Texas Trends

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Texas Trends

• Arthur C. Nelson, Ph.D, FAICP
• Director, Metropolitan Institute
• Professor, Urban Affairs Planning
• Virginia Tech Alexandria Center
• 2007

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America Grows

• 200 million in 1968
• 300 million in 2006
• 400 million in 2037
• 500 million in 2068
• 600 million in 2099
• America adds 100 million people faster than any
  other nation except India and Pakistan.
• Source Analysis by Arthur C. Nelson.

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Texas Grows Faster

• 23 million in 2005
• 28 million in 2020
• 34 million in 2040
• 40 million in 2060
• 47 million in 2080
• 54 million in 2100
• As the US doubles its population Texas increases
  about 2.5 times.
• Source Analysis by Arthur C. Nelson.

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Getting Ahead of the Curve

• US 2000 2040
• Population 281 million 391 million
• Housing Units 116 million 161 million
• Jobs 166 million 225 million
• Census projections are always too low by roughly
  5-10.

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MEGAPOLITAN AMERICA
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I-35 Corridor Trends

• Key demographic shift
• Dallas's White population will jump 30 percent
  as cheap real estate draws people from overpriced
  markets in other states.
• New growth industries
• Texas will be the country's new base for wind
  power Auto manufacturers will capitalize on
  cheaper labor.
• Best businesses to start
• Parts and components subcontractors to Toyota's
  San Antonio plant.
• Best residential real estate bet
• Starter homes/townhouses in Latino
  neighborhoods.
• Best commercial real estate bet
• Land along I-35 north of Dallas, where edge
  cities are leapfrogging each other.

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Gulf Coast Belt Trends

• Key demographic data
• Houston will surge in workers under 25 plus
  boomers wanting to downsize.
• New growth industry
• Homeland security technologies.
• Best businesses to start
• Law firms, accounting, restaurants in Texas
  "borderplex.
• Best commercial real estate bet
• Discounted industrial property will eventually
  bounce back.

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Front Page December 4, 2004
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Residential Development

• Texas 2005 to 2030
• Units in 2005 8.9 million
• Units needed in 2030 12.7 million
• Growth-related units 3.8 million
• Replaced Units 2.2 million
• Total Units 6.0 million
• Percent of 2005 units 70
• Loss rate 6 per decade compounded.

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Nonresidential Development

• US 2005 to 2030
• Space (sq.ft.) in 2005 5.7 billion
• Space needed in 2030 8.7 billion
• Growth-related space 3.0 billion
• Replaced space 9.2 billion
• Total construction 12.2 billion
• Percent of 2005 space 200
• Includes space built and rebuilt over period.

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Life-Span of Building Space
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What About .?

• Telecommuting?
• Internet retailing?
• Emerging technologies?
• And their effect on future space needs?

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Telecommuting Promises

• Higher productivity
• Reduce traffic congestion
• Reduce air pollution

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Telecommuting Reality

• Cabin fever reduces productivity in long- term
  after short-term gains.
• Cabin fever increases trips in am, noon, pm.
• Cabin fever increases peak pollution emission
  discharges with cold starts.
• Census work at home telecommuting indicator
• 1990 3.0
• 2000 3.3

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Internet Retail Sales Growth Rate and Share,
1998-2006
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Internet Retail Sales Growth Rate and Share
Figures, 1998-2006

• Year Retail Internet Share
• 1998 1.20T 5.5B 0.46
• 1999 1.49T 12.3B 0.83
• 2000 1.56T 24.1B 1.54
• 2001 1.62T 31.0B 1.92
• 2002 1.67T 41.4B 2.48
• 2003 1.83T 53.9B 3.11
• 2004 1.87T 67.3B 3.59
• 2005 1.95T 80.9B 4.14
• 2006 2.03T 95.3B 4.69
• Source Dept. of Commerce analysis by Arthur C.
  Nelson

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Reality Check

• Space Class 1992 2003 Dif
• Retail Service 57 62 9
• Office, Medical, Ed. 88 87 -1
• Total Glamour Space 145 149 3
• Warehouse Storage 45 35 -23
• All Other 75 63 -16
• Non-percentage figures per capita based on Census
  estimates.
• Source Energy Information Administration,
  Commercial Buildings Energy Consumption Surveys
  for 1992 and 2003.

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Bottom LineNew Construction 2005-2030

• Construction
• Residential 1.9 Trillion
• Nonresidential 1.0 Trillion
• Infrastructure 0.4 Trillion
• Total 3.3 Trillion
• Texas-Sized Growth Ahead

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Where Does It Grow?
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Market Analysts Finding Changing
Preferences National Association of
Realtors National Association of Home
Builders Nationally Recognized Market
Analysts Urban Land Institute Lend
Lease/PriceWaterhouseCoopers Joint Center for
Housing Policy at Harvard Golfing Buddies and
Taxi Drivers
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What is the Market Telling Us?

• Resale prices of condominiums rival resale
  prices of single-family homes for first time
  ever
• Appreciation of condominiums is higher than
  single-family homes nationally and in every
  region

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Emerging Price Evidence

• Change in Existing Home Prices 2006-2007
• Detached Townhouse 0.1
• Condominium Coop 2.6
• Existing Condo/Coop Units have had faster
  appreciation than existing Detached/Townhouse
  every year since 2002.
• Source National Association of Realtors, August
  2007. Single-family and townhouse data combined
  in NAR database.

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Traditional Households on the Wane Household
Type 1960 2000 2030 HH with
Children 48 33 27
Single-Person HH 13 26 30
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Share of Growth 2000-2040

• HH Type 2000 2040 Change Share
• W/ children 35 41 6 13
• W/o children 71 111 40 87
• Single-person 26 44 17 38
• Figures in millions of households.
• Source Adapted and extrapolated from Martha
  Farnsworth Riche, How Changes in the Nation's Age
  and Household Structure Will Reshape Housing
  Demand in the 21st Century, HUD (2003).

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People Turning 65 Each Year
Source US Census Bureau 65 in the United
States 2005 Wan He, Manisha Sengupta, Victoria
A. Velkoff, Kimberly A DeBarros. December 2005.
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Neighborhood Feature Preferences
Source National Association of Realtors Smart
Growth America, American Preference Survey
2004.
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Unmet Walkable Demand

• Residential Form Boston Atlanta
• want drivable suburbs 30 41
• of those who have 85 95
• want walkable suburbs 40 29
• of those who have 70 35
• Source Jonathan Levine, Zoned Out, Resources for
  the Future, 2006.

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Retired Location Preference

• In a city 14
• In a suburb close to a city 37
• Total urban 51
• In a suburb away from a city 19
• In a rural community 30
• Suburbs away from cities are the losers
• Source National Association of Realtors Smart
  Growth America, American Preference Survey 2004.

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Housing Unit Preference by Type, Surveys

• Unit Type Share
• Attached 38
• Apartments 14
• Condos, Coops 9
• Townhouses 15
• Detached 62
• Small Lot (lt7,000 sf) 37
• Large Lot (gt7,000 sf) 25
• Source Low range of surveys reviewed by Arthur
  C. Nelson, Planning for a New Era, Journal of
  the American Planning Association, Fall 2006.
• Toll Brothers shifting product mix to 15
  condominium WSJ 12/06.

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Looming Large-Lot Oversupply, 2005-2030

• Supply Preference Mid-Point
• Unit Type 2005 Change Change
• Attached 39M 15M 13M
• Small Lot 12M 40M 22M
• Large Lot 58M - 23M - 3M
• Figures in millions of units.
• Preference change based on low-range of
  preference survey averages.
• Mid-point is mid-percentage distribution between
  2005 and low-range estimate of preference surveys
  and supply of occupied units in 2005.

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Wasteful Residential EnergyEnergy Lost as
Percent of Energy Used
Source Energy Information Administration 2006.
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What Futurists Tell Us

• Cheap energy is over.
• Rising global competition for construction
  materials.
• Bio-medical advances will extend lifetimes.
  Another 20 years added?

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Tear Up a Parking LotRebuild Paradise

• Large, flat and well drained.
• Major infrastructure in place upgraded
  infrastructure to support redevelopment would be
  needed eventually anyway.
• 4 lane access, 1 sides, wide rights-of-way,
  often capacity for dedicated transit lanes.
• Single ownership Kelo problems reduced.
• Already planned/zoned for non low-density
  subdivision use.
• May more easily make NIMBYs into YIMBYs.
• Slide title phrase adapted from Joni Mitchell,
  Big Yellow Taxi, refrain Pave over paradise,
  put up a parking lot.

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Housing Challenges

• Increasing mismatch of housing demand by type
  relative to supply.
• Growing demand for housing accessible to transit
  but transit supply is lagging.
• Large-lot homes may not be worth their mortgages
  in 10 years.
• Historical demand for second homes cannot be
  sustained.
• Inducing home-ownership may harm financial
  condition of millions ? and already is in some
  areas.

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The Winners Will

• Know implications of demographic changes.
• Anticipate rising prices in energy, construction.
• Understand market responsiveness to
• New Metropolis development.
• Invent new financing tools to earn high
  long-term gains in New Metropolis investments
  despite short-term low returns.
• Create win-win public-private partnerships.

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• THANK YOU!