at the current sales rate climbed to 5.8 months’ worth from 5.7 months in January.
Purchases, tabulated when contracts are signed, fell in two of the four U.S. regions, led by a 7.2% drop in the South. Sales fell 2.4% in the Midwest and rose 14% in the Northeast and 8% in the West.
The regional breakdown affected prices as demand fell in the South and Midwest where homes are less expensive and rose in the Northeast and West where they are costlier.
The median sales price increased 6.2% in February from the same month last year to $233,700, Friday’s report showed.
New-home sales have lost their ability to forecast the broader market as demand shifts to previously owned houses. Purchases of existing homes are calculated when a deal closes about a month or two later. New properties made up almost 7% of the market last year, down from a high of 15% during the last decade’s housing boom.
Existing-home purchases eased to a 4.59 million annual rate last month from a 4.63 million pace in January, the National Association of Realtors reported this week. Even with the decline, January and February sales marked the strongest start to a year since 2007.
Home foreclosures remain a concern for builders. Filings fell 8% in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said last week.
“February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s CEO, said in the statement. “That should result in more states posting annual increases in the coming months.”
To hold down borrowing costs like mortgage rates, Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist.
The National Association of Realtors’s affordability index climbed to a record high in January, underpinning demand. That may be why builders are gaining confidence.
Builders this year have broken ground on homes at the fastest pace since October to November 2008, according to Commerce Department figures released this week. Permits for construction climbed to the highest level since 2008, the same report showed.
The National Association of Home Builders/Wells Fargo index of builder confidence in March held at the highest level since June 2007. Sales expectations climbed for a sixth month, according to the March 19 report.
Ryland Group Inc., which builds homes with an average price of $255,000 in 13 states, said it has a positive outlook for 2012.
“We finished the year on a strong note, entered the year optimistic and still feel fairly optimistic today,” Larry Nicholson, president and CEO at the Westlake Village, Calif.-based company, said March 6 at an investor conference. “The good thing about the traffic we are seeing is it’s new traffic. We feel a lot better than we did a year ago. Hopefully, we can keep this trend up.”
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Below: Part of the Teachers Village construction site, a project in Newark designed with education in mind.
NEWARK — Work has begun on an education-centered community featuring three charter schools and affordable housing for teachers in the city’s decayed downtown, with much of the design work done by the noted architect Richard Meier. The development, called Teachers Village, is expected to cost $149 million when it is completed two years from now. It will consist of eight low-rise buildings clustered around the intersection of William and Halsey Streets, in Newark’s Four Corners historic district. As such, Mr. Meier has designed buildings to reflect the historical nature of the area.
Teachers Village is receiving millions of dollars in government subsidies in various forms, with $14.2 million being provided in equity by the developers. Two of the buildings, together about 134,000 square feet, will be leased to the charter schools and day care while offering retail space on the ground floor. The other six buildings, totaling about 289,000 square feet, will contain as many as 220 rental apartments for teachers with retail space on the ground floor.
Teachers Village received its final approval at the city level in March 2011, but did not break ground until last month with a ceremony that included Mayor Cory A. Booker, Gov. Chris Christie and several private developers and investors.
Mayor Booker, who has shepherded the project from its first presentation in 2010, was not available for comment and referred a reporter to a news release: “Teachers Village shows that when Newark dreams big and makes ambitious plans, we can achieve development projects that meet the highest standards for innovation and excellence. While the global economy is struggling, we in Newark have fought to create transformative change that will lead to educational, economic, and social gains for our citizens.”
While the project seems to have the city’s unqualified support, some residents have protested the inclusion of the charter schools instead of traditional public schools, and others have said they felt left out of the planning process and disliked the project’s reliance on large public subsidies.
Ron Beit, a managing member of the lead developer, the RBH Group of Manhattan, said, “We were very committed to the point that you needed to create this community overnight.” Other partners include the billionaire investor Nicolas Berggruen; the private equity giant Frederick Iseman; the financier Warren Lichtenstein and his firm, Steel Partners Holdings; and the short-term commercial lender BRT Realty Trust.
Teachers Village is the first step of a development project by the same developers that will entail building or rehabilitating 15 million square feet of space, including several skyscrapers, on 32 parcels of land downtown.
The school spaces have been leased to two established Newark charter schools, Team Academy and Discovery Charter School, and a new charter, Great Oaks Charter School. The schools, with a charter school that abuts the site, are expected to accommodate about 1,360 children.
They and their families are potential customers for the stores that will occupy the 64,000 square feet of retail space being built, Mr. Beit said. So are the residents of the 220 apartments, which are not restricted to teachers, he said.
The residences in Teachers Village will be marketed toward Newark educators in charter schools, traditional public schools, private schools and universities, Mr. Beit said. About 40 studio apartments must be kept affordable according to government requirements, but Mr. Beit said the public subsidies involved in the project will enable developers to keep all their prices low — about $700 a month for a studio; $1,000 to $1,100 for a one-bedroom; and $1,400 for a two-bedroom apartment, he said.
“Our vision for Newark is really sort of a middle-income utopia, very much like how Queens and the outer boroughs have succeeded tremendously with their retail,” said Mr. Beit, who is working with Jacobs Enterprises of Clifton, N.J., to build the retail space.
He said the larger downtown development, which is to have a wide range of rental apartments and condominiums, both subsidized and market rate, may eventually draw more upscale retailers and affluent residents attracted by Mr. Meier, who is known for buildings like the Getty Center in Los Angeles.
Mr. Meier, who designed five of Teachers Village’s eight buildings — the others were done by a local architect, Mikesell & Associates, and KSS Architects of Princeton — also spent a significant amount of time working on the streetscapes in the plan. He said he expected to work on the master plan for the larger project beyond Teachers Village, also in the historic district.
“We spent a lot of time with the local landmarks commission to make sure that the designs were historically contextual,” Mr. Meier said, “and to ensure the neighborhood was true to its historic roots, while at the same time ensuring that the community has a unique distinction and quality suggestive of the new chapter commencing in this neighborhood.”
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Residential towers by name-brand designers are outperforming others, even in a weak real estate market.
A decade after a bumper crop of residential buildings designed by internationally renowned “starchitects” began rising around the city, the early results are in.
As predicted, such residences were indeed pricier to put up. But especially in Manhattan, the supply of people willing to pay more to live in architecturally celebrated environs seems to be more than adequate.
The biggest surprise, however, may be the degree of flexibility shown at times by such celebrity architects as Frank Gehry, Richard Meier, Jean Nouvel and Robert A.M. Stern. Some have gone so far as to lower the ceilings of their creations and even change facings to meet fast-changing economic conditions and New Yorkers’ (especially rich New Yorkers’) less-adventurous architectural tastes.
“These architects are great both at helping developers resolve whatever issues come up and creating notable designs for buildings that can command high prices,” said Vishaan Chakrabarti, director of Columbia University’s Center for Urban Real Estate.
Such compromises come in the context of cost expectations that are raised from the outset. For openers, starchitects can command fees up to twice those of their mortal brethren. Such buildings can also be more expensive to build. Everything from higher-than-standard-quality materials and mechanical systems added as much as 15% to the cost of constructing the 96-unit condo known as On Prospect Park in Brooklyn, according to Louis Greco, a principal with SDS Procida, the developer that tapped Mr. Meier for the job.
Despite all that, buildings constructed before the real estate crash were “incredibly effective,” selling quickly and at steep premiums compared with plain-vanilla projects, according to James Lansill, a senior managing director at brokerage Corcoran Sunshine. Even today, they still outperform the market.
A 2002 takeoff
The starchitect phenomenon started in earnest in 2002 with the completion of 173 and 176 Perry Street, a pair of sleek, 15-story glass boxes in the West Village on the Hudson River designed by Mr. Meier. They were followed in 2007 by such notables as Mr. Nouvel’s 40 Mercer, a 13-story glass palace built by Hines, and Robert A.M. Stern’s wildly successful 15 Central Park West, designed for developers Arthur and William Zeckendorf. The latter features two limestone towers inspired by the Art Deco architecture of their neighbors—and has racked up several of the city’s highest-priced sales in recent years.
But not all starchitect projects took off. In TriBeCa, developer Sleepy Hudson paid out $36.6 million for 5 Franklin Place and promptly hired Dutch architect Ben van Berkel to produce an ambitious design. The 20-story project died, however, when the recession hit.
With the economy still soft and construction financing continuing to be hard to find, the current crop of starchitect buildings in the works is small. There’s Extell Development’s 1,003-foot-tall apartment tower and hotel on West 57th Street and Seventh Avenue, designed by French architect Christian de Portzamparc. Mr. Nouvel’s controversial 75-story tower next to the Museum of Modern Art from developer Hines is also under way.
Having proven themselves so well and so widely, starchitect-designed residences look like they will be around a long time in New York.
“When building picks up, there’s going to be a greater sensitivity to higher-quality work,” said Mr. Meier.
Others agree that there may now be no turning back.
“It may not be optional,” said Stephen Kliegerman, president of Terra Development Marketing, which provides sales and marketing to developers, including many builders of luxury buildings. “Buyers are going to expect a certain level of design and, to obtain the highest price point, you’re going to have to give it to them.”
Location: 40 Bond St., Manhattan Architect/based: Herzog and de Meuron/Basel, Switzerland Completed: 2007 Number of units/size range in s.f.: 24/1,200 to 2,400 Construction cost per s.f.: $500 Sales price per s.f.: $3,000 Current occupancy: 100% Most striking features: Inspired by neighboring 19th-century cast-iron buildings, it has a shiny façade of thick, richly articulated green-glass, plus high, cast-aluminum faux-“graffiti” gates.
The timing was good for 40 Bond, the first U.S. residential building designed by Pritzker Prize-winning Swiss architects Jacques Herzog and Pierre de Meuron, the firm behind the Beijing National (Olympic) Stadium, aka the “Bird’s Nest.” It turned a nondescript block in NoHo into “one of the hippest places you could possibly live in New York City,” said James Lansill, a senior managing director at brokerage Corcoran Sunshine, which handles the building.
The property has a daring design and prices to match. They were nearly triple the going rate in the market, according to Ian Schrager, whose company developed the building. He attributes his success in getting those sums to a combination of star power and avant garde design. In June 2008, Mr. Schrager himself bought the 8,500 square-foot triplex penthouse.
“This might be one of the best examples of the power of working with world-class architects and letting them be free to design something radical,” said Mr. Lansill.
8 Spruce Street
Originally Beekman Tower Location: 8 Spruce St., Manhattan Architect/based: Gehry Partners/Los Angeles Completed: 2011 (interiors of upper floors still under construction) Number of units/size range in s.f.: 930 when finished/480 to 550 (studios) to 1,700 (3-beds) Construction cost per s.f.: NA Rent per month: $3,100 to $4,000 (studios), $12,000-$15,000 (3-beds), $45,000 to $60,000 (penthouses) Current occupancy: 530 units of the 620 completed Most striking features: Undulating stainless-steel façade resembles the folds in a large piece of cloth. The many bay windows create numerous interior configurations, with more than 300 unique floor plans.
Frank Gehry’s 76-story rental just south of the Brooklyn Bridge, built by Forest City Ratner, has attracted much critical acclaim. And it’s filling up quite nicely, despite studio rents that typically top $3,000, according to Susi Yu, Forest City’s senior vice president, retail development.
In fact, apartments are going at a 15% to 20% premium over the average luxury building rental, according to Clifford Finn, president of new market development at Citi Habitats. At the same time, the $875 million cost ran higher than normal, but not hugely above, according to Ms. Yu.
The building went through a series of twists to get where it is today. Forest City bought the land in 2004, planing to build condos, but switched to rental units two years later. Mr. Gehry then had to lowering ceiling heights and make other changes to lower costs so the building could work as a rental. After the crash, it looked like the project would have to stop at the 38th floor, but Forest City renegotiated union costs and went back to work.
On Prospect Park
Location: 1 Grand Army Plaza, Brooklyn Architect/based: Richard Meier and Partners/Manhattan Completed: 2009 Number of units/size range in s.f.: 96/962 to 3,500+ Cost of construction per s.f.: $350 Sales price per s.f.: Around $1,000 net, $800 gross Current occupancy: 75% Most striking features: A stark contrast to the neighborhood’s surrounding brownstones and brown-brick buildings, the glass and white metal structure features an ultra-modern design and noteworthy views of the park and plaza.
Pritzker Prize-winner Richard Meier designed the 15-story pristine modern building, carefully taking into account lighting and shadows from the park it overlooks. But when the bottom fell out of the market, On Prospect Park was 60% sold and half of those buyers dropped out, according to Louis Greco, a principal with SDS Procida, the project’s developer.
SDS halted construction, re-examined prices and re-opened for business in the spring. Now, prices are at about 90% of their original level and Mr. Greco hopes to have the building’s 96 apartments completely sold in a year.
While about half of the residents are from Brooklyn, the rest are from around the world, according to Cheryl Nielsen-Saaf, senior vice president and associate broker at the Corcoran Group. “To a great extent, that’s because of the architect,” she said. “He widened the market and broadened the net.”
Condominiums and Townhouses Location: 400 West 12th St., Manhattan Architect/based: Robert A.M. Stern Architects/Manhattan Completed: 2009 Number of units/size range in s.f.: 68 plus 7 townhouses/800 to 3,200 (apartments), 3,800 to 4,750 (townhouses) Construction cost per s.f.: $500+ gross Sales price per sq. foot: $3,000 net Current occupancy: 100% in tower, 5 of 7 townhouses sold Most striking features: Red-brick facing is designed to fit in with the surrounding West Village neighborhood and exploit Hudson River views. The townhouses hark back to residences of 100 years ago.
Robert A.M. Stern, dean of the Yale School of Architecture, designed this building after local preservationists objected to the original plan for a 270-foot modern glass tower. In an effort to retain the feel of the site, which housed an ink factory built in the early 20th century, Mr. Stern created a 17-story red brick building with 68 condos and a row of seven townhouses with private garages.
Its cost per square foot of construction made the project “one of the most expensive buildings we’ve built,” said Bruce A. Beal Jr., an executive vice president of Related Companies, Superior Ink’s developer. On the other hand, sales for tower units, which started well before construction was completed in 2007, “exceeded our expectations,” he said.
Interest is still high. One buyer who bought an apartment for $25 million in 2009, resold it a year later for $31.5 million, which worked out to a whopping $4,983 per square foot.
Source: Crain’s New York Business
Architects, along with land planners and civil engineers, are involved in the beginning stages of a project, so they are among the first to feel a recession — and a recovery.
It’s too early to say whether a recovery is at hand. But the downward spiral could be over, some industry experts say.
“It seems we are pulling out of it,” Farmer said. “We’re seeing increasing revenues, and we’re starting to see a little bit of profit.”
What’s more, the American Institute of Architects, after seeing five consecutive monthly declines in activity, reported a sudden upturn of activity in August in its billings index.
The index provides a nine- to 12-month lag time between architecture billings and construction spending, or a glimpse into the future of commercial construction activity.
“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said Kermit Baker, chief economist of the architects’ trade organization.
“Many firms are still struggling, and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.”
The index is centered on 50, with scores above 50 indicating an aggregate increase in billings and scores below indicating a decline.
In July, the index score was 45.1, the steepest decline in bbillings since February 2010, the trade organization reported. But the index reversed in August, shooting up to 51.4 percent.
Despite the recent upturn, “the extent of the (previous) decline was pretty serious,” Baker said, attributing the low index numbers to nervousness about the U.S. and global economies.
Architectural billings were improving at the end of 2010, showing stability and modest growth in the beginning of 2011, Baker said.
“There was a general sense the economy was improving and then … (the numbers) dropped off the end of the table and turned dramatically.”
Many projects are still on hold, Baker said. “Others are moving slowly and in fits and starts.”
Source: Richmond Times Dispatch
Very good article in THE HILL by George H. Miller, FAIA – 06/07/10 10:03 AM ET
When Congress returns this week, one of the first items on its agenda will be finding a way to pay for extending unemployment benefits to the millions of Americans who find themselves jobless even as the economy begins a slow and fitful recovery. The Senate hopes to begin work on the “tax extenders package” that was approved by the House of Representatives on May 28, just as lawmakers left for the Memorial Day Recess.
We sympathize with Congress as it looks for ways to pay for extending jobless benefits. Indeed, roughly 25 percent of my professional colleagues are unemployed – in some states the percentage is even higher – and would benefit from any extension, as well as from other provisions in the legislation, such as Build America Bonds. And yet, as world markets tremble from global debt anxiety, Congress is rightly pre-occupied with finding ways to fund the extension without adding to the ballooning deficit.
Bad decisions usually result when two such countervailing forces are at work. None is worse than the effort to help fund the extension by raising taxes on individuals and small businesses that form S Corporations. So-called S Corporations help to create jobs and economic growth by reinvesting hard-earned capital back into their enterprises. S-Corporation owners often pay themselves a salary, to which Social Security and Medicare taxes apply. But profits that are paid to the owner as a shareholder are not subject to payroll taxes. They will be for many S corporations, however, if this short-sighted provision passes and is signed into law by the President.
This type of tax hike comes at a time when many people – out of necessity due to layoffs and restructurings throughout the economy – are forming their own home-based consultancies, web design firms, landscaping enterprises and the like. If they structure themselves as an S Corporation – and many of them do – they would be caught up in this new tax just as they are planning to set up shop, hire staffers and buy the equipment they need to get started.
That is certainly the case in the architecture profession. We are struggling to find ways to restructure and resuscitate our careers and livelihoods after the collapse of the real estate market. Many of us operate as S Corporations, because it allows us the flexibility to compete in world markets and retain and attract the talent that has kept American architecture the envy of the world. We may be forced to lay off staff or stop hiring new staff to pay the new tax – even though this provision is in a “jobs” bill. The provision is particularly troubling in that it specifically calls out S corporations with three or fewer key employees.
We applaud Congress’s effort to find a way to extend unemployment benefits for individuals who need them. But as the economy begins to recover, now is the worst time to raise taxes on a sector that is a catalyst for job growth in the design and construction industry. After 27 consecutive months of contracting, the American Institute of Architects in May reported that architectural billings have trended upward for the third consecutive month. That’s an indication that new construction could be on the rise in nine to 12 months, which would create more jobs and advance our nation’s economic recovery.
Rather than hike taxes, Congress should enact legislation that generates revenue with little or no cost to the Treasury. One such bill is H.R. 5249, the Capital Access for Main Street Act of 2010, introduced by Reps. Ed Perlmutter (D-CO) and Mike Coffman (R-CO). This legislation would change accounting rules for community banks with less than $10 billion in assets as they work with borrowers to renegotiate loan terms, avoid large sums of commercial foreclosures, and free up credit that can be used more constructively.
Unscrupulous businesses do use S corporation status to avoid paying their proper share of taxes and they should be caught and punished. But the Internal Revenue Service is already empowered to address that issue. This tax hike lumps together the good and the bad, penalizing thousands of honest small businesses that follow the rules. We strongly urge Congress not to support this inappropriate tax increase.
George H. Miller is president of the American Institute of Architects, based in Washington, D.C.
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