DENVER | Main Development Thread #6

[FrancoRey]

Originally Posted by RyanD

Holy effing crap.

Toronto's building on up
via Toronto Sun

Toronto is a freak of nature. Doing everything to out-do Chicago as the premier Great Lakes City. I still am waiting for the bubble though. I really feel like Canada is a carryover of the Chinese real estate explosion. Once that market pops, Canada will be next in line.

[bunt_q]

Originally Posted by mhays

I'll repeat another point I've been making back home: New construction will always be expensive because it costs a lot to build. But buildings age, and that's where you get cheap units. Today's cheap housing is often what was built in the 1970s, or even 1990s to a degree. It's cheap because it's been supplanted by newer housing that pushes it down the chain, in contrast to SF/Man which don't have enough new supply to do that.

You're missing the point, though. You can never get cheap for-sale housing if you don't build any new for-sale housing. Especially in a growing city. And we are building essentially zero for-sale multi-family housing at the moment.

I enjoyed this little write-up from ULI that I read yesterday. (I enjoy less that they are not taking a position, but nevertheless.)

[DenverPoke]

Originally Posted by FrancoRey

Toronto is a freak of nature. Doing everything to out-do Chicago as the premier Great Lakes City. I still am waiting for the bubble though. I really feel like Canada is a carryover of the Chinese real estate explosion. Once that market pops, Canada will be next in line.

That 20/20 story on the buildings that are sitting empty in China was crazy!

On cheap(er) housing in Denver, I'm surprised no micro-units have broken ground yet. Wasn't there a 12-story being proposed in Cap Hill? I'm pretty sure Lennar(or a similar national developer) purchased some land recently near Park and Welton and planned micro-units.

[bunt_q]

Originally Posted by FrancoRey

Toronto is a freak of nature. Doing everything to out-do Chicago as the premier Great Lakes City. I still am waiting for the bubble though. I really feel like Canada is a carryover of the Chinese real estate explosion. Once that market pops, Canada will be next in line.

I don't know. Per that article, Toronto metro is adding 100,000 people per year. That is not so terribly out of line with even Denver, considering how much bigger they are. Our MSA adding over 50,000 per year. The difference is that Denver proper is still only capturing ~1/5 of that, and a chunk of that is still suburban-styled development.

From that article: There are 154 building cranes in the air right now in Toronto. That translates to 46,362 units being developed, mainly in highrises, and 89% of those units are sold, according to BILD. ... In the last five years, about 60% of new homes sold have been highrises.

What Toronto is doing is not a miracle, it's a clear policy choice they have made as a region in favor of real urbanism. There might be some bubble, but it sure seems like a lot of it is just a different type of development. If you channeled 60% or 90% of the suburban garbage I build into Central Denver high-rises, Ken would have to start paying Ryan for his time, because he'd be one busy fellow. We are nowhere close to that, despite what some cheerleaders would have us believe. What Toronto is achieving is presently impossible here for a number of reasons, some due to preferences, but others due to legalities.

[RyanD]

Originally Posted by bunt_q

I don't know. Per that article, Toronto metro is adding 100,000 people per year. That is not so terribly out of line with even Denver, considering how much bigger they are. Our MSA adding over 50,000 per year. The difference is that Denver proper is still only capturing ~1/5 of that, and a chunk of that is still suburban-styled development.

From that article: There are 154 building cranes in the air right now in Toronto. That translates to 46,362 units being developed, mainly in highrises, and 89% of those units are sold, according to BILD. ... In the last five years, about 60% of new homes sold have been highrises.

What Toronto is doing is not a miracle, it's a clear policy choice they have made as a region in favor of real urbanism. There might be some bubble, but it sure seems like a lot of it is just a different type of development. If you channeled 60% or 90% of the suburban garbage I build into Central Denver high-rises, Ken would have to start paying Ryan for his time, because he'd be one busy fellow. We are nowhere close to that, despite what some cheerleaders would have us believe. What Toronto is achieving is presently impossible here for a number of reasons, some due to preferences, but others due to legalities.

All great points. This clearly shows that Urban / Suburban mentalities can make a huge difference, Toronto v. Denver. So if our MSA is adding 50,000 a year and we were to capture as much as Toronto is, we would have probably 70ish cranes / high-rise products under construction given defects and all that condo jazz was fixed.

That being said, Ken and Ryan would have a full time business, making the cash!

[Wizened Variations]

Originally Posted by FrancoRey

Toronto is a freak of nature. Doing everything to out-do Chicago as the premier Great Lakes City. I still am waiting for the bubble though. I really feel like Canada is a carryover of the Chinese real estate explosion. Once that market pops, Canada will be next in line.

Toronto has a LOT going for it, right now.

A) Convenient location to big chunk of US population while not being IN the US.

B) Far safer place to live on a metro scale than any comparable US city. Chicago, during one weekend, can have more murders and other violence than Toronto has in a month.

C) Approaching world class financial and academic facilities.

D) Not world class, but, very good public transportation.

E) Mayor Ford aside, a good city government.

F) The financial capital of a 1st World nation that compared to many other 1st world nations, is well run (and yes, the Canucks have a huge real estate bubble in a few cities). Per Davemanual.com, as of June 19, the Canadian federal government was in debt $$619,674,167,665.25 CDN. Per the US debt Clock.com as of this entry $18,8442,443,700,000 US, or approximately 3 times the debt per capital- i.e., there is MORE money in excess of debt service costs.

***********

The only 2nd tier US city in the same league is Houston, while Dallas, and Miami, are working hard to narrow the gap.

Denver is 3rd tier.

[mhays]

Bunt, I get that condos are a problem. Their prices will probably keep rising due to lack of supply, while also keeping urban types in apartments and others in houses. Edit: At some point those higher prices should cover the added insurance cost premium, and maybe you'll see construction even with the current law.

But new apartments help keep rents in check. That's my point. Also, that will have a domino effect....even people who want to buy might be enticed to keep renting if rental prices are a bit better due to apartment construction.

[DenverInfill]

An important note about that "89% of the units under construction in Toronto are sold" statistic that I learned on my trip to Toronto last year:

Toronto has rent control which discourages developers from building for-rent apartment towers from scratch. Therefore, the way it works there is that the new residential towers are built as "for sale" units with a big percentage of the units purchased by investors who then rent them out. Most of the 89% "sold" units will actually be rentals. Add in the 11% that are built at rentals, and well over 50% (probably like 60-70%) of the new 46,000+ units are rental apartments in reality.

[EngiNerd]

Originally Posted by bunt_q

You can never get cheap for-sale housing if you don't build any new for-sale housing. Especially in a growing city. And we are building essentially zero for-sale multi-family housing at the moment.

I enjoyed this little write-up from ULI that I read yesterday. (I enjoy less that they are not taking a position, but nevertheless.)

To be fair, a lot of the 70s and 80s condos that we consider affordable now in the Cheesman and Capital Hill neighborhoods began life as Apartments and have since been converted to condos over the years. Nothing says these new units won't do the same in time. They are all built nice enough inside that they could do well as condos without too many capital improvements needed.

[Cirrus]

Originally Posted by DenverInfill

new residential towers are built as "for sale" units with a big percentage of the units purchased by investors who then rent them out.

Interesting.

Anyway, IMO the big question for North American cities with regard to Toronto is how they're getting around the NIMBY problem. I have absolutely zero doubt we could get the same level of new urban development in at least some US cities if we changed the zoning & development regs to allow it. But that's politically impossible, it seems. How did Toronto do it?

[EngiNerd]

Originally Posted by Wizened Variations

Toronto has a LOT going for it, right now.

A) Convenient location to big chunk of US population while not being IN the US.

B) Far safer place to live on a metro scale than any comparable US city. Chicago, during one weekend, can have more murders and other violence than Toronto has in a month.

C) Approaching world class financial and academic facilities.

D) Not world class, but, very good public transportation.

E) Mayor Ford aside, a good city government.

F) The financial capital of a 1st World nation that compared to many other 1st world nations, is well run (and yes, the Canucks have a huge real estate bubble in a few cities). Per Davemanual.com, as of June 19, the Canadian federal government was in debt $$619,674,167,665.25 CDN. Per the US debt Clock.com as of this entry $18,8442,443,700,000 US, or approximately 3 times the debt per capital- i.e., there is MORE money in excess of debt service costs.

***********

The only 2nd tier US city in the same league is Houston, while Dallas, and Miami, are working hard to narrow the gap.

Denver is 3rd tier.

I disagree with 'E' above, Mayor Ford is one of the best parts of that city...I mean how many crack-smoking, whore-mongering, rehab-dwelling large city mayors are there? He is an army of one, and an institution all by himself.

[Chucolo]

Looks like a new developer, same plans and now that all the litigation is over (at least I think it is), five-story buildings after all?

And an update on Block B of DUS, all courtesy of John Rebchook.

http://insiderealestatenews.com/

[mhays]

If Denver wants large-scale Downtown retail, the best opportunity by far appears to be the Federal Reserve block.

FRBs have upped their security standards in recent years. The one in my city (a branch) moved to the suburbs for this reason, with a large security perimeter. Is Denver's location in question? It looks pretty close to the street. If they've renovated for blast protection that would suggest it's staying.

(Edit: meant this for the "five blocks" thread...will repost there!)

[BG918]

Originally Posted by Chucolo

Looks like a new developer, same plans and now that all the litigation is over (at least I think it is), five-story buildings after all?

And an update on Block B of DUS, all courtesy of John Rebchook.

http://insiderealestatenews.com/

This is interesting for B Block. W Hotel perhaps? Maybe, just maybe something like the ones in Dallas and Austin with condos on top?

East West Partners buys site near Union Station.
Its partner is Starwood.
A 20-story building could be built on the land.

[wong21fr]

Originally Posted by BG918

This is interesting for B Block. W Hotel perhaps? Maybe, just maybe something like the ones in Dallas and Austin with condos on top?

It's Starwood Capital- a privately held real estate investment firm. While once having an interest in Starwood resorts, it divested itself in 2000. So, no affiliation with W Hotels.

[wong21fr]

Originally Posted by Chucolo

Looks like a new developer, same plans and now that all the litigation is over (at least I think it is), five-story buildings after all?

And an update on Block B of DUS, all courtesy of John Rebchook.

http://insiderealestatenews.com/

Yep, and a developer who will tell the Highlands residents to go f**k themselves as they couldn't give a shit about their complaints.

[BG918]

Originally Posted by wong21fr

It's Starwood Capital- a privately held real estate investment firm. While once having an interest in Starwood resorts, it divested itself in 2000. So, no affiliation with W Hotels.

Too bad, a W Hotel would be a great addition downtown. Lodo may be a better location though, maybe part of the Market Station redevelopment when that happens.

[Wizened Variations]

Originally Posted by EngiNerd

To be fair, a lot of the 70s and 80s condos that we consider affordable now in the Cheesman and Capital Hill neighborhoods began life as Apartments and have since been converted to condos over the years. Nothing says these new units won't do the same in time. They are all built nice enough inside that they could do well as condos without too many capital improvements needed.

IMO most of the stick wall apartment complexes will not age very well in the sense of whether in 2034 or 2044 that such units will be converted to condos.

I do believe, however, that many concrete floored, steel and concrete supported 5 to 10 story apartment (and older office) buildings will be converted, sooner rather than later, into condominiums. Such buildings can be safely gutted, and, new interior partitioning put up with comparative ease.

I think we all will surprised at how much of what is being built- much of the apartment build up northeast of DUS- will become seedy, quickly. The combination of poor cladding materials and cheap construction would certainly encourage me to keep them apartments, invest little in them for improvements, long term. There will be ample opportunity to pick many of these complexes up at 50% of the new construction costs where rental flow would service purchase debts within twenty years.

Many of the 3 to 5 story stick wall buildings being built nation wide, IMO, will be torn down within 40 years.

[Brainpathology]

Originally Posted by EngiNerd

I disagree with 'E' above, Mayor Ford is one of the best parts of that city...I mean how many crack-smoking, whore-mongering, rehab-dwelling large city mayors are there? He is an army of one, and an institution all by himself.

There is exactly one who seems to own it. If you're claiming with a straight face that only one exists then I have a "New Urbanism" development concept at an old airport site to sell you.

[Brainpathology]

Originally Posted by wong21fr

Yep, and a developer who will tell the Highlands residents to go f**k themselves as they couldn't give a shit about their complaints.

I hope they don't say that, that sounds a lot more respectful than the residents there deserve. Something like, "Not only do we take your complaints and obstructions seriously, but we will explore all options we can to recover any costs associated with delays/frivolous lawsuits that you may think to throw in front of us. Stay the F*ck out of our way, or pay for your shenanigans."

Not that they would have much of a chance to DO that.. but the threat would be satisfying to watch. It would also be nice if the developer pointed out that the neighborhood morons effectively siphoned off nearly 5 million dollars in development costs for the land that could have gone into the building (I imagine the real number would be less since they are buying the development plan too though). So now they get a crapier building from a Phoenix developer instead of a slightly better one from a local developer. Way to force money out of Denver!