Seeking the Market

By Mark Smith   – Fundamental cause missing in sprawl literature – - Fixed assets in changing markets – - Chronic sprawl is in part market inefficiency – - Development processes and techniques contribute to sprawl -  - Solution is pre enabling densification - – Many factors said to cause sprawl might be considered demand generators - – Excessive sprawl is not responsive to the market – - Implications of business as usual? Another generation of development that will contribute to sprawl – . The sprawl conversation does not include a fundamental cause, which is the fixed nature of real estate assets and their relationship to host evolving markets. . Coevolution is Needed in Key Locations The inception of…

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Azusa Street & SpiritWalk Report

Report 2014

By Mark Smith – Our Azusa Street & SpiritWalk report is a strategic plan for cultural assets in downtown Los Angeles. The report presents tactics to achieve goals of cultural preservation, historical exposition, artistic expression, urban placemaking, entrepreneurship, and economic development. The Azusa Street & SpiritWalk report has been funded by the U.S. Economic Development Administration, the Tom Bradley Legacy Foundation at UCLA, and the Little Tokyo Service Center. Summary of Azusa Street & SpiritWalk Report Azusa Street & SpiritWalk Report      

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Asynchrony and the Mechanics of Sprawl

Edges become suburbs with increasing activity and value, yet as this natural market evolution occurs, we have no pre-enabled methods for key locations to coevolve with market demand and financial feasibility.

By Mark Smith -   Markets Change, Buildings Don’t. They Could. Some Should. In many development circumstances, first construction maximizes development potential based upon financial feasibility or highest and best use at that time. But this often occurs at a time when a local market is in a low activity, low value phase of its life cycle—such as in suburban edge areas and the beginning of urban redevelopment. Low sales prices or lease rates generally limit construction types to low density, because high density construction is more expensive and not feasible. Once designed, entitled, financed, and occupied, buildings and their obligations have lives of 20 to 80 or more years, a long-term commitment.      …

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Let’s Pre-Plan Density…So That We Can Accomplish It

By Mark Smith – Planned Densification is a process to overcome property-level economic obstacles to accomplishing higher density real estate development. Because of high overall construction costs, decreasing market prices, and troubled municipal finances—higher density development is now getting more difficult to accomplish at a time when density is increasingly important for economic development and environmental preservation. “Markets Change, Buildings Don’t”  The Problem: In-Place Construction Being Out-of-Sync with Surrounding Markets Especially in key locations, there is an entire layer economic and environmental value that is now lost because of the value and timing relationship between in-place construction and its surrounding market. (Please see a blog post about Asynchrony for a graphic description.) Most new construction…

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The Problem of Asynchrony and the Wedge

Asynchrony Grows Over Time.

By Mark Smith – Low-density development is often result of the match between local market conditions and the financial feasibility determination for a building or project. Most instances of new construction occur in what Pario calls low activity, low value markets. Low value markets produce low revenue to developers, and low revenue does not support sufficient density to yield productive urban neighborhoods. This is a primary cause of sprawl and it is too little understood. If a one or two story building is constructed, its economic and environmental characteristics and performance are relatively fixed. See the green area in Exhibit 1.   The problem is that losses from asynchrony can begin shortly thereafter as the…

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Management Functional Span of Control & Organizational Change

Typical corporate functional control is represented by the large triangle, and real estate is typically the narrow triangle shown in the center with fewer functions under direct control, and more functions outside of direct supervision. Narrow functional control is a primary reason that change is hard in real estate.

By Mark Smith Here is a photograph of a functional span of control illustration, from an impromptu discussion about organizational change in real estate development…   We are often asked about change—questions like ‘how can my organization change to accomplish your recommendations?’ or ‘why don’t developers do it this way or that way?’ Narrow Span of Functional and Process Control Though the details of the reasoning can be complex, there is one high-level concept that is important and easy to understand. It is management’s span of control over organizational functions. In real estate, management’s functional span of control is in most cases narrow—in other words, many processes and decisions that determine outcomes are not in…

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The New Proforma — After the Collapse

By Mark Smith Urban development entered a new era in the mid 1990s as consumers and developers began to embrace higher density development in urban locations. This is an important trend that promises better ecological outcomes and better economic outcomes for both municipalities and consumers. However, the current economic recession poses a problem relative to the much-heralded urban renaissance. The problem is in what I’ll call the New Proforma, which is facing a ‘new balance’ between costs and revenues. During most of the approximately ten-year urban renaissance, construction costs were relatively low, even for the newly embraced mid-rise buildings and their accompanying parking structures.  And while construction costs were relatively low, compared with today, the…

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