upzoningisgood

@Hike @I miss RVA Very kind, thank you!

@I miss RVAThe advantage of getting rid of parking minimums is for smaller projects and for zones where the parking requirements may be onerous. In Nashville suburbs, it's not unusual to find parking requirements as high as 2 spaces/unit, which is nuts. Smaller projects by mom-and-pop firms might benefit because those firms are generally more willing to get "weird" and try out-of-the box stuff like parking less than 1 per bed. Institutional guys like Greystar and Crescent will still be parking one per bed. You can make a low-rent growth, high-volume approach work--see Texas. Texas is also crazy cheap to develop in, partly because they don't place a ton of restrictions on you, partly because there is a lot of general contractor competition because Dallas and Houston have been growing for so long, and the land is easy to develop on because it is flat. However, construction costs have grown so much that the insane rents we see now are needed to make deals pencil. A lot of people think "greedy developers" are raking it in right now, but that's not true--return metrics are actually down from a few years ago as the explosion in construction costs has harmed deal quality everywhere in the country. If construction costs came down, you would see a lowering of the economic break-even point and new units entering the market. I think that would help attract businesses and residents. I think part of the reason RVA has grown faster than NOVA is the increased value proposition now that fewer people have to commute to downtowns for work. I don't think that only having one BRT line instead of 6 matters much as far as business relocation goes at the moment, but I think developing a culture of public transit (and biking) could allow the city to develop in ways that attract business in the future. Bluntly, the executives at the companies looking to move to RVA will not be taking public transit, so they would only care about transit in so far as proximity helps attract employees. NYC, DC, Chicago, and maybe Boston, SF, and Philly are probably the only markets where rapid transit access is high enough for high-end talent (rich people who have a lot of options and make a lot of money who businesses want to attract) to seriously value proximity to a rapid transit stop. However, people have also demonstrated that they will pay more (reveal a preference for) walkable, dense developments. Like, people pay a premium to live in the Fan, and it's not because the houses are 100 years old. While it's possible to develop row houses in a car-dependent manner (see Houston), dense walkability is typically easier (and safer, and more pleasant) if there are fewer cars, especially for small-scale retail, and that is only feasible with robust rapid transit. So, I think a wide-scale BRT system with 6 lines would be helpful in that it would enable denser, walkable (and with mass upzoning, cheaper) neighborhoods that people have demonstrated a preference for, and companies want to be where workers want to be. I don't think companies are looking at RVA and thinking "if only they had 5 more BRT lines!" Austin, San Antonio, Houston, Tampa, Nashville, Phoenix, Raleigh, and Orlando and doing just fine without a wealth of rapid transit options.

Interesting nugget is that domestic migration is apparently slightly negative (-300) but international migration is strongly positive (+1100) with natural growth making up the rest. That seems wrong? But maybe families are moving out and DINKS are moving in? I don't know, but important to mention. ACS estimates that domestic migration is actually at -1700 since 2020. Something to keep in mind going forward.

If 2022 was a leap year like 2020, RIC might have set the record By the way, Nashville to Richmond and Richmond to Nashville were both ~85% full, I'd say.

Basically if you’re on this list, you’re big enough to open other people’s eyes if you hit it big in a non-major market, or at least catch their attention when they’re doing rent comps for a prospective deal. https://www.nmhc.org/research-insight/the-nmhc-50/top-50-lists/2022-top-developers-list/

It’s the cheapest siding you can get.

Yes. Did not know Greystar was doing that one.

Highest rents possible that enable target lease-up velocity. If you can prove that an institutional deal can lease up for high rents, then it’s much easier for analysts around the country to make a deal in Richmond pencil in their spreadsheets because they can all point to Novel Scotts Addition as a comp. Institutional vs local matters because institutional quality is typically higher in all dimensions. So you could give Crescent and a local guy the same dirt and Crescent would have higher rents because their product is better and leasing team is better.

Novel Scott’s Addition is the one to root for. Crescent as a developer and ParkProperty as an equity partner is as legit as it gets. If that one hits, word will get around and big money will look into Richmond.

I only brought up CoStar to answer the second part of the original comment. Agree with the multifamily component.

If you are under construction or have already secured debt and equity, you’re fine. If you’ve only secured equity, you’ve got an uphill battle but will probably be ok if your project is relatively small and you’re willing to be patient. But, you’ll have to wait awhile and slow down or pause design. If you have neither, you’re screwed for the time being unless you’re in one of a few markets (which does not include Richmond), you have a super killer project, or you have a relatively small project. The latter group is mostly pausing and delaying spending money. CoStar is going to be fine. You have to remember, every person who they bring to Richmond is not being paid DC or Atlanta wages, so they save money on the back end. Also, they have a notoriously high-pressure, high-turnover staffing model and the company has decided they want to be 100% in-office. Combined with companies finding they need awesome offices to lure workers (current and prospective) back to work, they would need to do a lot of renovations to their current offices, making the delta between DC/Atlanta and Richmond smaller. And, they already have debt and equity and have put it towards the project. I think they will see construction through.

All of this. Yes.

If they’re in the design stage, it would be crickets anyway. They also might have put the project on ice. There’s no way to know with where they would be in the design process.

Probably a financing issue. Equity is hard, debt is even harder. If I had to guess, Parkway dropped out as an equity partner, SNP went ahead and bought the land because they thought they could get an equity partner or had one in mind, got the project rezoned to recoup some spent $ through higher land value, then couldn’t secure the equity partner.

For context, Metro Nashville grew 2% annually over the last decade. Austin led the nation at 3% annual growth over the same time period. Personally, I lean more towards 260k. Pittsburgh is about the same size and has 300k people.

Weird thing about the Alliance deal is that the seller didn’t accept a retrade. I would bet hard money Alliance tried to get the land cost renegotiated after the utility thing came up and the seller said no. What I don’t get is why the seller thinks they could get better money for their land in this market. Oh well.

1) My stance on this is unchanged: I have no idea how Avery Hall is making this deal pencil. I would genuinely love to see their underwriting. I know for a fact we could not get this building type to pencil in Nashville at Richmond-tier rents. This is doubly-true because Avery Hall's land basis is so high. (Edit: I forgot they were doing 525 units. Reacted as if the unit count ~300. Land basis at 525 units is actually solid.) There has to be some variable I'm missing. Without knowing how Avery Hall is making this deal pencil, I can't say if their logic is repeatable by other firms. If I was forced to wager, I would stick to my priors and say I would not expect many, if any, high-rises to come online in the near future. However, there is evidence that my priors may need to be updated. 2) No, we do not run the risk of pricing ourselves out. It's conceivable that the city could grow to an extend that the delta between RVA and DC (or Charlotte or Chicago or whatever) narrows considerably. If rents rise in RVA faster than other metro markets and the two values converge, that is a signal (a "revealed preference") that the value proposition for RVA is changing away from being the affordable second choice towards a city worth moving to on its own merits relative to its competitors. "Relative to its competitors" is doing some work here: the gap could narrow because Richmond becomes much better (bigger, more restaurants, maybe a sports team, etc.) or DC (or Charlotte or Chicago or whatever) becomes much worse.* *This assumes that Demand>Supply. If Demand<Supply, the rent gap could widen by either city becoming bigger and cheaper. But if Demand>Supply, the rent gap narrows if your city is becoming relatively more competitive either due to your merits or their problems.

This is a great question so I want to answer it in depth. Also, I'm interpreting this question as comparing a 300-unit high-rise to a 1000-unit high-rise, not as a 300-unit 1+5 to a 1000-unit high-rise. There are at least a few limiting factors which I don't believe are exhaustive. My company does not specialize in high-rises but a lot of the below problems are extrapolated from more conventionally-sized apartments. 1) is lease-up. If you build 1000 units, you need to be able to lease them up at sufficient rents. There are two main hurdles in leasing: 30% occupancy and 70%. At 30% occupancy you're covering debt payments. At 70% occupancy you're covering operating expenses. So if you're leasing 1000 units, you need to be carrying extra money until you lease 700 units. Typically, your target lease-up period is 12 months, meaning you want to have leased all of your units within a year. WIth 1000 units that would be 83 per month. I believe renting 83 units in a month would be a Nashville record, for context. Certainly, I've never heard of higher. Now do that 6 more times before you start making a profit. 1a) is organizational complexity. You need more staff to run a large building and running a large headcount and lots of clients is harder than a small one. I know when we're projecting OpEx that larger buildings tend to assume higher salaries for staff, all else equal. There might not be anyone in RVA equipped to run a 1000-person building, or only one. If you find the right person, they're going to hold you over a barrel in salary negotiations. On the other hand, there might be 30 people equipped to run a 200-person apartment. 2) is your dirt. Some soil types are amenable to heavy structures (schist, like in Manhattan). Some are not (limestone, like in Nashville). The heavier your structure, the better dirt (or more thorough sitework) you need to construct it. It might be more economical to do 3 20-story buildings instead of one 60-story building if the soil would require a lot of reinforcing to support the higher weight. 3) is financing. It's always harder to secure $150M in financing than $50M. That's even more true today because interest rates have made it very hard to get money. So, if you can create 1000 units over ten years through 3 $100M buildings, that will be easier than one $300M building. 4) is construction complexity. I don't have deep content knowledge on this, but my understanding is that taller buildings require enhanced specialization and narrow the number of firms that can do it. I can't fully explain the mechanics of this one but I remember hearing about it. 5) is the a psuedo-square-cube law. This only matters for really tall buildings like in NYC, but the square footage of your building while its footprint stays the same, so a greater and greater percent of floorplates need to be filled with elevators to move people around as you start to get really tall.

Parc View is also student housing so the units are much bigger than standard MF. So, the residential component be taller than the standard 171-unit building.

I actually don’t think it will be. It looks like the parcel is 100x150, or 15000 SF per floor. Wood construction can’t be more than 6 stories high (maybe I’ve seen 7 near Shockoe bottom but that won’t affect the thought experiment too much). With perfect efficiency (which is impossible because that would mean no hallways, leasing office, amenities, storage, etc.) the average unit would have to be 497 SF (15000 SF/floor x 6 floors/181 units). I can’t imagine they would go for an average unit that small, and once you have physically possible efficiency the average unit would have to be even smaller. So, I think they will go up higher than stick frame would allow. Plus, it’ll have to be on a podium which will add some stories. Now, I don’t know how they could get steel construction to pencil out, but I can’t figure out how most of the deals in this city are penciling, so what do I know?

Right. Thanks!

I’ve been visiting for the day and Broad Street and The Fan seems…deader then usual? Like there seem to be a lot more vacancies than I remember. Am I tripping?

I’d estimate 85% full on this morning’s Allegiant flight from Nashville.

Sorry, just saw this. Reasonably, full I think? Honestly I’ve never thought about it. I don’t remember being crushed like a sardine but I don’t remember a bunch of empty seats either.

There is a RIC-Nashville flight through Allegiant. I take it frequently. It’s like $80.