Southside Construction Update - February 2013

[Metro Jacksonville]

Southside Construction Update - February 2013



A brief look at the status of various projects under construction in and around Jacksonville's Edge City, the Southside.

Full Article
http://www.metrojacksonville.com/article/2013-feb-southside-construction-update-february-2013

[Jason]

Its actually nice to see so much multi-family residential popping up. 

[thelakelander]

The funny thing is most of the multifamily residential construction is taking place in an area where developers have to pay a "transportation fee" to the Skinners so they can recoup their costs for building area roads like Gate Parkway.  I wonder if they are interested in placing a moratorium on their fee to stimulate additional growth around St. Johns Town Center?

[Doctor_K]

LoL.  touche.

I wonder why builders continue to build multi-family residential with wood (5000 Town obviously being the exception here).  Presumably it's cheaper.  But man.  Nothing beats concrete.  Especially in FL with hurricanes, termites, moisture, mildew, etc.

Wish they'd step their game up.

[duvaldude08]

I dont know why, but I dont care about anything that is happening on the southside. LOL

[JFman00]

Its actually nice to see so much multi-family residential popping up.

It's density without any of the usual benefits (on-the-street interactions, fewer car trips, fewer road fatalities, etc.), so not anything I'm too excited about.

[Overstreet]

Wood framing is cheaper and most times faster to build (read cheaper). Typically it is envelope protected from huricanes by the skin and roof (read cheaper).  Concrete takes longer and often is heaver because it is structure rated from hurricanes.

Wood framing fits the skill set of most apartment subcontractors.

Many apartment developers and retail developers plan to sell the development within five years after opening.

[peestandingup]

Its actually nice to see so much multi-family residential popping up.

It's density without any of the usual benefits (on-the-street interactions, fewer car trips, fewer road fatalities, etc.), so not anything I'm too excited about.

Exactly. Density built around cars & not people = nightmarish.

You can say the same things about Blanding or SJTC. Oh, they're "dense" alright. Dense with cars & road rage. And makes me want to put a gun to my head every time I go there.

[simms3]

Wood framing is cheaper and most times faster to build (read cheaper). Typically it is envelope protected from huricanes by the skin and roof (read cheaper).  Concrete takes longer and often is heaver because it is structure rated from hurricanes.

Wood framing fits the skill set of most apartment subcontractors.

Many apartment developers and retail developers plan to sell the development within five years after opening.

Second all of this.  You want concrete construction?  You need a different city that can support concrete construction.  Most of what you'll get in Jax is garden style stick...which is reflective of the low density, the low land costs and large land parcels, the lower risk and the rental rate matchup that is achievable in the market (concrete and higher quality is sooo much more expensive and there's simply not a market for that in Jax), etc etc.

Even in cities such as Charlotte and Dallas, there have been real challenges with concrete construction by way of materials pricing fluctuations (usually in the wrong direction), labor shortages, etc.  Charlotte has quite a job market that pays 23-30 year olds considerably more than in Jax, so they can also better afford the much more expensive infill characteristic of Uptown, the wards and the South End.  Even still, I have my doubts as to how successful all of these infill projects are going to be in all of these booming sunbelt cities, Atlanta in particular.  The jury is still out...only by sheer size and low interest rates are these projects really able to be justified, it's not as if the job markets are so spectacular where all of a sudden young professionals who were in $1,000 studios can now afford $1,500 studios!  And that's the pricing you get with concrete construction (add land costs and union contracts in urban gateways and that $1,500 studio becomes a $2,500 studio).

[Overstreet]

Building a concrete tower apartment building is not  a problem.  We are doing several apartment towers across the southeast.  Getting people to move in is the problem.  Note too that none of the 23 story towers we are doing are Berkmans or the ones on the south bank. Ours are the middle market.

[simms3]

Also, the kind of capital chasing deals in Jax is highly doubtfully looking for expensive product [read core deals] in such a risky and inexpensive market [read opportunistic market].  These developers are damn lucky if they can stabilize a commodity stick garden style community within 12 months of delivery, and while the fundamentals of the market [read jobs jobs jobs] are still considered a "buy"!  I don't think anyone really views the market as a long term hold with guaranteed stable cash flows, so with the risk already in the market, why add to the risk with the product?

220 Riverside might be a develop and hold strategy, given the partnership and the all-equity capital stack.  Cost of equity is more expensive than cost of debt...I'm sure the developers are weighing the length of time it might take to stabilize against the length of hold they might have to endure against the timing of when they may be able to sell such product at certain pricing so as to meet the preferred returns in that equity waterfall (and I'm sure the different partners have different time tables as to when they think they can exit).

All the other deals (less 5000 Town) are competing with each other for that SS young prof making $40-$60+K in one of the campuses over there.  We aren't talking about a market that is being driven by a bunch of 25 year old bankers making $80K downtown (as in Charlotte) or engineers under the age of 30 making hefty 6 figures working in high tech manufacturing and living in downtown Austin.

I'd say the SS construction update is a good indicator of the local job market moreso than local land use policies.  Until we start attracting really high paying jobs for 23-28 year olds, downtown, we aren't going to see much demand for higher rent infill close to downtown.  And the city does seem to be attracting high paying jobs for 30+ year olds (to the SS), but they are in the market for a cheap NE FL home for their family rather than an overpriced apartment.

There are so many things that go into this!  Something also unique to the sunbelt in particular given the history we've all had down there with having so much for so little, is that every renter now pretty much requires luxury finishes.  A 21 year old senior at UNF now basically requires granite counters and stainless stell appliances and high ceilings and space, amenities to the max, pool terrace, valet waste, etc...and they're not going to pay more than $900 for all of that.  In central Boston you'd be lucky to have a microwave, more than 400 SF, and a window that opens for less than $2500!  There is this disconnect in the South, so you can't have both worlds - superior construction AND all of that which you require.  Developers have to play in this market, to the jobs available and offered, to their renter base, etc.  It's not a renter base that is quite ready for the infill seen in Atlanta and Charlotte, and those cities certainly don't have a renter base profile as seen in Boston, DC, SF, etc.

[simms3]

Building a concrete tower apartment building is not  a problem.  We are doing several apartment towers across the southeast.  Getting people to move in is the problem.  Note too that none of the 23 story towers we are doing are Berkmans or the ones on the south bank. Ours are the middle market.

Are you doing them in Jax?  Tons of concrete going up in Atlanta...I am weary that there will be quite a few failed projects there for that very reason.  The job market there, after being completely built on a foundation of "housing boom" for 2 decades, has shifted to one that is more sustainable, but I don't think it's necessarily robust.  Many of the new projects built in the past 5 years are renting studios at ~$1,000, but most of the underwriting done with all of these new deals UC or delivering (~5,000 units in the core) pegs studios at $1,300, and these deals are no different than prior.  I don't think salaries of the renter base in the city have jumped 30% overnight (actually indicators are that salaries basically keep up with inflation at best and don't keep up with COL increases occuring in the city, so there is a squeeze which may be good for the rental market though housing is still so depressed and considered a better buy).

Also, the big story across the country and notably in the SE is the rapid rise in construction costs of said projects (stick construction seems to be left out of that "problem" story).  I have read articles about the rapid and significant rise in Charlotte, Atlanta, Houston, Dallas, Denver, and Seattle.  It's on both the materials and labor side.  Delays are happening as a result.

[Bruin Brain]

Hello! I'm de-lurking here because I'm doing some research on multifamily housing and know of a relevant study from the Spring 2010 issue of the Journal of Architectural and Planning Research written by Nico Larco, titled "Suburbia Shifted: Overlooking Trends and Opportunities in Suburban Multifamily Housing". It challenges some general assumptions about suburban multifamily housing, examining primarily American Housing Survey data on suburbs from 1997-2005. I'm not an expert (yet), but I can serve as messenger.

Here are some excerpts, with the main conclusion in bold:

"The single most reported criteria given by suburban multifamily residents for moving to their current neighborhood was convenience to jobs, with almost one-third of all recent movers citing this reason." (This was compared to 13% of suburban detached single-family residents.)

"The transportation behavior of suburban multifamily housing residents is markedly different than those of single-family housing residents. The modal split of multifamily residents points to a much higher rate of non-private automobile use: 6.6% of multifamily versus 1.5% of single-family home residents used public transportation as their primary means of travel to work. This percentage of public-transit use by suburban multifamily residents approaches the percentage of public transit use typically seen in urban areas (9.4%). In addition. 3.5% of multifamily versus 1.1% of single-family residents either biked or walked to work. Of those driving to work, 15.2% of multifamily residents drove with others while only 7.3% of single-family residents did so. Also, the median distance traveled to work was 17% lower for multifamily households (10 miles) than single-family households (12 miles)."

"A majority (55.1%) of multifamily households have only one car, and 24.5% of the households have no car at all. In addition, 48% of multifamily units reported having businesses or institutions within half a block, and 69.1% reported having a neighborhood store within one mile. This is in contrast to single-family housing, where 14.7% have businesses or institutions within half a block, and 54.7% have a neighborhood store within one mile. This reinforces the observation that many suburban multifamily developments are zoned around commercial areas."

"While multifamily suburban development is rarely created under the banner of smart growth or promoted by environmentally and socially progressive planners or designers, it contains many of the qualities and benefits of'smart-growth development. Suburban multifamily housing is dense, has mixed-use adjacencies, and houses a population showing an inclination to use non-auto-oriented transportation. These qualities need to be acknowledged so that planners, policymakers, and designers can shape policy and development to build upon the existing benefits of this housing type."

Also, more about the source:

"Nico Larco is an assistant professor in the Department of Architecture at the University of Oregon, where he is a co-director of the Sustainable Cities Initiative. His research is focused on various aspects of the design and development of sustainable suburbs."

I would say that although it's not the same as urban multifamily housing, neither is it merely a more headache-inducing concentration of other suburban housing types. The demographics, activities, behaviors, and proximity to non-residential spaces are different and more intermediary between what we think of as suburban and urban. Still, wouldn't it be nice to see this level of growth downtown!

[JFman00]

^thanks for that information. It makes sense when I think about it. I'm not upset that the density is occurring outside the core, it's that much of the density is just not created in a particularly sustainable, walkable context. I have friends that live around Deerwood and by SJTC who will cross parking lots, jaywalk and work their way through hedges to walk to destinations. It would be minimal cost and take just small design changes to make those dense, semi-suburban areas an order of magnitude more pedestrian friendly. It's interesting to see how far a half mile walk will really get you if you stick to roads, sidewalks and paths in these areas versus a half mile radius on paper.

[TD*]

I feel like Jax has some runaway growth going on lately. Tallahassee needs some!