PITTSBURGH | Development Rundown II

[BrianTH]

This is a good place to start for empirical evidence on why NYC housing prices are so high. In fact, you can start just with the conclusion:

http://app.ny.frb.org/research/epr/03v09n2/0306glae.pdf

[BrianTH]

Originally Posted by Jonboy1983

You do have a point, but when Atlanta hosted the Olympics in 1996, did they build all new sports venues for the games? I don't recall they ever did.

They used a lot of existing venues, but they built Olympic Stadium, which afterward became Turner Field (at which point Atlanta Fulton County Stadium was demo'ed). I believe there were also some smaller all-new venues, and a lot of work was done on various existing venues to make them suitable for the Olympics.

I strongly suspect that in Pittsburgh, we would also need to build something new on the scale of Olympic Stadium, but we don't need such a venue otherwise (Atlanta was lucky in the sense they were already thinking about replacing Atlanta Fulton County Stadium). I also doubt we have as many usable other existing venues as Atlanta did, so a lot of smaller specific purpose stuff would be needed.

Why do host cities build all new infrastructure that will be used only once?

In a nutshell, because most cities don't need 90,000 seat track and field stadiums before or after the Olympics. Again Atlanta was lucky in that they did want a new 50,000 seat baseball stadium afterward, and they designed Olympic Stadium to be convertible.

Beijing National Stadium (aka the Bird's Nest) was supposed to become a soccer (aka football) stadium, but the Beijing team pulled out of the deal because it is just too big for them.

London's Olympic Stadium was also supposed to become a soccer (football) stadium with a reduced capacity of 60,000, but that process has also run into trouble and is still up in the air:

http://www.guardian.co.uk/sport/2012/dec/05/west-ham-highest-ranked-bidder-olympic-stadium

Needless to say, Pittsburgh doesn't need a massive soccer venue.

The same issue extends really throughout the venues. Many events require special venues that never before and never again would be used for the same purpose at anything close to the Olympic scale. So that's why you end up with a lot of new or extensively renovated stuff you can't really reuse afterward.

[bruchaus]

Originally Posted by BrianTH

This is a good place to start for empirical evidence on why NYC housing prices are so high. In fact, you can start just with the conclusion:

http://app.ny.frb.org/research/epr/03v09n2/0306glae.pdf

So that report will tell me why the first two years I lived in my apartment they increased my rent $50 a year then last year by $250 + increase in security deposit? Was it because of building regulations? Me thinks otherwise.

[markson33]

The increases in your rent are a result of general market conditions. Rents are going up across the board. This is a nationwide trend, but Pittsburgh is one of the strongest markets in the country. Our vacancy rate is around 3% - which is statistically full.

It's a result of a combination of factors. Fewer people can get financing to buy thanks to Dodd Frank. Fewer people want to buy due to the general downturn in the housing market. Fewer developers are building because of financing issues. More people are moving back to the city. Etc etc.

[bruchaus]

Originally Posted by markson33

The increases in your rent are a result of general market conditions. Rents are going up across the board. This is a nationwide trend, but Pittsburgh is one of the strongest markets in the country. Our vacancy rate is around 3% - which is statistically full.

It's a result of a combination of factors. Fewer people can get financing to buy thanks to Dodd Frank. Fewer people want to buy due to the general downturn in the housing market. Fewer developers are building because of financing issues. More people are moving back to the city. Etc etc.

Real estate in NYC is very different from real estate in Pittsburgh. Rents here in Brooklyn have been going up over the last few years. It is an annoying result of yuppies moving into particular neighborhoods due to new construction and driving up rents in older buildings like mine.

When that Greenpoint Landing project is finally built rents in that area will skyrocket and the people who live there now will have to move further out into Brooklyn and the established community will be destroyed to make way for the yuppies.

[bruchaus]

Originally Posted by BrianTH

This is a good place to start for empirical evidence on why NYC housing prices are so high. In fact, you can start just with the conclusion:

http://app.ny.frb.org/research/epr/03v09n2/0306glae.pdf

This study is 10 years old and all about ownership. In NYC only 33% of people own their apartments or homes and that includes Staten Island where it is mostly owners. 67% of the city rents.

[Topher51]

Originally Posted by BrianTH

They used a lot of existing venues, but they built Olympic Stadium, which afterward became Turner Field (at which point Atlanta Fulton County Stadium was demo'ed). I believe there were also some smaller all-new venues, and a lot of work was done on various existing venues to make them suitable for the Olympics.

In a nutshell, because most cities don't need 90,000 seat track and field stadiums before or after the Olympics. Again Atlanta was lucky in that they did want a new 50,000 seat baseball stadium afterward, and they designed Olympic Stadium to be convertible.

Beijing National Stadium (aka the Bird's Nest) was supposed to become a soccer (aka football) stadium, but the Beijing team pulled out of the deal because it is just too big for them.

London's Olympic Stadium was also supposed to become a soccer (football) stadium with a reduced capacity of 60,000, but that process has also run into trouble and is still up in the air:

http://www.guardian.co.uk/sport/2012/dec/05/west-ham-highest-ranked-bidder-olympic-stadium

The same issue extends really throughout the venues. Many events require special venues that never before and never again would be used for the same purpose at anything close to the Olympic scale. So that's why you end up with a lot of new or extensively renovated stuff you can't really reuse afterward.

You beat me to it. Atlanta also used the Georgia World Congress Center for a lot of sports like wrestling, weight lifting, fencing, etc. They renovated the existing athletic venues at Morris Brown College & Morehouse College, which are less than a mile from the GA Dome for field hockey and such, built a new aquatic center at GA Tech and used a lot of their venues, built the Olympic Village at Georgia State so that they could be dorms afterwards, etc. They also widen all the interstates in town and added HOV lanes (that we used exclusively for buses and official olympic vehicles during the games). The area around Centenial Olympic Park has seen some significant development too and that is still a really nice place to visit.

For all the negative perceptions of the Atlanta games, they did a really good job with legacy aspect. I was at the games for 3 days and I loved it.

The biggest issue I see for Pittsburgh hosting something like this (other than the 10-12 bigger US cities that might also want to do it) is the public transportation system and the roads. There are more than enough venues in the area and more than enough demand for urban housing so that the Olympic Village could be re-used, but it would be expensive as all hell to bring the transportation system up to the standards needed for something like this.

As for the London Olympic Stadium, it actually wasn't designed to be a soccer venue afterwards. That is why there is so much trouble. The upper deck was built so that it could be easily removed and the remaining stadium would be a much smaller track venue. West Ham United and Tottneham Hotspur however put in bids to renovate it for their own use, but the layout isn't really conducive to soccer. If they had planned on converting it to soccer afterwards during the design, the seating bowl would have been rectangular instead of oval.

[PittPenn 03]

Originally Posted by BrianTH

They used a lot of existing venues, but they built Olympic Stadium, which afterward became Turner Field (at which point Atlanta Fulton County Stadium was demo'ed). I believe there were also some smaller all-new venues, and a lot of work was done on various existing venues to make them suitable for the Olympics.

.

I lived in Atlanta before and during the Olympics. I wouldn't wish the Olympics on any city as it is an extremely miserable experience. I worked downtown and we had to go on a 6 to 2 schedule to be able to get in and out of town (which meant getting up at 3:30 am to get in on time). I also had to walk home (I can't remember how far now, but I would guess 5 miles) in a city that really isn't made for walking in the summer heat. It was that or sit in traffic for who knows how long on a bus so packed it felt like it would tip over - same for trains. Downtown was packed with illegal vendors and scam artists crowding the streets out to a point where you could barely move - it was just a complete mess in every way I can remember.

Again from what I can remember, the major structures built were the stadium, the aquatic center - which became part of Georgia Tech's campus, the Olympic Village which became dorms for Georgia State, and the Olympic Park. I can't remember anymore, but I think everything else directly involved was existing.

I am not saying this as wanting to have the Olympics, but I think we are aside from hotel rooms and transit in a better position than Atlanta was before they got the Olympics. Keep in mind that Atlanta was not much bigger than Pittsburgh when they were awarded the Olympics. Their advantages would have been hotel rooms from their convention economy, the airport, and their rail connecting the airport to downtown. In downtown and the Northshore (where I would assume the center of it all would be) I think we actually have more natural places for people to congregate, more places to eat and drink, and more to do when not at events in a central location. I think aside from the Olympic sized stadium we would have plenty of venues. We would have all the local university venues, the professional venues and the convention center. The biggest problem would be transit and getting people through the tunnels. It was likely big corporate money that made Atlanta able to pull the Olympics off. If the local corporations got behind it and pressured the government, perhaps it could be the avenue that we finally get rail to the airport and a major convention hotel. Hmm, I change my mind -I would be willing to suffer for a few weeks to get the rail connection to the airport!

http://old.post-gazette.com/olympics/20000928olypitt1.asp

^I don't think we would end up ever being awarded the event, but it has been thought about in the past, so I would not be surprised if there is at least a feasibilty study completed.

[BrianTH]

Originally Posted by bruchaus

So that report will tell me why the first two years I lived in my apartment they increased my rent $50 a year then last year by $250 + increase in security deposit?

Well yes, in a way.

Housing prices (absent controls) are set by supply and demand, as in any other market. Demand for housing is obviously high in places like NYC, but in a relatively unconstrained supply environment, that should cause a supply response as developers compete to cash in on the high demand. The upshot is that in a relatively unconstrained supply environment, market housing prices should converge on the amount necessary to cover the cost of providing new units in that market.

What we know is that in some cities like NYC, housing prices are much higher than what it would take to cover the cost of construction alone. The other major input cost is land, but what this study did is show that land costs are also not sufficient to explain why housing prices in cities like NYC are so high.

The study then looked at a way of measuring the regulatory barriers to building new units, and it concluded that was a plausible explanation for why housing prices in cities like NYC were higher than construction costs and land costs could otherwise explain.

So in your particular case, what you are seeing in your rent increases is the result of demand for NYC housing growing faster than supply can keep up. And the reason supply can't keep up is not that developers could not make a profit given their land and construction costs, but rather because there are a variety of regulatory barriers slowing them down.

[Evergrey]

there are a couple of tantalizing articles behind the Pittsburgh Business Times paywall this week dealing with the residential boom Downtown

http://www.bizjournals.com/pittsburgh/pr...pittsburghs-residential-conversions.html

Real Estate

Pittsburgh’s residential conversions are placing premium on remaining office space

Building a new downtown

Downtown Pittsburgh’s residential construction boom is causing some ripple effects in the commercial and office markets.

As more people look to move back into urban areas, thereby increasing demand for apartments and condos downtown, the lowest-quality office space is slowly evaporating, leading to a rise in rental rates.

The trend started when developers began purchasing so-called Class C commercial buildings downtown. Badly in need of repair, these buildings were inexpensive to purchase and ripe for conversion.

Their occupancy rates were low because their space was largely obsolete, with floors that were too small, no parking and HVAC that could be ...

http://www.bizjournals.com/pittsburgh/pr...tsburgh-businesses-residential-boom.html

Real Estate

Pittsburgh businesses keep eyes on downtown residential boom

Office moves taking advantage of popularity

While an increase in residential properties downtown is squeezing rental rates higher, it’s simultaneously making downtown a more attractive place for companies.

Dan Adamski, managing director of the Pittsburgh office of Jones Lang LaSalle, said a desire to live downtown is beginning to factor into the office location decisions of the corporate clients with which he works.

“We do demographic mapping for all of our clients when they’re considering where to locate,” Adamski said. “More and more, you see a propensity of employees to want to live downtown.”

Adamski said he sees the increasing health of downtown as a growing ...

[bruchaus]

Originally Posted by BrianTH

Well yes, in a way.

Housing prices (absent controls) are set by supply and demand, as in any other market. Demand for housing is obviously high in places like NYC, but in a relatively unconstrained supply environment, that should cause a supply response as developers compete to cash in on the high demand. The upshot is that in a relatively unconstrained supply environment, market housing prices should converge on the amount necessary to cover the cost of providing new units in that market.

What we know is that in some cities like NYC, housing prices are much higher than what it would take to cover the cost of construction alone. The other major input cost is land, but what this study did is show that land costs are also not sufficient to explain why housing prices in cities like NYC are so high.

The study then looked at a way of measuring the regulatory difficulty of building new units, and it concluded that was a plausible explanation for why housing prices in cities like NYC were higher than construction costs and land costs could otherwise explain.

So in your particular case, what you are seeing is the result of demand for NYC housing growing faster than supply can keep up. And the reason supply can't keep up is not that developers could not make a profit given their land and construction costs, but rather because there are a variety of regulatory barriers slowing them down.

I mean, that all makes sense to a degree. Maybe what I am seeing is more renovation of old vacant buildings that have been converted into new apartments, a lot in my neighborhood. These new buildings then have a base rent of at least $3000. I stopped by one building who had people out front offering tours and they don't have any 1 bedrooms in the building and the cheapest 2 bedroom was $3400. All the new buildings are luxury and not affordable, but then because they are charging that much the neighboring buildings think they can get away with rent increases. It is annoying. I see your point though.

[BrianTH]

By the way, here in Pittsburgh, as in many places in the U.S. outside of the prime coastal areas, housing prices for pre-existing units are actually below what it would it take to construct equivalent new units, even accounting for depreciation. But new units have to cover their costs, so new units go for a premium sufficient to cover those costs.

With demand rising in the core area of Pittsburgh, what this means is that as share shifts to new units, average housing prices are going to gradually creep upward at least until they converge on the cost of providing equivalent new units, minus any relevant depreciation. That is more or less inevitable in a growing market, but what we want to avoid is overshooting that mark, as has happened in places like NYC.

And that, in a nutshell, is why anti-height, anti-density, anti-new NIMBYs represent a threat to the future economic development of Pittsburgh.

[Evergrey]

Originally Posted by BrianTH

And that, in a nutshell, is why anti-height, anti-density, anti-new NIMBYs represent a threat to the future economic development of Pittsburgh.

Which is why we all hate Buncher's proposal featuring surface parking and small, spaced-out buildings. It undershoots the mark for a prime riverfront parcel immediately adjacent to Downtown.

Or is this an example of "the perfect being the enemy of the good"?

[Private Dick]

Originally Posted by Jonboy1983

Personally, I thought Pittsburgh would be a better host for the Winter Games at some point. You have a hockey arena and other locations that I think could be used for indoor Winter Games, and you have skiing/snowboarding not too far away.

Olympic skiing could not be held in the Pittsburgh region.

And... Olympics in Pittsburgh... talk about a logistical nightmare.

[BrianTH]

Originally Posted by bruchaus

It is an annoying result of yuppies moving into particular neighborhoods due to new construction and driving up rents in older buildings like mine.

You are misattributing the source of increasing "yuppie" demand for housing in neighborhoods like yours. It isn't caused by new construction--new construction is itself an effect of the underlying growth in demand. Rather, the cause of that increasing demand is that NYC is a place where "yuppies" can make a lot of money and build up their human capital, and they want convenient places to live while they do that.

And incidentally, it is good for the nation, the environment, and really the whole world for people to be able to move to cities like NYC if they can be the most productive and gain the most human capital by doing so. So efforts to keep "yuppies" out of your city are de facto hostile to the long-term economic development of the nation and the health of the environment.

Of course I understand that the people already living there might prefer to close the door behind them and keep NYC to themselves. But in my view, no one has a superior entitlement to the benefits of living in cities like NYC--if you can make it there, you should be allowed to. And certainly NYC became what it is precisely because people could move there in large numbers (and there were massive rates of building in prior eras to accommodate that growth).

Edit: In a later post of yours, I think we are getting on the same page. I'll just note that developers wouldn't charge the rents they do if there were not people willing to pay those rents.

[BrianTH]

Originally Posted by bruchaus

This study is 10 years old and all about ownership. In NYC only 33% of people own their apartments or homes and that includes Staten Island where it is mostly owners. 67% of the city rents.

All the same reasoning applies to housing prices whether in the form of purchase prices or rents. However, it is true that proposed new rental housing may be subject to even more regulatory barriers than housing planned for sale (lots of NIMBYs particularly don't like rentals), and there are also specific sorts of regulations (like rent control) that can interfere with rental pricing.

[BrianTH]

Originally Posted by Evergrey

there are a couple of tantalizing articles behind the Pittsburgh Business Times paywall this week dealing with the residential boom Downtown

When you couple this with the relatively low vacancy rates for Class A office space, the overall picture becomes pretty clear: we should be building new Class A office space in and around Downtown while both building new residential and also converting vacant lower-class office space to residential.

Of course giving the market what it wants in that sense is going to move Downtown further "upscale"--the office mix and very likely the retail mix both. Personally, I think that is fine, as long as we are doing an OK job providing more "downscale" options in places close to or with good rapid transit into Downtown.

[BrianTH]

Originally Posted by Evergrey

Or is this an example of "the perfect being the enemy of the good"?

Yes, it is.

As we have walked through before, unless you are going to exercise Kelo-style eminent domain, we are stuck with Buncher as the land owner.

That means if you can't work out a mutually-acceptable deal on developing this land with Buncher, it will remain fallow, which is far worse than doing something good but not perfect.

Fortunately, if you are willing to read past the headlines and some of the more sensational criticism, there is actually a lot of potential in the Buncher plan. As I keep pointing out, the plan actually allows for those residential buildings to be up to 15 stories high, and some of the other buildings to be up to 20 stories high.

That would be a very good use of that land in my opinion. So rather than carping about extremely small-ball stuff like non-resident car access on the side streets, if you really care about these issues you should be thinking about how to get Buncher to do something at or close to the high end of what the plan allows.

[bruchaus]

Originally Posted by BrianTH

You are misattributing the source of increasing "yuppie" demand for housing in neighborhoods like yours. It isn't caused by new construction--new construction is itself an effect of the underlying growth in demand. Rather, the cause of that increasing demand is that NYC is a place where "yuppies" can make a lot of money and build up their human capital, and they want convenient places to live while they do that.

And incidentally, it is good for the nation, the environment, and really the whole world for people to be able to move to cities like NYC if they can be the most productive and gain the most human capital by doing so. So efforts to keep "yuppies" out of your city are de facto hostile to the long-term economic development of the nation and the health of the environment.

Of course I understand that the people already living there might prefer to close the door behind them and keep NYC to themselves. But in my view, no one has a superior entitlement to the benefits of living in cities like NYC--if you can make it there, you should be allowed to. And certainly NYC became what it is precisely because people could move there in large numbers (and there was massive rates of building in prior eras to accommodate that growth).

It is almost a chicken and egg thing. 10-15 years ago there was a TON of housing available in Williamsburg but yuppies didn't want to live there and had no demand for the housing. And so hipsters moved in and began to open coffee shops and art galleries etc. The yuppies didn't move in until they built high rise luxury rentals for them. The yuppies would've been fine staying in Manhattan, they weren't demanding new construction in Williamsburg. It was a kind of "If you build it they will come" thing. But was the demand there first or was the demand created when they built the buildings?

I don't hear a huge amount of clamoring from rich yuppies for housing in Greenpoint. Wherever they build the luxury housing the yuppies will move in. There may be demand for housing in general from everyone who lives here but new construction all over this city seems to only benefit the wealthy because the new construction is all luxury buildings.

If they built some buildings and charged $1500/month rather than $4000 you'd have a much more diverse population moving in. They don't want that though. Economic growth trumps all. This is my problem. I am not 100% pro growth. Not all growth is good. I'm not really anti-capitalist, but I do agree almost 100% with many Marxist critiques of capitalism, specifically Gramsci and others.

[Steel City Scotty]

An interesting article on the former leader of SouthSide Works. Information on incoming businesses and attractions is featured as well.

http://www.post-gazette.com/stories/business/news/southside-works-leader-has-exited-676460/

SouthSide Works leader has exited
February 22, 2013 12:25 am
By Mark Belko / Pittsburgh Post-Gazette

SouthSide Works will be moving into a new phase in its development without the man most responsible for making it into one of the region's top restaurant and entertainment destinations.
Damian Soffer, the former president and CEO of the Soffer Organization credited with luring the Cheesecake Factory, trendy retailers and the headquarters of American Eagle Outfitters to the city brownfield, is "no longer active in the management of the company," said Alfred C. Maiello, general counsel for Soffer.
Mr. Maiello said that Mr. Soffer's last day with the company was Nov. 30, but he would not discuss specifics surrounding his departure.
"As I said, there were issues. Those issues were resolved and he elected to remove himself from management and pursue other endeavors," he said.

Read more: http://www.post-gazette.com/stories/busi...-leader-has-exited-676460/#ixzz2Le425qVK