Author Archives: payton

Overrated and underrated cities

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Screen Shot 2018-09-16 at 18.07.47

 

Which cities did I expect to enjoy visiting, and which ones did I enjoy in reality? Here’s a 111%, completely, utterly, totally subjective look at 57 cities in North America, reduced to a scatterplot. Since the data labels might overlap, a link to the full spreadsheet is here.

Overall, I found that about 75% of cities are about as hyped as they deserve, with the hype being informed mostly by overall population and media buzz. This makes the outliers all the more interesting. The most overrated cities:

  • Austin
  • Miami (tie)
  • Cleveland (tie)
  • Boulder (tie)
  • San Francisco (tie)

Yes, Cleveland (4,2) tied San Francisco (9,7).

Surprisingly, I’ve found more cities are underrated, probably because I had an exceptionally fine experience:

  • Philadelphia
  • Madison
  • Asheville
  • Ottawa
  • Minneapolis
  • Richmond
  • Newark
  • Buffalo
  • Providence

As always, YMMV. Based on visits mostly within the past decade.

Coming soon to a power center near you: Ikea?

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Big Blue Box

Atlanta, Ga.

Ikea is in the midst of a complete rethink of their US store strategy, rapidly announcing the cancellation of multiple superstores that were due to open in 2020: in my hometown of Cary, N.C., outside Nashville, west of Phoenix, and Fort Worth. Other stores set to open in 2020 could also be canceled, affecting plans in northwest Denver, the East Bay, and northwest of Atlanta. Stores already under construction, like one in Norfolk, are proceeding as planned.

As Ikea branched out from America’s top-20 metro areas (median population ~5 million) to the top-40 metro areas (reaching some with populations below 1.5 million), it doubled its store footprint — but now each new-build store addressed fewer than half as many potential customers. Some of the mid-sized cities draw from large hinterlands and can easily support full-sized stores, like Salt Lake City or Jacksonville… but many blur into Ikea-served regions nearby: Hartford, Providence, Tulsa, Richmond, Raleigh, or Buffalo and Rochester (near Toronto). Even within the megacities, customers on the far side of town, or downtown, don’t want to carve out an entire day to drive all the way across town to wait in long lines and stress-eat meatballs.

Much has been written, albeit with few details, about Ikea opening shops in city centers. A look at their small shops in the UK and Canada indicate that they’re primarily using these new compact store formats to reach smaller metro areas, not necessarily “alpha” global cities, and to fit into strip malls where people are already shopping.

A quick review of the five US-drugstore-sized “IKEA order and collection points” in the UK & Ireland turns up:

  • two urban locations, although with plenty of parking, in large metros with existing suburban stores (London & Birmingham)
  • two suburban locations outside smaller cities that previously didn’t have IKEAs (Norwich & Aberdeen)
  • one suburban location, across town from an existing full-size IKEA (Dublin)

Canada’s six “IKEA Pick-up and order points” are up to twice as large — about the size of a small supermarket, from a Fresh Market on the small end (20,000 sq ft) to a Whole Foods Market on the large end (40,000 sq ft). They are all located in suburban locations, outside smaller cities in Ontario and Quebec. Around Toronto, for instance, are a series of smaller satellite cities — close enough that people could drive to the city for Ikea, but in practice rarely do. The biggest city, Hamilton, has a full Ikea, but what do with the smaller ones? Now that the PUP exists, every city can have a conveniently sited Ikea. For instance, Ontario’s Tri-Cities, a collection of college towns (Kitchener, Cambridge, Waterloo) about 60 miles outside Toronto, with a regional population of about 500,000. There, IKEA located in a Costco-anchored strip mall in the center of the region — well away from the area’s universities. All of the six PUPs are adjacent to either Costco, Home Depot, or the like; five are in power centers, and one in an enclosed mall (although untraditionally anchored by Walmart).

The “Pick-up and order points” (PUPs) address many of the potential customer segments that its previous superstore strategy missed. Since they’re 90% smaller than full-sized stores, they can easily branch out into smaller metro areas, or fill in around megacities. As a bonus, they can go into existing spaces, for faster and cheaper build-outs, and can go into first-tier locations rather than being shunted to second-tier sites which happen to have room. Several have even backfilled existing dark big boxes — e.g., Birmingham was a Toys ‘R’ Us.

Two of the cancelled locations, in Cary and Nashville, were being planned as part of turnaround plans for dying malls. Those locations contrast sharply with the first wave of Ikea USA locations, which were often right outside fortress malls. Future PUPs will likely be in well-trafficked power centers, close to fortress malls, and are a terrific opportunity for landlords like Kimco or DDR.

2020 update: IKEA Canada has closed all PUPs; it’s replaced those with outsourced “collection points” where trucks drop off the day’s orders at a 3PL‘s warehouse, with no on-site shopping. It’s continuing to open mini-stores in central cities. In an interesting twist, Ikea’s captive shopping center developer (a la Sears & Homart) Ingka Centres has announced it’s shopping for adaptive-reuse opportunities in US gateway market CBDs, beginning with repositioning a newly built, but already failed vertical mall in SF’s Mid-Market.

Neighborhood guide: DC’s waterfront

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[A guide for my houseguests, which others might find useful.]

There are four major commercial areas within walking distance; they’re also all connected via the DC Circulator’s L’Enfant Plaza – Eastern Market bus route. The table below is roughly arranged from nearest to furthest.

WS – Waterfront Station; has most necessities
W – District Wharf; entertainment and retail destination, see wharfdc.com
LP – L’Enfant Plaza, 1+ km northwest near 10th & D St. SW; office area and major public transit hub
Y – The Yards, 2 km east near 2nd & M SE; entertainment and retail surrounding baseball stadium

Essentials and shopping

  • Safeway supermarket (5 AM-midnight) – WS
  • Public library (9:30 AM–9 PM, except 5 PM close Fri-Sun, 1 PM open Sun & Thu) – WS
  • CVS pharmacy – WS, W, LP
  • Senate Dry Cleaners (tailor) – WS
  • Enterprise rent-a-car – WS
  • Post office (24 hours) – LP
  • District Hardware & Bike – W
  • Politics & Prose books – W
  • Anchor Ship Store (beer, sundries) – W
  • Cordial (wine/liquor) – W
  • M Street Yoga – WS

Dining highlights, updated 6/2018

  • Masala Art (Indian, jazz Wed/Fri) – WS
  • All About Burger – WS
  • Velo Cafe (coffee) – W
  • Canopy Central (spacious hotel bar) – W
  • Hank’s Oyster Bar (seafood) – W
  • Union Stage Tap (local beer, pizza) – W
  • Del Mar (elegant Spanish, reserve) – W
  • Dolcezza (ice cream, coffee, breakfast) – W
  • Officina (Italian) – W
  • Due South (Southern) – Y
  • Agua 301 (Mexican) – Y
  • All-Purpose (pizza) – Y
  • Bluejacket (brewery) – Y
  • Chloe (global) – Y
  • District Winery – Y
  • Lot 38 (coffee) – Y
  • Salt Line (seafood) – Y
  • Rasa (Indian) – Y

Attractions

  • Arena Stage theaters, half-price tickets at 7 PM – 6th & Maine, between WS & W
  • Anthem, Pearl Street Warehouse, Union Stage concerts – W
  • Riverwalk, seasonal boat rental and ice skating, summer Wednesday free concerts – W
  • Fish Market, cooked blue crabs & fresh fish – W
  • Washington Nationals baseball stadium – Y
  • Farmers’ market on Sunday midday, spring-fall – Y
  • Yards Park waterfall/splash park, summer Friday free concerts – Y
  • East Potomac Park golf, mini-golf, tennis, outdoor pool – W, free shuttle boat from 7th St. pier
  • Tidal Basin, cherry trees, memorials – 6.5km round-trip walk through W

Getting around

  • Metro Green Line – WS, LP
  • Metro Yellow, Blue, Orange, Silver Lines – LP
  • Capital Bikeshare – WS, W, Y, LP
  • Southwest Shuttle to National Mall (free) – W (by CVS), LP
  • DC Circulator ($1) runs between LP, W, WS, Y, and Eastern Market, via 7th St SW & M St.
  • Water taxis to Alexandria, Georgetown/Kennedy Center ($20 roundtrip) – W

Beyond the neighborhood — by foot, Metro, or bikeshare

  • National Mall: 1.5km north (along 4th or 7th St.); my favorites are the Air & Space Museum with its giant IMAX cinema, African-American Museum, American History Museum, Botanic Garden, Holocaust Memorial Museum, Hirshhorn, Freer, and Sackler Galleries, and National Gallery of Art.
  • Downtown DC/Gallery Place/Chinatown: 2.3km north (just beyond the Mall), particularly along 7th St., F St., H St., and I St. (NW), is the busiest retail, dining, and entertainment area in the city. The American Art Museum, Building Museum, and Renwick Gallery are excellent and compact.
  • Capitol Hill: 2.5+ km northeast, home to the Capitol and Library of Congress, plus shops and dining around Eastern Market (7th & C St. SE, additional vendors on weekends) and along H St. NE.
  • 14th & U St. and Shaw are two of the city’s liveliest nightlife areas, just up Metro’s Green Line. For a more hipster vibe, try 11th St. in Columbia Heights and Georgia & Upshur St. in Petworth.

Recommendations from others

Focus preservation resources on the best, and let the city continue to evolve

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Comment submitted to HPO, regarding its Preservation Plan.

I am a homeowner, in a historic landmark building. I have been a National Trust member for my entire adult life, and have spent almost all of that time living in National Register-listed buildings. I consider myself an ardent preservationist.

It therefore pains me to say that the historic preservation process in DC is broken — as I have recently documented in Greater Greater Washington. The District has designated almost as many historic structures as New York City, which has 6.4 times as many total structures. Thousands of unremarkable buildings such as production-built rowhouses and strip mall parking lots, almost identical to thousands or even millions of others around the country, have been deemed by HPO and HPRB to be “locally significant” for seemingly no other reason than the fact that they exist.

Kennedy Street commercial strip

Kennedy Street is a rare rowhouse corridor that’s still allowed to evolve with new structures, instead of being frozen in amber by overzealous historic preservation

I became a preservationist because I am pro-urbanism, and want to maintain the rich urban fabric of small-scale buildings, evolved over generations, that was common in pre-WW2 America. It is dispiriting to see that NIMBYs have hijacked the historic preservation process to stop that very process of urban evolution that created the places they claim to admire.

Instead of pouring all of its resources into finding more and more mediocre buildings to designate as “locally significant historic resources,” HPO should instead halt the process of reviewing outside nominations and focus its efforts on a comprehensive, District-wide survey of structures to identify those of high historic and aesthetic merit. Los Angeles has eight times the land area of DC and six times as many buildings, and completed a full survey of its structures within eight years. Meanwhile, DC HPO is now 40 years old, and has not completed a District-wide survey — ignoring many potential treasures in overlooked neighborhoods, while lavishing time and attention to ensure that no detail is overlooked for every single building in the District’s prosperous quarters.

Historic preservation also should not triumph over other aspects of the Office of Planning’s remit. The District has other planning priorities besides preservation, including creating affordable housing, allowing more people to live and work near transit and the regional core, and increasing renewable energy production. HPO and the HPRB must find ways to balance their own mandates with others’.

HQ2 search is still about talent, above all else

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Last September, I pointed out that the Amazon HQ2 RFP was almost entirely about site readiness and talent. On the latter topic, one excellent resource was a 2017 report from commercial real estate broker CBRE that ranked metro areas based on “tech talent” — the number of people employed as “software developers and programmers; computer support, database and systems; technology and engineering related; and computer and information system managers.”

Not too surprisingly, eight of the top 10 from that particular ranking ended up as finalists for Amazon’s HQ2. The other two are Seattle (HQ1) and the Bay Area, which is currently Amazon’s second largest location.

cbre tech talent 1

Top 10 (minus SF) circled in blue; cities officially ruled out for talent reasons in red; shortlist cities with even smaller talent pools ruled out in blue. Source: BLS, via CBRE.

A single theme keeps showing up in the “thanks, but no thanks” feedback interviews. “Talent was the most important factor out of everything they looked at,” said Ed Loyd of Cincinnati. Charlotte’s “pool of tech talent is lacking compared to other markets.” “We weren’t good enough on the talent front,” said Sandy Baruah of Detroit. Amazon “really emphasized that they put a high weighting on talent,” says Mary Moran of Calgary. “Talent that could be hired immediately… ‘it was clear from the earliest stage of the RFP that it was the top priority,” says Tom Geddes of Baltimore. The feedback got more specific in one instance: “Prince George’s county doesn’t have a large enough pool of senior-level software engineers.”

Now that we know that Detroit and Baltimore don’t have enough local software engineers, who does? Helpfully, CBRE also looked specifically at the software engineer labor pool.

cbre tech talent 2

HQ2 candidates are in blue, Seattle and the Bay Area are in black, Detroit and Baltimore are shown in red. Click to enlarge.

There’s a substantial gulf between the top 10 and the latter 10, with Los Angeles having about 50% more local programmers than Denver. More importantly, if Detroit was rejected because they don’t have enough programmers, how can Philadelphia or Raleigh say otherwise? This puts the smaller labor markets on the shortlist at a steep disadvantage. Only Newark can make a case that it could pull commuters across the Hudson (though not for long).

Shallow talent pools also explain why “turnaround” sentiment wasn’t enough to save bids from Rust Belt cities. The only Midwestern cities that made the cut are either Sunbelt-era cities that happen to be north of the Ohio, like Columbus and Indianapolis, or the classic turnaround success stories of Chicago and Pittsburgh (even if both have deeper post-industrial legacies than the coastal cities).

A bit less confidently, recent large office leases in Boston and Manhattan are probably best thought of as consolation prizes, given that the locations chosen don’t have much in the way of expansion options. Leases being negotiated now would reflect planning work that was underway before the HQ2 search got going. [Update, 1 May: not alone on this reasoning.] Recent warehouse and data center leases or openings, of course, have zero bearing on future office locations.

The Boston move also has implications for cities 5-10 in the above chart, all of which have ~45,000 programmers. Quality of local talent is also important, and proximity to MIT gives Boston an edge over others in this group. If Boston and NYC are only worthy of consolation prizes, who’s left?

Hint: it’s also the metro where not just the number of programmers most closely matches that of Seattle’s, but their skill sets do, too.

Other thoughts:

  • Reporters are so desperate to write anything about this story that they’re making mountains out of molehills, especially given the paucity of public information. Don’t read too much into:
    • Paddy Power betting odds, which explicitly exclude the Americans who might know anything about the cities. I don’t see British newspapers breathlessly tracking every movement in how Vegas bookies view the English Premier League.
    • Hiring a lobbyist in Georgia. They have lobbyists in other states (e.g., two listed in Virginia, five in Kentucky, three in Tennessee).
  • Amazon really does seem to prefer working with single developers. Just one developer (COPT) has a four million square foot portfolio of Amazon data centers in NoVA.
  • The already-tight timing is now getting a little ridiculous. The decision will be announced sometime in 2018, presumably not in the next few months — but occupancy is still supposed to be in 2019? That essentially limits the search to existing buildings.
  • Given that fact, I’m going to give a Top Three that combine the right site, the right workforce, and the right time:
    • Arlington – Crystal City, the only move-in-ready location with access to as many programmers as Seattle has
      • Update, 25 Apr 2018: Others share this prediction
      • Update, 15 Sep 2018: Someone suddenly seems interested in Crystal City offices. As recently as January, JBGS filed plans to switch 670,000 sq ft of office capacity to 665 apartments. As recently as August, the CEO’s quarterly letter to shareholders promised a company-wide pivot from office to residential. Yet… In July, they retracted 1750 Crystal’s conversion, puzzlingly adding back 250,000 sq ft of office to a block with 551,000 sq ft empty. The result fits in neatly with a short, medium, and long-term occupancy strategy for HQ2.
    • Chicago – Old Post Office, the perfect building with great access and aggressive leadership but more iffy growth potential
    • Dallas – Union Station, although the buildings require considerable work. (Not that Amazon’s RFP mentions this topic, but: right-wingers love to harp on Chicago’s fiscal woes even though Dallas isn’t far behind.)
  • Expanding to a Top Five adds:
    • Toronto, great workforce but no new buildings opening until 2020, and not enough adjacent space
    • Atlanta, the AT&T and BofA towers have vacancies between downtown and Tech Square, but land/building ownership is fragmented; also concerns over “cultural fit”

Idle speculation: podium apartments, floating above a parking lot

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Podium construction: if it's good enough for these guys, it's good enough for you

As of 2015, the IBC now permits multi-story concrete podiums. At first, this was mostly of interest because it permitted even taller “double podium” apartment buildings, with up to eight stories framed mostly in wood.

This diagram (by Nadel, Inc. for Multifamily Executive) shows the effect between The Podium and The (Double) Podium: you can squeeze an additional floor in above grade, and because it’s concrete (heavy line) it can be used for residential, retail, or parking.

Yet using that magical concrete-framed second floor for residential (which could just as easily be wood-framed) seems like a bit of a missed opportunity. Instead, the second floor could be a mezzanine parking level for the wood-framed residential above — as was done in the mixed-use Grey House at River Oaks District pictured above, or in this mixed-use development on LA’s Olympic Blvd.

The real breakthrough possibility for the parking mezzanine isn’t atop retail, though: it’s atop yet more parking.

It just so happens that a 65-75′ wide module fits either a double-loaded apartment building or a double-loaded parking aisle. Therefore, a four-story building (three floors of Type V residential, one level of parking) can be stacked atop an existing aisle of parking — without diminishing the existing parking lot, and without excavating any parking.

It’s the suburban infill version of “have your cake and eat it, too”: keep your parking and add infill housing, too.

3 over 2

Developing these air-rights infill parcels used to require some pretty tremendous trade-offs. The first such projects that I saw were designed by Gary Reddick, a Portland architect who won a CNU Charter Award in 2004 for two such projects. Jury chair Ellen Dunham-Jones subsequently wrote about these in HDM:

In Seattle and Portland, where there are very good markets for residential development, Sienna convinced a variety of non-residential building owners to sell the air rights over their parking lots or roofs for housing. In Portland’s desirable and compact Northwest neighborhood, Sienna saw the parking lot of a specialized medical center as a potential housing site. After producing a pro forma, the firm approached the owners and showed that it could provide them with a covered, forty-three-space parking lot (with only three fewer spaces than before) and a million-dollar profit in exchange for stacking an additional layer of parking (with a separate entry) and two stories of condominiums. The built project, Northrup Commons, screens the parking with duplexes entered from the streets and adds two floors of apartments.

This turns out to be tough to replicate elsewhere. Because the residential comes with its own parking requirement, fully replacing the on-site parking requires adding parking somewhere else — either building a new parking lot elsewhere, or digging underground, at super-high cost ($11 million at one Seattle project). Most of the Sienna projects, including Northrup, used sloping sites (common in the Northwest) to tuck one parking level partially or fully underground.

tyson

Since the resulting buildings would block visibility and doesn’t result in an active ground-floor frontage, this particular infill seems best for infilling around Class B offices that currently sit adrift in a moat of parking — such as the above complex on Old Courthouse Road, at the southern fringe of Tysons Corner (image from Bing Maps). Or, many properties along this stretch of the infamous Executive Boulevard near White Flint (image from Google Earth):

exec

* A rough assumption here is that each 1,000 sq. ft. apartment would have one parking space, which works out to about 3:1 residential:parking floor space. The ratio seems to work for the Houston example, which promises its residents the ability to park in-building rather than having to venture outdoors. Sufficient parking for rich Houstonians is probably enough for anyone.

Recently: winning the war on sprawl, over-preservation, office to residential, shared streets, tax bill

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I’ve recently published several articles over at GGWash.

  • “Sprawl is slowing, but that doesn’t have to mean higher housing prices.” The downtown high-rises under construction only tell half the story of Greater Washington’s housing growth story. While all those cranes are easy to see from afar, what isn’t immediately apparent from the airport (but might be from a plane) is that many fewer acres of the countryside around us are being bulldozed for subdivisions–which for the past century has been where most lower-cost, low-rise housing was built. As a result, the region as a whole isn’t building enough housing for our rising population… Not only is supply overall not keeping pace with demand, but a large fraction of the new supply is in the housing market’s priciest segment: expensive high-rise construction, on expensive downtown land.
  • “DC has more historic buildings than Boston, Chicago, and Philadelphia combined. Why?” Nearly one in five properties in DC are protected by local historic designation laws. DC is so prolific at handing out historic designations that we have more historic properties than the cities of Boston, Chicago, and Philadelphia combined, which together have almost eight times as many properties as DC. While this policy has ensured harmonious architecture across much of central Washington, it also means that Washingtonians are much more likely than residents of other cities to have their construction plans delayed or denied on subjective grounds by a historic review board.
  • “Historic preservation in DC saves the loudest neighbors, not the finest buildings.” DC’s surfeit of historic structures results from several factors, notably the broad application of rather vague criteria for designation. As Roger Lewis has written, “the HPRB decision is inevitably a judgment call because much of the evidence for historic designation is inherently subjective.” Since every resident “squeaky wheel” is invited to request historic designation for just about any site in the District, many do — and overwhelmingly, they succeed.
  • “DC’s countless thirtysomething office buildings stare down mid-life crises.” No other region can match Greater Washington’s density of 1980s and 1990s office buildings — we built over a million cubicles’ worth, almost as many as in the much-larger New York and Los Angeles regions. Now, these buildings are facing mid-life crises; many require substantial additional investment, as key building systems (like air-conditioning, plumbing, elevators, and roofs) require overhaul or replacement, just as the office market has changed.
  • “Not every obsolete office building is cut out to become apartments.” Some, but not all, of these old offices can become residences, depending on their location, price, and layout. Despite considerable media coverage, office conversion has been comparatively limited in greater Washington for a variety of reasons, including a relatively healthier office market and a lack of specific incentives for the practice. Residential conversion offers some promise, but will not be a panacea for either the over-supply of offices, or the under-supply of affordable homes, because not every obsolete office building can be converted to housing.
  • “Metro needs a loop to lasso riders from this growing corner of DC.” The way the District is growing is creating another rail bottleneck on the other side of town that will have to be addressed in the future. The Capitol Riverfront is easily the fastest-growing part of DC right now, and by some accounts one of the fastest-growing neighborhoods in America. If all 11,978 new housing units proposed within the Capitol Riverfront get built, the area around Navy Yard station would have the largest household population of any Metro station. Metro’s ridership forecasts, which now factor in development proposals, foresee that the area’s rapid growth might require additional investments, like a new subway line.
  • “How are the Wharf’s shared spaces working out?” When the Wharf opened last month, it instantly became the largest expanse of “shared space” streets in the country. Over the past few weeks, it seems like these streets are largely working as they were designed. Even though a few of our commenters were skeptical about whether the approach would work here, so far there haven’t been any major complaints or adjustments needed.
  • “The GOP tax plan would make housing and infrastructure more expensive.” Eliminating Private Activity Bonds and New Markets Tax Credits, as the House GOP’s tax code overhaul proposes, would have deep ramifications for funding infrastructure and affordable homes in the region.
  • “The latest Republican tax bill changes commuter benefits, but probably not yours.” Tax law will only indirectly affect most area commuters.
  • Added 26 January: “A bold California bill would ease transit oriented development. How would a similar approach affect DC?” A bill recently introduced into the California legislature boldly proposes that every transit corridor in the state be rezoned to permit mid-rise apartments. In Slate, Henry Grabar writes that it’s “just about the most radical attack on California’s [housing] affordability crisis you could imagine.” In the Boston Globe, Dante Ramos writes “the bill may be the biggest environmental boon, the best job creator, and the greatest strike against inequality that anyone’s proposed in the United States in decades.”

 

Recently: instant neighborhoods, unmasking institutional capital, dockless bikeshares compared

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Cranes around Navy Yard, from roof of 100 M SE

Three things I’ve written elsewhere this week, the first two inspired by the mechanics of my neighborhood’s growth:

1. “Instant neighborhoods” don’t make for great cities, but DC insists on them in GGWash. I really do relish living in a neighborhood that’s growing and changing quickly, but it’s a little bit unnerving to think that we may be repeating the biggest mistake of Southwest’s past — the hubristic assumption that our best-laid urban plans can anticipate every need, for all time.

2. Meet the everyday people who own these iconic Washington-area buildings in  GGWash. Amidst a lot of dark insinuations about outside money, it’s kind of funny to uncover the rather more quotidian reality of who’s paying for all these new buildings.

3. I wrote a Twitter thread about riding all four of the new, dock-less bike sharing systems that have launched in DC this past week. Click through for the reviews:

 

Amazon’s HQ2 RFP prioritizes site readiness and talent, not incentives

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Parking crater at Spooky Park, Yards

Site availability, not incentives, are of “paramount importance” to Amazon.

A lot of the early press around the Amazon HQ2 announcement zeroed in on the usual economic-development narrative of a company shopping around for incentives. Yet a close reading of the RFP reveals that incentives are actually a middling concern for Amazon.

The RFP reveals (as Benjamin Romano also writes) that Amazon feels that it’s outgrown Seattle; they feel as if they’ve hired everyone in Seattle who could work for them, and growth requires tapping into a new labor pool. The company isn’t hungry for cash; it needs people, space, and speed.

I’ve plucked out the various considerations listed in the RFP and rearranged them roughly in order of urgency:

“Paramount importance”

  • “Finding suitable buildings/sites,” i.e., initial size of 500,000+ (up to 1.0 MSF) available in 2019, expandable nearby to 3.5 – 6 MSF over three phases and potentially up to 8 MSF beyond 2027
    • Keep in mind that a high-rise office building takes about a year to build, so groundbreaking should occur by mid-2018
    • For perspective: the TSA just awarded a build-to-suit contract for a 625,000 sq. ft. headquarters on a greenfield site in Springfield, Virginia, where the buildings are drawn, the developer has cash in the bank, the land is already cleared, and the office will open in late 2020
  • “Optimal fiber connectivity”

“Must be” or “required”

  • Close to a significant population center that can fill 50,000 jobs (many of them technical)… Direct access to significant population centers with eligible employment pools
  • Strong university system
  • Compatible cultural and community environment, diverse population, higher ed, officials eager to work with company

“Critical”

  • Highly educated labor pool
  • Initial and ongoing costs
  • Travel/logistics for employees and to other facilities
  • Site has access, utilities, zoning

“High-priority considerations”

  • Stable and business-friendly environment and tax structure

“Key factor”

  • Travel time to major highways and arterial roadway capacity

“Significant factors”

  • Incentives offered by state/province, local communities

“Important”

  • Near airport with daily flights to SEA, NYC, QSF, WAS
  • Stable and consistent business climate (demonstrated via testimonials from other large companies)

“Ideally”

  • <30 miles to major city
  • <45 minutes to international airport
  • <1-2 miles to highways
  • 0 miles to mass transit (rail or bus)

“Preference for”

  • Metro with 1M+ people
  • Urban or suburban location to retain/attract technical talent
  • Communities that think big

“Want to”

  • Employees will enjoy living there, recreation, education, high quality of life

“Could be, but does not have to be”

  • Urban/downtown
  • Similar layout to Seattle campus
  • Development-prepped site

Site-specific statistics that must be provided, and therefore will be considered:

  • General site information
  • Ownership structure, notably if government owned
  • Current zoning
  • Utilities present
  • Total incentives offered and terms, if legislation is needed, estimate uncertainty thereof, timeline
  • Highway, airport travel
  • Transit options, including bike and pedestrian

Regional statistics that must be provided, and therefore will be considered:

  • Labor pool information
  • Ability to attract talent regionally
  • Opportunities to hire software engineers
  • Recurring sourcing for software engineers
  • “All levels of talent”
  • Executive labor pool
  • Existing and potential university-employer partnerships
  • List of higher ed institutions with relevant degrees
  • Number of recent grads
  • K-12 computer science programs
  • Transit and transportation options
  • Traffic congestion ranking
  • Quality of life
  • Recreational opportunities
  • Diversity of housing options
  • Availability of housing locally
  • Housing prices
  • Crime data (“also”)
  • Cost of living (“also”)

So, what locations make sense on the East Coast?

The RFP only calls out two criteria as “of paramount importance”: fiber data service, and having a shovel-ready site of 0.5-1.0 million sq ft, with on-site or adjacent expansion to 8 MSF.

The site not only should be zoned already, it needs to have utility capacity in place. The 2019 timeline leaves zero time for rezonings, public hearings, geological surprises, soil contamination, lease buy-outs, tenant relocation, wish-upon-a-star transit lines, etc. It means either clean dirt that’s ready to go, or a monster of a cold-shell building that already has construction crews hard at work.

It’s hard to overstate how enormous this project is. It’s more than the total commercial (retail, office, hotel) space that now exists at National Harbor. It’s more than the total commercial space contemplated in the long-range plans for Downtown Columbia or White Flint — much less what’s already gone through zoning approvals. It’s bigger than the entire Capital One campus plan at the McLean Metro, or Under Armour’s Port Covington campus plan in Baltimore. It’s more office space than even what could be built under the Navy Yard area’s zoning. It’s twice as big as the Pentagon.

The Greater Washington office market is the country’s third biggest, after NY and Chicago (other large cities’ employment bases are more industrial). This is one of a few regions in America where developers regularly propose 1+ MSF office sites — largely hoping for giant federal leases. (Granted, cities like Atlanta, Chicago, and Dallas often give away zoning for the asking; Toyota doubled its Plano campus’ size during negotiations.)

Most local sites might have shovel-ready space for Phase 1, but not necessarily plans in place to accommodate phases 2-3-4. Only two come to mind: Tysons Corner and Crystal City-Pentagon City.

  • Tysons: 50,000 jobs is a 50% increase on Tysons Corner’s current employment, and 25% of the 2050 “buildout” number there. As far as I can tell, no one owner at Tysons can accommodate the full 8 MSF buildout, but sites could be combined at two locations:
    • McLean station: Scotts Run, next to Cap One, is the largest single project at Tysons with approvals for about 4.5 MSF of office. Another 0.5 MSF has been approved in two parcels to its southwest, and the Mitre campus can also expand.
    • Tysons Corner station: Lerner has entitlements for an additional 2.3 MSF of office south of the Galleria, Arbor Row has approvals for another 1.1 MSF to its north, and Macerich has approval for another 0.5 MSF office tower south of the station. The Galleria itself hasn’t been rezoned yet, although one idea that’s been presented adds about 1 MSF of office; there are also sites to its west (closer to Greensboro station) that would still be within walking distance.
  • Crystal and Pentagon City have seen 20,000+ federal jobs in defense and homeland security depart since BRAC; there’s over 2 MSF of vacant office available today. What’s especially notable is that most of the offices are already controlled by one very interested  landlord (JBGS). There aren’t many closer analogues anywhere in America to their partnership with Vulcan in South Lake Union: one deep-pocketed owner, one neighborhood, and a placemaking/planning framework that forecasts tremendous growth.
    • [Updated 13 March 2018] From a JBGS filing: “Our holdings alone can accommodate Amazon’s entire long-term space requirement and we have a cost advantage over our competitors given the existing in-place parking and substantial infrastructure. Crystal City has plenty of capacity to accommodate Amazon or any large user looking for a sizeable home in an urban market.”
    • Crystal City has long-term plans to renew the existing buildings and expand office space by about 5 MSF net, including active or expired plans for 0.7 MSF at the vacant 1900 Crystal and 0.65 MSF at 223 23rd St. There’s also about 1 MSF vacant today, and over 1 MSF in 2018-2019 lease expirations that could free up sites for incremental additions.
    • Pentagon City has an entitled site for 2 MSF at the shovel-ready PenPlace, and two adjacent sites are also approved for ~1 MSF of office apiece: Brookfield’s TSA/DEA block (leases are up in 2018-2019) and Kimco’s Costco site.
    • Potomac Yard has a power center to redevelop, where JBG is a partner and could build 1.9 – 5.3 MSF of office after the new Metro station opens after 2020. (There’s vacant land in Arlington, too, but it’s owned by Lidl’s headquarters.)

These sites compare favorably to other leading East Coast contenders: Schuylkill Yards or UCity Square in Philadelphia and Seaport Square in Boston are by far those cities’ largest sites, with superior access to intercity transport and higher ed, but both are approved for only ~3 MSF of office. (The Philadelphia sites are adjacent to air-rights parcels that may be available later, and for which plans have been floated, but the metro area has a considerably smaller technical talent pool.) The Boston submission ended up focusing on the Suffolk Downs racetrack, which is centrally located within the region but clear across downtown from the region’s plush suburbs and educational institutions.

The obvious sites in downtown Atlanta, like the Gulch, are still visions rather than plans, with fragmented ownership and poor infrastructure/access. It appears 2 MSF of Class A office is vacant downtown, but by far the largest and highest-profile block is Bank of America Center, a mile north — and much closer to Tech and Midtown. Too bad the Gulch isn’t on the other side of downtown.

Colossal loft conversions might fit the bill elsewhere, as with the warm shell of Chicago‘s Old Main Post Office — one of the country’s biggest buildings at 2.5M sq. ft., and so impossibly huge that its size had been the stumbling block to several previous plans. It happens to sit astride a subway line, highway, and fiber lines, and within a block are three approved plans for five new build-to-suit office towers.

It could also spread across a few six-figure spaces on the Brooklyn waterfront; although the area’s comparatively small office market isn’t promising, industrial space is relatively plentiful.

The Dallas Morning News’ old printing plant and the mostly-empty Dallas Union Station building have a combined 425,000 square feet, and happen to sit next to not just many empty lots but also an iconic sphere thing.

Central city or suburbs?

Regarding HQ1, Bezos is on record saying, “We could have built a suburban campus… I think it would have been the wrong decision.” Amazon VP for global real estate John Schoettler echoes: “Jeff said the type of employees we want to hire and retain will want to live in an urban environment…. We could have gone to the suburbs, and we could have built a campus.”

Bezos was also heavily involved in siting the Washington Post’s new office. A key consultant says: “One discipline Bezos brought in was money… He saw [a fringe site] as a lot of empty holes, not urban-istic.”

Update May 2018: Arlington, TX confirms they were told “it wanted an already-developed urban core.”

Which locations have a deep enough talent pool to draw from?

A large labor force, primarily technical but also executive, is another “required” factor. Crain’s Detroit points out that “Amazon’s biggest business impediment is labor”: it has over 6,000 current vacancies in Seattle, 75% of which are technical. Real estate brokerage CBRE recently published a report, based on BLS data, comparing cities’ “tech talent” (“software developers and programmers; computer support, database and systems; technology and engineering related; and computer and information system managers”).

Three of CBRE’s charts stood out to me:

  1. 50,000 Amazon employees will include tens of thousands of software engineers, yet only 10 metro areas have more than 100,000 tech employees to begin with. For context, consider Amazon’s current need for 4,500 technical employees: hiring those people in Pittsburgh today would require poaching 11% of its tech workforce, 9% in St. Louis, or 7% in Raleigh. In Toronto or New York, you’d only have to convince 2% to leave their jobs, and in the Bay Area or Washington-Baltimore it’d be less than 1.5%.
  2. A key advantage for DC, Boston, or LA is that only these three regions export CS graduates in large numbers. Seattle, Atlanta, DFW, and the Bay Area already have to import thousands of tech employees a year; since there’s only a limited pool willing to pick up and move, recruiting thousands more every year could be that much more difficult. (The RFP specifically asks about university hiring partnerships.)
  3. Regarding costs, CBRE did an interesting analysis looking at the cost of running a 500-employee technology office. DC, Boston, and Seattle all come in at about the same price; SF is about 20% more. The big winner in that table is Toronto, with its large workforce and low wages — which more than offsets the relatively high cost of real estate there.

 

The problem is inequality, not speculation

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Need homes? Build homes (even the Communist youth thought so in 1946)

In 1946, even the Communist Party USA agreed that the obvious solution to a housing shortage was to build housing. Why is that controversial now?

In a recent fit of contrarian cutesiness (which I partly responded to earlier, here), Chuck Marohn wrote about out-of-control housing prices: “The simple answer is downzoning.”

That’s as dishonest an answer to the question as Tommy Lasorda, in those vintage Ultra Slim Fast commercials, saying that the secret to out-of-control weight is spaghetti-and-meatball dinners — the daily treat, rather than the three calorie-restricted, high-fiber shakes that you choke down the rest of the day.

Marohn balances his call for downzoning with a casual mention of his previous “floating height limit” idea — allowing, across all zones, somewhat bigger buildings than the norm. This would, in essence, upzone the vast majority of metropolitan American land that’s currently zoned solely for low-rise single-family residential, while lowering allowable heights in the much smaller proportion that’s subject to more-lenient commercial zoning. (Of course, in his contrarian telling, a call for raising allowable building heights for 90% of America is titled “the case for height restrictions.”)

He pins the blame for metro Portland’s housing affordability crisis — and, by extension, the broader housing-affordability crisis afflicting bicoastal Blue America — on property speculation, saying that developers are bidding up residential land prices around transit in hopes of winning rezoning to build multifamily TOD. Thus, his call for downzoning, to frighten off those vile speculators. There certainly exist a few situations where transit-oriented speculation distorts markets — I’ve written about these pretty extensively in GGWash, pointing to why “parking craters” surround Metro stations instead of 8-story high-rises.

But these are fringe situations, affecting only a few square miles across the entire country. Even when I lived in the highly desirable, transit-accessible neighborhood of Bucktown, where zoning was infamously corrupt, the upzones that the local alderman brazenly sold did not result in the dumpy single family houses being replaced with parking-light apartments, as Chuck’s hypothesis holds. In fact, the exact opposite occurred: dumpy, parking-light apartments were replaced with swanky single-family houses! In countless other areas which have been downzoned, housing prices have increased regardless of speculation.

Why? Because the price increases in Bucktown, and on Portland’s east side or Los Angeles’ west side, have little to do with transportation (Chuck’s bailiwick) — and much more to do with rising income and wealth inequality, both within and between regions, combined with a largely static land-regulation regime that hasn’t adapted. The gains accruing to the wealthiest means that the wealthy can bid up housing prices, substantially raising housing prices in high-income regions where both demand and barriers to entry are high. As I wrote earlier, this imbalance has held on for decades in some cities, particularly in coastal California, and the political dynamic that sustains it appears to be utterly implacable.

As I also wrote earlier, the economies in different regions have diverged in a way that has fed this dynamic. Economists Stijn Van Nieuwerburgh and Pierre-Olivier Weill found that “house price dispersion” between regions increased much faster than income inequality between regions (which has also been increasing): their statistical measure of the variation in house prices increased by 38 percentage points, vs. 8.6 points for wages, from 1975-2007. As their paper explains,

The increase in productivity dispersion creates flows of workers towards high-productivity metropolitan areas, driving local house prices up because of limited housing supply. Conversely, households flow out of low-productivity areas, driving local house prices down. This increases house price dispersion.

The situation has gotten even worse since the 2007 crisis, with housing prices in wealthy Census tracts increasing almost twice as fast as those in more modest areas.

Just to be sure, the Harvard Joint Center on Housing Studies examined metro-level data about the uneven recovery in house prices more closely and observed:

a strong case for the gap between recent changes in supply and demand exerting a strong upward pressure on house prices… the overriding importance of the imbalance between population growth and housing stock growth in explaining trends in prices…

Sure, pointing the finger at transit, multifamily, and TOD burnishes Chuck’s prickly-independent bona fides, a long tradition in Upper Midwest politics. But he’s searching only within his narrow sphere of expertise (transportation) to find the cause of problems that have much larger global causes — and which don’t lend themselves to his hyper-local bootstraps approach.

Update: Portlanders have already studied and diagnosed their problem — as in Bucktown, it’s inequality and McMansions, not multifamily zoning. Their solution is not downzoning, but rather to switch up the zoning in lower-density neighborhoods, increasing the number of units allowed while reducing FAR allowed.

What to memorize before you’re in a crash

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Crash report

I was injured in a hit-and-run crash last year, and unlike so many others, the driver is being brought to justice. (I recently talked to a prosecutor about the case.) Here’s what I’ve learned to do: shout out the license plate number. Then repeat it, even louder. Get in the habit of doing this whenever you see bad driving, and certainly do this instead of cussing. You will need to make this so habitual that it becomes instinct — at the moment it happens, you will not be able to think clearly.

What happened to me: I was on a short summer vacation to Toronto. On a whim, I decided to take the bus to the nearby city of Hamilton, just to see something different. (Oh, it’s different, all right.) As I was crossing Main at James, with the light, I noticed a left-turning car proceeding through the intersection — clear of traffic, but not yet clear of me. I had a stomach-dropping realization of “uh, that car is going to intersect with my leg” a moment before the car’s bumper grazed my ankle.

I pivoted and began shouting out the license number repeatedly. This (a) helped me remember it when I had a chance to get to the corner and write it down, for recitation to 911, (b) alerted the driver that yes, someone had noticed, and most importantly (c) caught the attention of a witness, who was thinking clearly.

A witness who was a block away ran back towards me just afterwards, told me that the motorist had turned right, offered a description of the car complete with a correct license plate number [I was off by one], and offered to look in that direction for the car. He found the car two blocks away, parked in a parking lot, confronted the driver, and told him that he needed to return to the scene — which he did. (Like a good Canadian, this witness apologized profusely on behalf of Hamilton, and while we were waiting for the police talked about his hockey league.)

Everything else about the sequence of events was relatively easy to recall when on the phone with 911, and later when filing the police report. But without the license plate number, there’s no way that I could have even begun the process.

All of the above is also good advice, but only after you’ve correctly remembered the license plate number.

Q&A about DC’s gas tax

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Nature's fuel

Who wouldn’t be happy about Mother Nature’s Fuel?

How is DC’s current gas tax computed?

It’s 8% on the wholesale price per gallon… with a floor of $2.94, so that the revenue doesn’t drop below the prior rate of $0.235 per gallon. Since 2015, the gas tax rate has been at that floor.

It’s levied at the same rate on a variety of fuels, including ” including gasoline, diesel fuel, benzol, benzene, naphtha, kerosene, heating oils, [and] all liquified petroleum gases.”

Why did DC change how its gas tax is computed?

Here’s some background from DCFPI about why that changed. Maryland and Virginia also shifted to a percentage basis around the same time.

When did the gas tax computation change?

It was Phil Mendelson’s idea, and it was implemented rather quickly:
– May 21, 2013 headline in the Post: “D.C. council chairman seeks shift in collecting fuel taxes.”
– May 22, 2013 headline: “D.C. Council agrees to scrap per-gallon gas tax in favor of levy on wholesale fuel.”

How else could the gas tax be computed?

Here’s one goofy idea: Burning a gallon of gas produces 19.64 pounds of carbon dioxide. One could thus levy “a motor fuels tax of $0.0133 per pound of carbon dioxide emissions that result from the fuel’s combustion,” which would result in a tax of:
– $0.235/gallon for gasoline with 10% ethanol (the usual mix around here)
– $0.261/gallon for pure gasoline (usually only sold as marine fuel around here)
– $0.298/gallon for pure diesel
– $0.276/gallon for pure biodiesel
Doing so would technically put a “carbon tax” on the books without appreciably raising existing tax rates, and providing a very small incentive for biofuels.

Of course, a recalculation is also an opportunity to harmonize rates with a neighboring jurisdiction… see below.

(Interesting fact: British Columbia applies its carbon tax to fuels on a per-liter basis.)

How does DC’s gas tax rate compare to its neighbors’?

Maryland’s current rate is equivalent to $0.335 per gallon. (Yes, that’s $0.10 higher than DC’s.) Virginia’s current rate is $0.162.

How might DC gas station owners react to an increased gas tax?

You’ll have to ask them, but I was struck by this passage in a 2011 CityPaper profile (by Christine McDonald) of Joe Mamo, who owns nearly half of DC’s gas stations:

“We are really a real estate company,” he says. “We’re in it for the real estate.” Mamo considers the coming transition inevitable, given the high cost of D.C. real estate and predictions about “peak oil,” alternative fuels, and electric cars that might eventually make gas stations obsolete. “Long term, the real estate is where the value is,” he says.