In Search of Good NewsAssessing the New Urbanism in the Face of the Recession

Jonathan Bartlett – jbartlett@rclco.com | CNU18 May 2010

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THREE BITS OF GOOD NEWS, AND A CHALLENGE

• A demographic shift is in progress that will create extraordinary opportunities for developers and the

f i l hi d t d th i thi kiprofessionals hired to do their thinking.

• Green, whatever it means, is a big deal, and people have started to expect itstarted to expect it.

• TND projects have earned the right to fail for the same reasons as their more conventional counterpartsreasons as their more conventional counterparts.

• More than ever before, empirical evidence shows that the traditional model of suburban development is broken Cantraditional model of suburban development is broken. Can you provide a scalable, inclusive alternative?

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Boom . . . Boom!

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GEN Y, BOOMERS CALLING THE SHOTS

2010 U.S. Pop.

Eisenhowers17% - 51M

Gen Z (?)10% - 30M

B b B

Gen Y27% - 81M

Baby Boomers27% - 78M

Gen XGen X18% - 52M

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SOURCE: Claritas, National Center for Health Statistics, US Census

GEN Y MAKING ITS MARK TODAYSHAPING POST-RECESSION PLACEMAKING EFFORTS

RCLCO Consumer Research shows: 41% of Generation Y plan to rent for at least three years 77% of Generation Y plan to live in an Urban Core

4,000,000

4,100,000

4,200,000 Largest group began graduating in 2009 –Greatest demand for rental housing in this period

3,700,000

3,800,000

3,900,000If this group rents for at least three years, there will be more first-time homebuyers in the market in 2013-2018 than ever before

3 400 000

3,500,000

3,600,000

, ,

3,400,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Number of 22 Year Olds Same 22 Year Olds Turn 25

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NOTE: Number of 22-year olds is based upon birth rate and does not factor in death rates and migration.SOURCE: U.S. Centers for Disease Control and Prevention

GEN Y WILL PAY FOR WALKABLE, MIXED-USECHALLENGE IS PROVIDING PRODUCT THEY CAN AFFORD

• Driven by convenience, connectivity, and a healthy work-life balance to maintain relationships

• 1/3 will pay more to walk to shops, work, and entertainment

• 2/3 say that living in a walkable community is important

• More than 1/2 of Gen Y would trade lot size for proximity to shopping or to workfor proximity to shopping or to work

• Even among families with children, one-third or more are willing to trade lot size and “ideal” homes for walkable, diverse communities

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SOURCE: RCLCO Consumer Research

> 85% OF GROWTH IS HOUSEHOLDS WITHOUT CHILDRENDIFFERENT HOUSEHOLD LANDSCAPE BY 2025

Married with children 1 376 788

Absolute Change in Households, United States1980–2005

children, 1,376,788Married, no

children, 5,476,979

One-person households, 11 825 702

Single male with hild 2 165 939 11,825,702children, 2,165,939

Single female with children, 4,680,913 Other Family,

1,758,377

Nonfamily, 3,416,246

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, ,

SOURCE: US Census

FORGET ABOUT EQUAL PAY…WOMEN POISED TO OUT-EARN MEN – ARE YOU READY?

Data from 2003-2004 shows a dramatic reversal from only a few decades ago – whereas 60% college graduates were men in 1978, today almost exactly the reverse is true.

These Gen Y women will begin to outpace their male counterparts with respect to earning and purchasing power.

Degrees by Sex: 2003 – 2004

58.93%47.66%

57.46%

42.54% 41.07%52.34%

Bachelor's Master's Doctorate

M l F l

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Male Female

Green Research Shows Importance of Messaging

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C

“GREEN” COMPETES IN A CROWDED FIELDSCHOOLS, SPACE, SIZE STILL MOST IMPORTANT FACTORS

Most Important Factors When Choosing a New Home

Indoor parking for at least tw o vehiclesReduced electricity bills

First-f loor master bedroomSeclusion and space from neighbors

Excellent school system

Uses the sun for home heating/energyA smaller home w ith less square footage

Improved indoor air qualityAdditional storage space

Appliances that use less w ater and less energyCosts more today but saves energy and has reduced energy bills over time

A larger home w ith more square footageUse of materials that do not contain potentially hazardous chemicals

Finished basementLarge law n

Community amenities such as pools, basketball courts, and clubhousesWalking distance to transit

Hardw ood f loorsProximity to major highw ay or thruw ay

Pedestrian-friendly locationEnergy Star certif ication

Uses the sun for home heating/energy

S f i h i i i f fLuxury appliances, such as Viking and Miele

Golf courseNAHB Model Green Home certif ication

Ten foot ceilings or higherUse of renew able materials

Walking distance to w orkFireplace

Finished basement

Uses less w aterUse of low -w ater usage landscaping

Granite countertopsBerber or other luxury carpet f looring

Stainless steel appliancesLEED certif ication

Formal dining roomSurfacing that minimizes runoff

N=1,011

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0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%SOURCE: RCLCO Consumer Research

THREE PRIMARY MOTIVATIONS

Green homes are betterGreen homes are betterfor “the environment”

Green homes save energy(and have lower utility bills)

Living in a green home is better for g gmy health and

that of my family

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WHAT’S IN IT FOR ME? HOOK TO SELL SMART LOCATIONS IS “ME”, NOT “WE”

50%

If their green investment may not pay them back over time, buyers are willing to spend more money on their home if….

41%40%

45%

50%

18%

24%25%

30%

35%

18%

10%

15%

20%

0%

5%

It Saves Energy It Provides Health Benefits It’s Good for the

E i t

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Environment

“BRANDING” THE GREEN BUILDINGENERGY STAR IS THE BRAND THEY KNOW AND TRUST

For those who answered ‘MORE INCLINED TO STAY’ in CQ27, please indicate your willingness to pay a higher rent for one or more of the following certifications:

None

National Audubon Society

Other

Specify

Healthy Home or HealthHouse1

Model Green Home

Built Green

E St

EarthCraft

Green Globes

y

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

LEED

Energy Star

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Not Willing to Pay any more Rent Willing to Pay more in Rent

A Tale of Two Suburbs

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OLD MODEL VERSUS THE NEW

Telfair (#4) Daybreak (#6)

Metro Area Houston Salt Lake CityMetro Area Houston Salt Lake City

Metro Area Population 5.9 million 1.2 million

MPC Gross Acreage 2,018 4,126

Market Positioning Primary Home Primary HomeActive Adult

First Home Sale June 2006 June 2004

Units Sold to Date 1 452 2 423Units Sold to Date 1,452 2,423

Units Sold in 2009 450 (2.4% of market) 375 (16% of market)

Lots Sold in 2009 404 355

Most Popular Amenities Walking Trails/Parks (15), Lifestyle Center, Resort-Style Water Park

Walking Trails/Parks (51)--70% of kids walk to school--, Community Gardens, future rail

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DISTRIBUTION OF HOME SALES IN 2009

DaybreakTelfair

13% Large Lot SFD

27% C d /MF

33% Small Lot SFD

27% Townhome

27% Condo/MF

100% Large Lot

27% Townhome

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IS THERE ARE SMART GROWTH PREMIUM?

(*even in a downturn)

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Source: Eppli and Tu

If you prefer quick and easy exurban developmentIf you prefer quick and easy exurban development, please raise your hand.

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But New Urbanism Creates LongBut New Urbanism Creates Long-Term Value!!

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CONTACT USJONATHAN BARTLETTVice President - Atlanta

jbartlett@rclco.com

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Austin, TX 78701(512) 215-3156 Phone

WWW.RCLCO.COM

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