CREFW-Winter2016

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Winter issue 2016 sponsored CRE Finance World Winter 2016
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Urban
Demand for apartments in the urban core has accelerated. City
centers have become a desirable place for Americans to live and
work. Deindustrialization of center cities eliminated the reasons the
affluent wanted to move away9. The loss of manufacturing jobs and
the facilities that served them resulted in the loss of working class
neighborhoods10, but also opened up areas close to the urban core
for residential development and conversion. Perhaps the most
important development has been the astounding 49% decline in
the violent crime rate since 199211. Demographic trends also favor
center cities as more Americans are remaining single and childless
longer and prefer a city lifestyle.
Urban desirability is not confined to major first-tier cities; urban
cores nationwide are experiencing a renaissance. The increased
attraction of urban centers is further punctuated by a shortage of
functional and desirable urban locations in the U.S.12 .
Suburban and Non-Downtown City Neighborhoods
Although an increasing share of Americans and young adults in
particular reside in center city areas, the vast majority of all age
groups, including young adults, do not. A significant share of the
nation’s middle income housing can be found in the suburbs.
Opportunities may exist in Class B and C suburban and downtown
neighborhood multifamily near good transportation linkages and
in good school districts.
Manufactured Home Communities
Significant sectors of American society have not recovered from the
great recession and in fact certain groups have been experiencing
long-term decline. Approximately one in four American households’
survives on less than $25,000 a year13. There is also economic
stress in a significant segment of the growing 65+ age bracket.
Accordingly, demand for affordable manufactured home communities
(MHCs) will increase. MHCs situated in or near metro areas will be
particularly attractive.
Seniors’ Housing
We expect that demand for all types of seniors’ housing will
accelerate at unprecedented levels. There should also be an
increase in demand for multifamily in general and age restricted
55+ housing in areas with a high percentage of 65 + Americans.
Those who desire services such as a common dining room with
meal plan will spur demand for independent living facilities (ILFs).
We expect that Multifamily, age restricted 55+ communities, and
ILFs will be of particular demand in metros with high barriers to
entry. Assisted living facilities which offer assistance with one or
more activities of daily life and nursing facilities for high acuity
patients should see demand begin to spike in 10 to 15 years time
when baby boomers begin to enter their ninth decade of life.
The Information presented herein does not involve the rendering of
personalized investment advice, but is limited to the dissemination of
general information on Market conditions. This is an abridged version of a
larger paper that can be found on
Trends-impacting-habitation-alternatives.pdf. See same link for important
disclosures pertaining to this article. Real Estate Investors is an investment
group within NYL Investors LLC. NYL Investors is a wholly owned subsid-
iary of New York Life Insurance Company.
1 Tad Philip and Kevin Fagen “Moody’s/RCA CPPI: Moody’s/RCA CPPI:
CBD Office Prices Gain 7% in Past Three Months”, September, 2015.
2 Eric Klinenberg, “Going Solo: The Extraordinary Rise and Surprising
Appeal of Living Alone”, Penguin Books, February, 2012.
3 Jordan Rappaport “Millennials, Baby Boomers, and Rebounding Multi-
family Home Construction” Page 13, Federal Reserve Bank of Kansas
City, July, 2015.
4 Andy Kiersz, “Since the financial crisis, almost all Americans have seen
their wages fall.”, Business Insider, July 13, 2015. Based on BLS data
and covering years 2007 to 2014.
5 Dionne Searcey, “More Americans Are Renting, and Paying More, as
Homeownership Falls.”, New York Times, June 24, 2015.
6 Laura Kusisto, “New Luxury Rental Projects Add to Rent Squeeze”, The
Wall Street Journal, May 20, 2015.
7 Laura Kusisto, “Rents Rise Faster for Midtier Apartments Than Luxury
Ones”, The Wall Street Journal, August 16, 2015.
8 Jordan Rappaport “Millennials, Baby Boomers, and Rebounding Multifamily
Home Construction”, Federal Reserve Bank of Kansas City, July, 2015.
9 Alan Ehrenhalt, The Great Inversion and the Future of the American
City”, Knopf, April 2012.
10 Richard Florida, Zara Matheson, Patrick Adler & Taylor Brydges, “The
Divided City: And the Shape of the New Metropolis” , The Martin
Prosperity Institute (MPI), Rotman School of Management, University
of Toronto September 2014.
11 Source: Federal Bureau of Investigation.
12 Joe Cortright, “Our Shortage of Cities”, City Observatory, August 4, 2014.
13 Carmen DeNavas-Walt and Bernadette D. Proctor, “Income and poverty
in the United States”, US Census Bureau, September, 2014.
Trends Impacting Habitation Alternatives