Article in the Wall Street Journal about the increase in apartment construction in the large cities. The problem is everyone is going for the higher-end luxury units and the income base of the areas where these apartments are being built doesn't support the rents. In Los Angeles an apartment rent averages $3,000 a month and in Boston it is $3,500. It would take an income of $128,000 to afford the LA place and $142,000 for Boston, while the median incomes for those areas is $29,000 and $60,000. The result is an increase in vacancy rates in the core cities and a decrease in vacancy rates in the 'burbs.
shellarchitect
Jan 13, 16 8:27 am
detroit is no different in the apt. boom. talk now is of micro apts. going up for those that can't afford the rent for a 1,000 sq. ft. place. I don't remember if those are legal around here though.
Lee Robert
Jan 13, 16 8:40 am
I've wondered about this myself.
The vacancy rate is increasing in cities, but I wonder if that has more to do with the amount of new construction outpacing the population growth. Not necessarily people being priced out of the housing market entirely and having to move (unwillingly) to the burbs. People do move out of the city, but it might not be 100% because of cost. Lifestyle probably plays a factor.
Living in Boston myself, it's still relatively easy to find affordable housing. I know it's anecdotal, but even when looking to purchase our first home, we found a great deal on a pre-war condo in a very competitive neighborhood for a great value. I wonder if the existing housing stock might be a good place for most people to hang while the world of new "luxury" condos goes nuts.
My mortgage is $1800 a month for a 850 sf. 2 bed condo, btw. Nowhere near this $3500 average. Some statistics can be deceiving.
Josh Mings
Jan 13, 16 9:28 am
The whole luxury apartment/condo scene here in Chicago is bat-s**t insane right now. Everywhere you look a new one is going up. It definitely can't sustain - reason? Student loans. Not many people with student loans are willing to pay that much for rent.
I'll stick with my 3 bed 2 bath in an 100 year old house in Logan Square for well under what the luxury apartments are charging for a studio or one bedroom. Sure my kitchen is awful, but the rest is nice.
Volunteer
Jan 13, 16 9:32 am
Lee Robert,
I don't have any experience with the Boston housing market, but I have heard it is a living nightmare. A lot of the big city cores, including such hot-spots as Washington DC, are actually losing population as the middle class can't find affordable housing. They either go to the 'burbs and commute or just settle for a lesser paying job in medium and small cities and leave the large urban areas altogether.
JeromeS
Jan 13, 16 10:13 am
We are providing material for a ton of Jersey City projects. This link is from a story of a year or two ago - its maps all the buildings going up.
DeTwan
Jan 13, 16 12:54 pm
It is interesting, I would say that many of these projects are benefiting from tax subsidies. The developers are sitting on so much cash that they are not looking at the future needs in housing, and really just want to spend the cash and turn it into a physical asset. Sometimes they build cheap apts that are quasi-afforadable, other times they do the very fancy high end ones.
The first firm that I worked for pre-recession was a Dallas based multi-family firm that specialized in building cheap/undercutting the competition. It was interesting b/c they seriously curtailed their business in 2009-12, going from a 200 person firm to a 12 person firm. Funny enough, many many ppl moved to the Dallas area after the crash of 2008 since Texas barely felt the consequences of the financial mishap. The end result is a peripheral city with no sense of 'place' that is a constant traffic jam. Out of that, a plethora of mutli-family firms were birth not only in the Dallas area, but in every large city.
There are a lot of developers in the Kansas City area where I now live that are building the very expensive and the quasi-cheap. All of which are out of the affordable range for the ppl that "should" be living in them, millennials. I don't see Kansas City attracting the socialites and cosmopolitians that these highend apts are trying to attract and could possible afford.
In the end, I just see it as another indicator to the dissolving of middle class. Another indicator of the incongruent growth of wealth in our society, and the disconnect that these individuals have with reality. I guess "the reality" will set in with time and the lack of leases and purchases, for as we all know, the purchasing power of the leading generation is non-existent, and as speculated, will not be growing anytime soon with ever looming debt.
Some are speculating that this is the beginning of the next bubble burst, with global growth slowing to a crawl. This is what happens when the emerging markets of the 80's and 90's adopted Reagenomics and the debt system. Yeap, the trickle down method at work.
geezertect
Jan 13, 16 1:27 pm
It's just a normal function of the real estate cycle. The luxury units will get built until absorption suddenly drops. The last guy in will panic and drop his rates, forcing competitors to match him. In turn, owners of the next tier down in desirability will drop their rents. It will cascade down to the bottom until the market appears to stabilize at a lower level. Then, after the storm clouds clear, rents will gradually creep up again until irrational exuberance returns and the cycle repeats. Actually, the glut of luxury units will eventually benefit the rest of the renters, who will be able to upgrade their living standards, at least for a while. Bad news for architects who specialize in multi-family, but what else is new?
The worst news for renters would be high rents with no new supply coming on line. Then you have a permanently insane market like NYC or SF.
won and done williams
Jan 13, 16 1:54 pm
A developer can't make the numbers work renting at $1.50/sf. Therefore their product needs to rent at $2.50+/sf to make it pencil out. Hence all the luxury units. Any new units renting at less than the top of the market are laden with public subsidy to make them affordable.
Schoon
Jan 13, 16 4:50 pm
Upscale student apartments are going up all over University City, too. Two completed in 2015 and one more in construction, all within 8 blocks of each other. All out of my price range, sadly... Guess I'll take my west Philly rowhome...
ivorykeyboard
Jan 15, 16 11:55 am
Josh there is no luxury condo boom in Chicago. If there was, the spire would be being built right now. There is some possible speculation of super-talls in the South loop, but it's just that- speculation.
400k-500k condos aren't luxury, if you're referring to the mixed used buildings going up on Milwaukee and Division street. Luxury is 600-700 dollars a sq foot.
Josh Mings
Jan 15, 16 1:31 pm
So not condos, but you can't deny the crazy amount of apartment towers going up right now, the vast majority of them proclaiming themselves to be luxury.
And the former spire site is being worked on presently. Related took it over and is working on a design right now.
zonker
Jan 15, 16 1:32 pm
Its what I am working on at this minute - and with a new recession looming - here in the bay area they are building like there is no tomorrow -
geezertect
Jan 15, 16 5:56 pm
^ Frenzied development always precedes a real estate bust.
Chicago is a real estate laggard compared to other major cities, and I think this is a positive. We've had modest, low single digit growth in home value since the recession.
I am well aware the Spire site is being developed by Related. They're probably holding back out of an abundance of caution.
Carrera
Jan 15, 16 8:52 pm
Not exactly a “frenzy” nationally.
Think a bigger question is single family housing or even any form of home ownership…read that millennials aren’t buying into the dream…SFH has always lead us out of recessions, but not this time…couple with student loan debt and skittish banks the economy will barely be airborne before the next landing.
shellarchitect
Jan 15, 16 9:19 pm
Had no idea, good perspective
geezertect
Jan 15, 16 9:54 pm
Think a bigger question is single family housing or even any form of home ownership…read that millennials aren’t buying into the dream
When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin. Green grass and quiet with room to spread out will look good. And if we have another bout of runaway inflation, people who are renters will be very sorry they aren't homeowners. Housing is one of the few fool proof inflation hedges that the middle class has.
Carrera
Jan 15, 16 10:48 pm
^ Agree, hard to beat fixing your housing cost for 30 years...lots of talk last night (as usual) about tax reform and the elimination of deductions, can’t imagine the interest deduction being eliminated, may be the biggest obstacle to tax reform….don’t trust it…Step 1 – Lower tax rates & eliminate deductions….Step 2 - jack up the taxes when the middle class is bare of deductions.
Miles Jaffe
Jan 15, 16 11:14 pm
Lower tax rates? I pay a higher percentage in FICA than the top 400 pay in federal tax.
"Tax reform" is codespeak for taxing the rich even less and trying to make it up on everyone else. Is anyone still buying this crap when 1% owns half of everything?
no_form
Jan 15, 16 11:54 pm
"When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin."
That's about all people can afford to entertain themselves. with student debt, stagnant wages, over priced housing, limited saving for down payments to secure mortgages, credit card debt to finance what student loans couldn't cover, oh maybe they had a kid while still renting (are only wealthy single family home owning couples entitled to have children?).
Unless you live in a low cost of living area owning a home before 45 is next to impossible.
archeyarch
Jan 16, 16 5:51 am
its as if they flipped a switch in 2013 and everyone started building again. is it really prosperity? or is it just massive debt growth fueling this boom? are your pay raises keeping up?
^ Not a big fan of the turning-in-your-neighbor technique, didn’t end up well in East Germany.
Think restaurants are a good barometer of what’s going on…when I go to an expensive one it’s packed, when I go to the lesser ones, hardly anyone is there, seems to be across the board….even Walmart is in trouble.
geezertect
Jan 16, 16 1:46 pm
Yup. Middle priced stores like Macy's suffer because their customers step down to WalMart, but then WM's customers step down to the dollar stores and thrift shops. Meanwhile, the higher end like Nordstrom's do just fine. The squeeze is at the middle.
It's not a mystery why Trump is gaining such a following. He may get a lot of the particulars wrong, but he has his pulse on something that the others don't quite get.
Carrera
Jan 16, 16 2:15 pm
^"Follow the money"
Keep playing around with doing an affordable housing project….then I wake up.
toasteroven
Jan 16, 16 3:25 pm
When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin. Green grass and quiet with room to spread out will look good.
and spend 3-4 hours a day stuck in car traffic? no thanks.
Miles Jaffe
Jan 16, 16 3:45 pm
The only pulse Trump is checking is his own.
DeTwan
Jan 16, 16 4:02 pm
I think it boils down to the feds wanting money (ie taxes) from these cash only transactions. The IRS is suffering in tax collection bc big corp has bypassed collection thur lobbying, and all the fancy things billion dollar companies do to hide their money. Now with the decay of middle class they have to squeeze something to get paid(taxes). Gotta go after ppl that actually make money now...you can only squeeze so much blood out of a turnip.
geezertect
Jan 16, 16 4:48 pm
and spend 3-4 hours a day stuck in car traffic? no thanks.
When the alternative is busting out at the seams with a growing family, putting your kids in a dangerous and incompetent public school system, and forever paying escalating rents with no inflation protection and no equity build-up, you'll be amazed at how palatable those commuting hours can be. Besides, you can always work in the suburbs where you live, in which case the commute isn't that oppressive. There are no perfect answers unless you are part of the economic elite, and you pretty much gave that option up when you decided to be an architect.
Volunteer
Jan 16, 16 6:25 pm
When GE recently decided to move their headquarters from Fairfield, CT, to Boston they said it was to help them attract young college graduates to their work force because Boston is so cutting-edge. O.K., but how many new-hire college graduates work at headquarters? What GE did was to avoid Connecticut taxes with the multi-year deal they cut with Boston and Massachusetts. GE employees go from a high-tax Connecticut environment to a high-tax MA environment - basically a wash except they now have to unload their Connecticut homes in a suddenly flooded Fairfield market and try to buy something in Boston's overheated market. The company makes out like bandits, the employees not so much.
poop876
Jan 16, 16 6:31 pm
"Besides, you can always work in the suburbs where you live".... In a strip mall perhaps!
gruen
Jan 16, 16 6:45 pm
A lot of Boston area multi family forclosures getting rehabbed to condos. Buy half a house for twice as much money.
Carrera
Jan 16, 16 9:20 pm
Total Housing Units in the U.S. is about 130 million; 47 million are multifamily units or about 35%. Read that single family follows household formation which is running about 300,000/year….1 million is normal…kids are still in mom’s basement and aren’t coming up, can’t say I blame them.
Peter Normand
Jan 17, 16 7:32 pm
GE like many firms are having trouble attracting young folks to work for their legacy company. They moved from New York to Fairfeild to get away from Urban Blight and failing schools in the 80s. The problem is now totally different, the cities are the place young professionals want to live and work. even in our industry it is hard for firms in the suburbs to get and retain the talent they want and need to grow. Urban schools are lacking but are probably much better than they were 10 years ago. Cities that are smart like Boston know that public schools need to offer quality education or their city will suffer economically, in Chicago we create racial and economically separated schools to try and stave off white or more accurately middle class flight.
As for rentals and multifamily housing it depends on the scale. In Chicago low rise 1-4 floor developments that don't require expensive elevators, structure and or mechanical systems are serving the lower end of the market. High rise towers 5-50 floors are much more expensive and thus need to rent in the luxury rate. The cost of granite counter tops compared to laminate is only a small part of the cost difference. For example in Chicago you lose water pressure once you are 4-5 floors up, those pumps are expensive to install and maintain for taller buildings.
I think we are seeing or perceiving a boom in luxury rentals as the city core has become a target market for young well paid professionals and combined with gentrification is causing a huge shift in housing affordability. the push for greater density is partially leading to the luxury boom as taller buildings cost more per square foot.
For the fortune 500 companies a 28 year old recent grad can make 80K+ they also have choices and once you are living comfortably the rest is just gravy lifestyle choices take priority. Choosing a job in the fun exciting city or sleepy stuffy Fairfield like suburbs is what is driving firms like GE, Kraft and even McDonalds to begin moving back to the city center. At 3k per room rent is not a top concern for the young professionals who don't have children and want to spend their leisure time in style late into the evening. In the suburbs things close early and lots of time every day is spent in the car.
What we are also seeing is a faltering of car culture that is also playing a key role in the growth of multifamily housing, no need to have a garage. Owning a car is expensive. Transit and Uber are now the way people want to get around, or that is the trend that is rising.
Article in the Wall Street Journal about the increase in apartment construction in the large cities. The problem is everyone is going for the higher-end luxury units and the income base of the areas where these apartments are being built doesn't support the rents. In Los Angeles an apartment rent averages $3,000 a month and in Boston it is $3,500. It would take an income of $128,000 to afford the LA place and $142,000 for Boston, while the median incomes for those areas is $29,000 and $60,000. The result is an increase in vacancy rates in the core cities and a decrease in vacancy rates in the 'burbs.
detroit is no different in the apt. boom. talk now is of micro apts. going up for those that can't afford the rent for a 1,000 sq. ft. place. I don't remember if those are legal around here though.
I've wondered about this myself.
The vacancy rate is increasing in cities, but I wonder if that has more to do with the amount of new construction outpacing the population growth. Not necessarily people being priced out of the housing market entirely and having to move (unwillingly) to the burbs. People do move out of the city, but it might not be 100% because of cost. Lifestyle probably plays a factor.
Living in Boston myself, it's still relatively easy to find affordable housing. I know it's anecdotal, but even when looking to purchase our first home, we found a great deal on a pre-war condo in a very competitive neighborhood for a great value. I wonder if the existing housing stock might be a good place for most people to hang while the world of new "luxury" condos goes nuts.
My mortgage is $1800 a month for a 850 sf. 2 bed condo, btw. Nowhere near this $3500 average. Some statistics can be deceiving.
The whole luxury apartment/condo scene here in Chicago is bat-s**t insane right now. Everywhere you look a new one is going up. It definitely can't sustain - reason? Student loans. Not many people with student loans are willing to pay that much for rent.
I'll stick with my 3 bed 2 bath in an 100 year old house in Logan Square for well under what the luxury apartments are charging for a studio or one bedroom. Sure my kitchen is awful, but the rest is nice.
Lee Robert,
I don't have any experience with the Boston housing market, but I have heard it is a living nightmare. A lot of the big city cores, including such hot-spots as Washington DC, are actually losing population as the middle class can't find affordable housing. They either go to the 'burbs and commute or just settle for a lesser paying job in medium and small cities and leave the large urban areas altogether.
We are providing material for a ton of Jersey City projects. This link is from a story of a year or two ago - its maps all the buildings going up.
It is interesting, I would say that many of these projects are benefiting from tax subsidies. The developers are sitting on so much cash that they are not looking at the future needs in housing, and really just want to spend the cash and turn it into a physical asset. Sometimes they build cheap apts that are quasi-afforadable, other times they do the very fancy high end ones.
The first firm that I worked for pre-recession was a Dallas based multi-family firm that specialized in building cheap/undercutting the competition. It was interesting b/c they seriously curtailed their business in 2009-12, going from a 200 person firm to a 12 person firm. Funny enough, many many ppl moved to the Dallas area after the crash of 2008 since Texas barely felt the consequences of the financial mishap. The end result is a peripheral city with no sense of 'place' that is a constant traffic jam. Out of that, a plethora of mutli-family firms were birth not only in the Dallas area, but in every large city.
There are a lot of developers in the Kansas City area where I now live that are building the very expensive and the quasi-cheap. All of which are out of the affordable range for the ppl that "should" be living in them, millennials. I don't see Kansas City attracting the socialites and cosmopolitians that these highend apts are trying to attract and could possible afford.
In the end, I just see it as another indicator to the dissolving of middle class. Another indicator of the incongruent growth of wealth in our society, and the disconnect that these individuals have with reality. I guess "the reality" will set in with time and the lack of leases and purchases, for as we all know, the purchasing power of the leading generation is non-existent, and as speculated, will not be growing anytime soon with ever looming debt.
Some are speculating that this is the beginning of the next bubble burst, with global growth slowing to a crawl. This is what happens when the emerging markets of the 80's and 90's adopted Reagenomics and the debt system. Yeap, the trickle down method at work.
It's just a normal function of the real estate cycle. The luxury units will get built until absorption suddenly drops. The last guy in will panic and drop his rates, forcing competitors to match him. In turn, owners of the next tier down in desirability will drop their rents. It will cascade down to the bottom until the market appears to stabilize at a lower level. Then, after the storm clouds clear, rents will gradually creep up again until irrational exuberance returns and the cycle repeats. Actually, the glut of luxury units will eventually benefit the rest of the renters, who will be able to upgrade their living standards, at least for a while. Bad news for architects who specialize in multi-family, but what else is new?
The worst news for renters would be high rents with no new supply coming on line. Then you have a permanently insane market like NYC or SF.
A developer can't make the numbers work renting at $1.50/sf. Therefore their product needs to rent at $2.50+/sf to make it pencil out. Hence all the luxury units. Any new units renting at less than the top of the market are laden with public subsidy to make them affordable.
Upscale student apartments are going up all over University City, too. Two completed in 2015 and one more in construction, all within 8 blocks of each other. All out of my price range, sadly... Guess I'll take my west Philly rowhome...
Josh there is no luxury condo boom in Chicago. If there was, the spire would be being built right now. There is some possible speculation of super-talls in the South loop, but it's just that- speculation.
400k-500k condos aren't luxury, if you're referring to the mixed used buildings going up on Milwaukee and Division street. Luxury is 600-700 dollars a sq foot.
So not condos, but you can't deny the crazy amount of apartment towers going up right now, the vast majority of them proclaiming themselves to be luxury.
And the former spire site is being worked on presently. Related took it over and is working on a design right now.
Its what I am working on at this minute - and with a new recession looming - here in the bay area they are building like there is no tomorrow -
^ Frenzied development always precedes a real estate bust.
https://www.yahoo.com/news/yahoo-lay-off-2-000-employees-132205338.html
http://sanfrancisco.cbslocal.com/2014/07/11/san-joses-rapid-housing-construction-causes-concerns-of-overbuilding/
http://money.cnn.com/data/markets/
Here we go again
Mings, this isn't a boom, or a frenzy. Go see what is happening in San Francisco and New York - now that's a construction boom. See below
http://www.chicagobusiness.com/realestate/20150514/CRED0701/150519908/why-isnt-the-ritz-selling
http://www.chicagomag.com/real-estate/November-2015/Chicago-Home-Prices/
Chicago is a real estate laggard compared to other major cities, and I think this is a positive. We've had modest, low single digit growth in home value since the recession.
I am well aware the Spire site is being developed by Related. They're probably holding back out of an abundance of caution.
Not exactly a “frenzy” nationally.
Think a bigger question is single family housing or even any form of home ownership…read that millennials aren’t buying into the dream…SFH has always lead us out of recessions, but not this time…couple with student loan debt and skittish banks the economy will barely be airborne before the next landing.
Had no idea, good perspective
Think a bigger question is single family housing or even any form of home ownership…read that millennials aren’t buying into the dream
When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin. Green grass and quiet with room to spread out will look good. And if we have another bout of runaway inflation, people who are renters will be very sorry they aren't homeowners. Housing is one of the few fool proof inflation hedges that the middle class has.
^ Agree, hard to beat fixing your housing cost for 30 years...lots of talk last night (as usual) about tax reform and the elimination of deductions, can’t imagine the interest deduction being eliminated, may be the biggest obstacle to tax reform….don’t trust it…Step 1 – Lower tax rates & eliminate deductions….Step 2 - jack up the taxes when the middle class is bare of deductions.
Lower tax rates? I pay a higher percentage in FICA than the top 400 pay in federal tax.
"Tax reform" is codespeak for taxing the rich even less and trying to make it up on everyone else. Is anyone still buying this crap when 1% owns half of everything?
"When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin."
That's about all people can afford to entertain themselves. with student debt, stagnant wages, over priced housing, limited saving for down payments to secure mortgages, credit card debt to finance what student loans couldn't cover, oh maybe they had a kid while still renting (are only wealthy single family home owning couples entitled to have children?).
Unless you live in a low cost of living area owning a home before 45 is next to impossible.
its as if they flipped a switch in 2013 and everyone started building again. is it really prosperity? or is it just massive debt growth fueling this boom? are your pay raises keeping up?
All that bailout money had to go somewhere ....
Here is any article that was published a few days ago about how the Feds will track buyers of luxury apts. There is a reason a lot of these buyers are secretive about their purchases...dirty money...http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxury-real-estate.html?_r=0
^ Not a big fan of the turning-in-your-neighbor technique, didn’t end up well in East Germany.
Think restaurants are a good barometer of what’s going on…when I go to an expensive one it’s packed, when I go to the lesser ones, hardly anyone is there, seems to be across the board….even Walmart is in trouble.
Yup. Middle priced stores like Macy's suffer because their customers step down to WalMart, but then WM's customers step down to the dollar stores and thrift shops. Meanwhile, the higher end like Nordstrom's do just fine. The squeeze is at the middle.
It's not a mystery why Trump is gaining such a following. He may get a lot of the particulars wrong, but he has his pulse on something that the others don't quite get.
^"Follow the money"
Keep playing around with doing an affordable housing project….then I wake up.
When they start getting into middle age, clubbing and restaurant meals and living in a cramped urban apartment will wear thin. Green grass and quiet with room to spread out will look good.
and spend 3-4 hours a day stuck in car traffic? no thanks.
The only pulse Trump is checking is his own.
I think it boils down to the feds wanting money (ie taxes) from these cash only transactions. The IRS is suffering in tax collection bc big corp has bypassed collection thur lobbying, and all the fancy things billion dollar companies do to hide their money. Now with the decay of middle class they have to squeeze something to get paid(taxes). Gotta go after ppl that actually make money now...you can only squeeze so much blood out of a turnip.
and spend 3-4 hours a day stuck in car traffic? no thanks.
When the alternative is busting out at the seams with a growing family, putting your kids in a dangerous and incompetent public school system, and forever paying escalating rents with no inflation protection and no equity build-up, you'll be amazed at how palatable those commuting hours can be. Besides, you can always work in the suburbs where you live, in which case the commute isn't that oppressive. There are no perfect answers unless you are part of the economic elite, and you pretty much gave that option up when you decided to be an architect.
When GE recently decided to move their headquarters from Fairfield, CT, to Boston they said it was to help them attract young college graduates to their work force because Boston is so cutting-edge. O.K., but how many new-hire college graduates work at headquarters? What GE did was to avoid Connecticut taxes with the multi-year deal they cut with Boston and Massachusetts. GE employees go from a high-tax Connecticut environment to a high-tax MA environment - basically a wash except they now have to unload their Connecticut homes in a suddenly flooded Fairfield market and try to buy something in Boston's overheated market. The company makes out like bandits, the employees not so much.
"Besides, you can always work in the suburbs where you live".... In a strip mall perhaps!
A lot of Boston area multi family forclosures getting rehabbed to condos. Buy half a house for twice as much money.
Total Housing Units in the U.S. is about 130 million; 47 million are multifamily units or about 35%. Read that single family follows household formation which is running about 300,000/year….1 million is normal…kids are still in mom’s basement and aren’t coming up, can’t say I blame them.
GE like many firms are having trouble attracting young folks to work for their legacy company. They moved from New York to Fairfeild to get away from Urban Blight and failing schools in the 80s. The problem is now totally different, the cities are the place young professionals want to live and work. even in our industry it is hard for firms in the suburbs to get and retain the talent they want and need to grow. Urban schools are lacking but are probably much better than they were 10 years ago. Cities that are smart like Boston know that public schools need to offer quality education or their city will suffer economically, in Chicago we create racial and economically separated schools to try and stave off white or more accurately middle class flight.
As for rentals and multifamily housing it depends on the scale. In Chicago low rise 1-4 floor developments that don't require expensive elevators, structure and or mechanical systems are serving the lower end of the market. High rise towers 5-50 floors are much more expensive and thus need to rent in the luxury rate. The cost of granite counter tops compared to laminate is only a small part of the cost difference. For example in Chicago you lose water pressure once you are 4-5 floors up, those pumps are expensive to install and maintain for taller buildings.
I think we are seeing or perceiving a boom in luxury rentals as the city core has become a target market for young well paid professionals and combined with gentrification is causing a huge shift in housing affordability. the push for greater density is partially leading to the luxury boom as taller buildings cost more per square foot.
For the fortune 500 companies a 28 year old recent grad can make 80K+ they also have choices and once you are living comfortably the rest is just gravy lifestyle choices take priority. Choosing a job in the fun exciting city or sleepy stuffy Fairfield like suburbs is what is driving firms like GE, Kraft and even McDonalds to begin moving back to the city center. At 3k per room rent is not a top concern for the young professionals who don't have children and want to spend their leisure time in style late into the evening. In the suburbs things close early and lots of time every day is spent in the car.
What we are also seeing is a faltering of car culture that is also playing a key role in the growth of multifamily housing, no need to have a garage. Owning a car is expensive. Transit and Uber are now the way people want to get around, or that is the trend that is rising.
Over and OUT
Peter N