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The Impact of Building Restrictions on Housing Affordability Most parts of the United States are not facing a widespread crisis in housing affordability.House prices approximate the cost of construction, and in some regions, they are below physical construction costs. We identify a limited set of markets, especially in New York City and California, where housing prices diverge substantially from new construction costs. The evidence suggests that zoning and other land-use controls are responsible for abnormally high prices in these places, as there are other parts of the country experiencing high demand without high and growing prices. Policy advocates interested in reducing housing costs should examine local regulations because reducing the implied zoning tax on new construction could have large effects on housing prices. Perhaps the impact of the regulatory tax on housing prices is local regulation’s strongest political appeal. Weaker rules could cause property values to fall, hardly the ideal platform for political aspirants. If reforms are to be politically feasible, losers from reductions of regulatory burdens on hous-ing development will have to be compensated.
REITs as an Alternative Investment in Volatile Financial Markets While real estate, unlike conventional stocks and bonds, has not been widely embraced as a stand-alone asset class, this article suggests that investors should consider the perform-ance enhancement and risk reduction potential of REITs in their portfolio construction process. A REIT allocation serves to diversify a stock and bond portfolio while providing competitive rates of return. The income component of REIT returns and the relative con-sistency of earnings based on a highly visible revenue stream make REITs an alternative worth considering in the face of broad equity market volatility. Finally, incorporating or increasing a portfolio’s exposure to REITs when they move to meaningful discounts to underlying net asset value may provide downside protection and the opportunity to cap-ture excess return relative to other forms of real estate investment.
Stock Market Rotations and REIT Valuation This article confirms what many people in the industry already accept about real estate stocks: they are both real estate and stocks. The strong relationship between REIT perform-ance and market sentiment toward small cap value and small cap growth stocks provides valuable insights into the often puzzling disconnect between the public real estate market and the private property markets. While public real estate companies afford investors access to the investment characteristics of private real estate - and most important, high and relatively sta-ble yields - they represent a very small sector of the public equities market. Because of the small size of the sector, capital flows in the public equities market can and often do easily overwhelm the private market property characteristics of real estate stocks when these char-acteristics are either in or out of favor. As shown in this article, REITs have traded at premi-ums to net asset value (NAV) when value investing is in favor, and at discounts to NAV when growth investing is in favor. Since sentiments in the stock market change much faster and less predictably than property market cycles, the stock market gyration dominantly delineates the cycles of REITs trading at premiums or discounts to NAVs.
The Changing Design of Shopping Places Shopping is an interaction between a marketing strategy and the design of the shopping place. The environment is an integral part of the retail equation, as important as the way that goods are marketed. Sometimes changes in shopping are driven by environmental innovations, and sometimes by innovations in strategy; sometimes innovations occur in both realms at once. The only constant is change, because retailing, more than other sec-tors of commercial real estate, is particularly susceptible to fashion: whatever attracts con-sumers one year may repel them the next. This article is a historical review of how shop-ping environments have changed and evolved from nineteenth-century arcades, to depart-ment stores, to shopping malls, and to the modern big-box self-service stores. Although the trend seems to be in the direction of reducing overheads (and prices) and increasing convenience, the town-center format suggests that, in a simplified form, there is still room for shopping-as-recreation.
The Evolution of Retailing in the United States Retailing in suburban America has undergone a dramatic evolution over the last 50 years. The authors explore the competitive forces that have fueled this transformation, noting that retail developers frequently misunderstood the process. Only recently have competi-tive forces created supply and demand equilibrium, a development that has vastly increased the challenges facing suburban retailing. The authors estimate that in 1950 there were more than 650,000 suburbanites per existing shopping center, but by 2000, that ratio had drastically declined to just over 4,000 suburbanites per shopping center. Opening a storefront and just "being there" is no longer a sufficient criterion for success in retailing. Today, from neighborhood centers to regional malls to outlet centers to big-box category killers, evolution in retailing continues. Only retailers who pay great attention to cost con-trols, as well as design detail, will have even a chance at leading the next wave.
The Return of the Town Center In recent years, new town centers, main streets, and urban villages have attracted intense interest from the real estate development community, retail industry and planners. Urban "place making" -- via the mixing of uses within a pedestrian environment modeled after traditional town centers -- is not simply a dream of urban designers and city planners but a marketable development concept that is increasingly being embraced by both the pub-lic and the private sectors. Whether modest village centers on the suburban fringe or bustling urban districts created on infill sites, main-street and town-center projects are making waves as promising new forms of real estate development. Today there are more than a hundred new town-center projects of various types planned or under construction, and at least one-third of the plans for new shopping malls incorporate an open-air urban setting, such as a main street, as a featured component. This article looks at the recent evo-lution of town-center development, discusses the trends contributing to the proliferation of town centers in recent years, and identifies some of their essential characteristics and ingredients for success. The article concludes that the most successful town centers will be those that capture the essence of great urban places while following the practical rules of real estate development and retailing.
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