By KATIE THISDELL, The Daily Transcript
Wednesday, September 17, 2014
San Diego is essentially out of land, housing demand is up, homeownership is down among members of Generation Y and technology is changing how businesses operate.
Myriad factors affect how future development will have to be different from how it has been historically, a real estate analyst told members of the Associated Subcontractors Alliance this week.
“We’ll see a world that’s very different than what we have before,” Gary London, president of The London Group Realty Advisors, said at Tuesday’s economic forecast event. “We’re in a very good place, but a very different place going forward.”
London compared the economy to sports: If the economic recovery were a baseball game, San Diego is in the fourth or fifth inning.
“I think we have a long road ahead of us. That speaks well for all our businesses,” London said to the group of about two dozen people at The Butcher Shop on Kearny Villa Road.
The era of single-family homebuilding is closing in on its end as apartment development drives markets. Demand is high, far outpacing supply; one-third to one-half as many housing units are constructed each year than there were before the recession.
But population growth remains steady.
“We have a situation where we just can’t build enough housing. This is perpetual — it’s not temporary anymore,” London said.
Pressure is mounting in urban sectors as development will have to go up.
“There’s a lot of tension associated with that. It changes the face, the look of a community; it changes what people thought they moved into,” London said.
Kilroy Realty Corporation’s proposed 1.4 million-square-foot One Paseo project is an example of how a mixed-use development has spurred debate in Carmel Valley.
Kilroy, a client of London’s, is facing opposition from residents who believe that the high-density project would change the character of the suburb through increased traffic and the addition of nine-story office buildings. The project goes to the Planning Commission next month.
“It’s been the subject of a jihadist movement in the Carmel Valley,” said London, who likes seeing the tension in real estate.
The imbalance between supply and demand grows every day, leading prices and home values to go up, he said.
Wage and economic growth must keep pace so that people can afford their housing, he said.
In San Diego, fewer new families will be buying homes like previous generations did, and will likely raise families in smaller units. Since the recession happened during an impressionable period in the lives of Generation Y members (in their 20s and 30s), they may just rent for the rest of their lives, London said.
Rentals are the darling of real estate now, he added.
Technology advances are also driving changes in real estate.
On the commercial side, businesses need less space, about 125 to 175 square feet per employee, a drop from the demand of 250 square feet that was previously the norm.
“It’s not because people are getting smaller. It’s because we don’t need file cabinets anymore,” London said. Files are on computers, servers and the cloud, leading a redefining of office space.
Retail has seen similar changes through applications such as online ordering and video streaming.
“There’s a compression going on in terms of demand for retail. What will drive the next commercial wave? Or, how otherwise do we fill these spaces that we have?” London said.
New ride-sharing programs, including Uber and Lyft, are even redefining the need for cars, and thus, for the role of expensive parking spaces in developments.