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Phoenixs Future:After the Bubble and BeyondPhoenixs Future:After the Bubble and Beyond

Presentation by Joel Kotkin12th Annual Fall Real Estate Seminar Irvine Senior Fellow New America FoundationPhoenix, AZ September 14, 2006

Presentation by Joel Kotkin12th Annual Fall Real Estate Seminar Irvine Senior Fellow New America FoundationPhoenix, AZ September 14, 2006

The Bubble: The ProblemsThe Bubble: The Problems

Phoenix is somewhat vulnerable Condos and speculators will have a tough time Real Estate downturn will cause problems through the economy Biggest issue: Loss of employment, particularly for immigrant

laborers

Phoenix is somewhat vulnerable Condos and speculators will have a tough time Real Estate downturn will cause problems through the economy Biggest issue: Loss of employment, particularly for immigrant

laborers

0% 5% 10% 15% 20% 25%

Construction

Education and Health

Retail

Professional andBusiness Services

Financial Services

Tourism

Government

Research by Dr.Mike Shires, Pepperdine University for Inc. Magazine

Phoenix Job creation by sector 2002-2005

Construction has been the star player in the current boom (2002-2005)

Construction has been the star player in the current boom (2002-2005)

Whos most vulnerableWhos most vulnerable Condos expected to drop

by as much as 9% over the next year. Single family homes by about 1% (Goldman Sachs)

Condos being turned into rentals or being cancelled particularly in downtown markets, such as Minneapolis, Philadelphia and Los Angeles

New York apartments for sale at highest inventory in a decade

Speculative investments, second homes, people with interest only loans

Phoenixs Hope: Attend to BasicsPhoenixs Hope: Attend to Basics

Lower prices are necessary corrective

The key issues are back to basics Job Creation key, particularly for

displaced white and blue collar construction workers

Stay affordable, competitive, focus on infrastructure and Phoenix will do fine

Conventional Wisdom AmongArizonas Policy Elites

Conventional Wisdom AmongArizonas Policy Elites

[Arizona] is just like hell, all it lacks is water and good society.

US Senator Benjamin Wade (185169)

Phoenix and Arizona Natural AdvantagesPhoenix and Arizona Natural Advantages

Still affordable, particularly compared to California and the Northeast

Good Business Climate Entrepreneurial Culture Flexible Geography Room to Grow

Competition Between Cities and Regions is a Fact of Life and has been for over two millennia

Competition Between Cities and Regions is a Fact of Life and has been for over two millennia

Every city is in a natural state of war with every

other, not indeed proclaimed by heralds, but

everlasting.

Plato, 4th Century BC

Rise and Fall of CitiesRise and Fall of CitiesHuman prosperity does not abide long in one place

Herodotus Greek Historian 5th Century BC

Key Factors for DeclineKey Factors for Decline

Inability to absorb newcomers Lack of upward mobility Inattention to basic infrastructure Lack of security Loss of Moral Compass

Inability to absorb newcomers Lack of upward mobility Inattention to basic infrastructure Lack of security Loss of Moral Compass

Attacks on peoples property remove the incentive to

acquire and gain property

Ibn Khaldun14th Century Arab historian

The miracle of toleration was to be found, wherever the community of trade convened.

The Cosmopolitan CityThe Cosmopolitan City

French historian Fernand Braudel on Venice, Antwerp, Amsterdam and

London in the early Modern Period

Beyond elitism:Jane Jacobs on the

proper role of an urban economy

Beyond elitism:Jane Jacobs on the

proper role of an urban economy

A metropolitan economy, if it is working well, is constantly

transforming many poor people into middle class people

...greenhorns into competent citizens... Cities dont lure the

middle class, they create it

The Evolution of Global CitiesThe Evolution of Global Cities

London and Paris --- 1750 New York and Chicago --- 1900 Tokyo, Los Angeles, Hong Kong --- 1970s Sydney, Singapore, Seoul, Sao Paolo --- 1980s Shanghai, Beijing, Mumbai, Toronto --- 1990s The 2000s: Prospects for new players from

Bangalore, Perth, Calgary, Houston, Phoenix

London and Paris --- 1750 New York and Chicago --- 1900 Tokyo, Los Angeles, Hong Kong --- 1970s Sydney, Singapore, Seoul, Sao Paolo --- 1980s Shanghai, Beijing, Mumbai, Toronto --- 1990s The 2000s: Prospects for new players from

Bangalore, Perth, Calgary, Houston, Phoenix

The Global City in Modern TimesThe Global City in Modern Times

Spread of Urbanism Technology and

de-clustering in western metropolitan areas

Rise of smaller hubs The Ephemeral City New Prospects for

Phoenix and other cities of Aspiration

In America, Australia, and Canada the single family house remained

the dream

In America, Australia, and Canada the single family house remained

the dream

The suburban house is the idealization of every

immigrants dream---the vassals dream of

his own castle. Europeans who come here are delighted by

our suburbs. Not to live in an apartment! It is a universal aspiration to own your own home.

Los Angeles urbanist Edgardo Contini

Western Cities Become a Global ModelWestern Cities Become a Global Model

Los Angeles the original in the Xerox machine

Cities old and new around the world evolve towards multipolar model

The de-clustering of business and people away from traditional concentrations

The challenge ahead: Creating a more humane and functional urban model

U.S. Population in Urban, Suburban, & Rural Areas U.S. Population in Urban, Suburban, & Rural Areas

Peo

ple

(mill

ions

)

0

20

40

60

80

100

120

140

160

1950 1960 1970 1980 1990 1999

Suburban Urban Rural

1950-1999Millions

Growth: city vs suburbGrowth: city vs suburb

This should be a chart showing how little of 2000-5 growth was in cores

10,405,253821,077

020,000,00040,000,00060,000,00080,000,000

100,000,000120,000,000140,000,000160,000,000180,000,000200,000,000

2000 2005 change 2000 2005 change

Metropolitan Population Central City Population

US Metropolitan & Central City Population: 2000-2005

Demographia

-6%

-4%

-2%

0%

2%

4%

6%

8%

Phoenix

San FranciscoLos Angeles

Houston

Boston

Minneapolis

Sprawl Cities Grow Faster thanHot Boutiques 2000-2004

Sprawl Cities Grow Faster thanHot Boutiques 2000-2004

Source: US Census

-12.9% 7.8%14.8%

-1.1% 9.0%18.1%

-19.0%17.2%

54.0%

-7.8% 30.8%

66.4%

-24.1% 39.7%74.0%

-8.6% 59.0%

108.5%

-40% -20% 0% 20% 40% 60% 80% 100% 120%

Tokyo

Paris

Frankfurt

Chicago

New York

London

Core City Metropolitan Area Suburbs

Declustering: A Global Perspective

Declustering: A Global Perspective

Percentage Change in Population 1965 - 2000

Source: Demographia

0%

5%

10%

15%

20%

25%

30%

35%

Rural Suburb closeto a city

City Suburbfarther out

Suburbia PreferenceSuburbia Preference

Source: 2004 American Community Survey: National Survey on Communities, Belden. Russonello & Stewart

Focus on What People Want: Mostly Single Family Homes, Safe Areas

Focus on What People Want: Mostly Single Family Homes, Safe Areas

83 percent want this kind of dwelling (National Association of Home Builders)

86 percent in California (PPIC)

70% of downshifting boomers retiring in place

More empty nesters heading out than in

40% expect kids to move back at some point

Focus: suburbs,exurbs, safe neighborhoods in closer, attractive areas

0

1000

2000

3000

4000

5000

6000

1940 1950 1960 1970 1980 1990 2000

Phoenix Maricopa County Arizona

Phoenix, Maricopa County and Arizona Population Growth (1940-2000)

Phoenix, Maricopa County and Arizona Population Growth (1940-2000)

0

500

1000

1500

2000

2500

3000

3500

1975 1986 1991 2000

Popu

latio

n an

d U

rban

Are

a Ac

res

(in th

ousa

nds)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Peop

le p

er A

cre

Population Urban Area Acres People Per Acre

Metro Phoenix Density (1975-2000)Metro Phoenix Density (1975-2000)

Future Shape of Phoenix RegionFuture Shape of Phoenix Region Downtown will remain a relatively minor player Economic growth the driver Development of multipolar centers most rational form for the future Goal: Towards an Archipelago of Villages

Downtown will remain a relatively minor player Economic growth the driver Development of multipolar centers most rational form for the future Goal: Towards an Ar