Every year, the federal Low Income Housing Tax Credit program budgets nearly $8 billion for state and local tax credits to encourage developers to renovate and build affordable housing, according to the U.S. Department of Housing and Urban Development. Since 1987, more than 2.6 million housing units have been created through the LITHC program.
Two Stanford University researchers recently studied the effect of affordable housing development on different neighborhoods, analyzing the LITHC effect over a 10-year span, studying 16 million transactions from 15 states and more than 7,000 LITHC projects. The results showed that, when placed in a low-income neighborhood, an affordable housing project was worth about $116 million to the immediate surrounding neighborhood. In areas with incomes below $26,000, home values appreciated 6.5 percent near LITHC projects, creating a “revitalization effect,” according to the researchers, reducing crime and increasing diversity as well. However, in neighborhoods with incomes above $54,000, houses near LITHC projects decreased in value about 2.5 percent.
Location decisions are only one factor facing affordable housing developers. The LITHC program is one of the few subsidies available for affordable seniors housing, a growing need in the coming decade. By 2024, about 6.5 million 65-and-over households will have annual incomes under $15,000 - a 37 percent increase in the next 10 years, according to the Joint Center for Housing Studies of Harvard University. Older households with incomes between $15,000 and $29,999 will add another 2.9 million to the ranks of low-income households.
“The average [office] tenant improvement allowance nationwide is $30 psf, up to just over $50 psf in central business districts. The 2Q15 average has eclipsed 2010 highs.”
-JLL, U.S. Construction Perspective, 2Q15
Hospitality - The right brand matters when looking for hotel investments, according to discussions at the 2015 Hotel Data conference this fall in Nashville, Tenn. “There are two clear favorite companies for investors if you're thinking about building or buying a branded hotel: Marriott and Hilton,” said Russell Shattan, senior vice president of MCR Development. “They are doing a better job than other major companies in capturing a wide variety of travelers.” As of August, investors had bought $17.7 billion of hotels, almost matching 2014's total of $18.7 billion.
Industrial - A 6 percent market share of container shipping has shifted from west coast to east coast ports since 2007, according to JLL, which expects this shift to continue as the new Panama Canal opens next year. JLL predicts an additional 10 percent shift by 2020; however, “it cannot be assumed that demand for warehouse space will transfer equally. There are too many complexities and variables in the movement of goods,” JLL reports.
Multifamily - As if anyone needed more proof of this sector's dominance, multifamily investment reached a historic high of $127 billion at the end of 2Q 2015, a 36 percent YOY increase in volume, the highest four-quarter total in history, according to CBRE. It far surpasses the peak performance of $100 billion at the end of 2Q 2006.
Office - Of 14 top metros tracked, Dallas, Boston, and Philadelphia all clocked more the 2 msf of net absorption for 1H 2015, according to Transwestern, while Chicago, Miami, San Francisco, and Washington, D.C., were all under the 500,000 sf. Only three markets - New York, San Francisco, and Denver - posted sub-10 percent vacancy rates, indicating that the office market still has a way to go.
Retail - While only 6.8 msf of retail space was absorbed in 1H 2015, activity should strengthen considerably in the remainder of the year to bring the year's total net absorption to 32 msf, according to CBRE, up from 2014's 28.6 msf. CBRE is predicting a post-recession high of more than 58 msf net absorption for 2016.
Canada Goes Luxe Shopping
After the discounter Target's Canadian debacle ending in 133 closed stores, more upscale retailers are venturing north in an attempt to build a Canadian fan base. Hudson Bay Co. is opening three of six planned Saks Fifth Avenue stores next year in Toronto, Montreal, and Vancouver, plus 25 of its discount Saks Off Fifth Avenue stores in the next few years. Nordstrom, which has mall stores in Calgary and Ottawa, is opening a flagship store in downtown Vancouver. In addition, several high-end niche retailers, such as Tory Burch and Jimmy Choo, are already in the major Canadian markets. Experts debate how much luxury retail Canadians can buy: the country of 35 million has just over half a million residents who earn more than $150,000 a year.
Embrace the Enemy?
Airbnb and BridgeStreet Global Hospitality Group have struck a deal to share their property listings on both platforms, according to company press releases. BridgeStreet, which owns about 50,000 corporate apartments in more than 60 countries, will make Airbnb's properties available to its clients. In turn, Airbnb will list BridgeStreet apartments on its new corporate housing portal, Airbnb for Business. “We viewed Airbnb as a natural choice to link up with as they have certainly helped redefine the travel industry,” said BridgeStreet Global CEO Sean Worker. Launched in July, Airbnb for Business says that 1,000 companies in more than 35 countries use Airbnb in their corporate travel programs.