Historic Carnegie Center in East End enters into a purchase agreement today.

The Carnegie Center in Downtown Cincinnati East End, active for sale at $347,000, has entered pending status today after the current owner and undisclosed new owner agree to purchase terms. Those terms will not be disclosed until final sale takes place. The historic building was being marketed with multiple different uses from meeting hall to primary residence. The building was listed at 111 years old, and was prestine inside and out thanks to recent remolding over the past decade or so.

 

Listing #1283094
$347,900 (LP)

3738  Eastern Ave,  Cincinnati, OH  45226     Pending
Lot Sz: 0.470ac
Area: E04 Age: 111

Remarks
In Col/Tusc Hist Dist. Saml Hannaford designed Carnegie Center.Fabulous 5048 sf. 22′ ceilings,patterned wood flrs, ornate mouldings. On Natl Historic Reg. Ideal for offices,art gallery,dance school or day care or maybe the perfect home?

 

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Spike in Distressed Property Sales Is A Healthy Sign, Says Moody’s

Spike in Distressed Property Sales Is A Healthy Sign, Says Moody’s

May 25, 2011 10:14 AM, By Matt Hudgins, NREI Contributing Writer

An index of U.S. commercial real estate prices fell to a cyclical low in March that was down 47% from the peak in October 2007. So why should investors be happy?

The Moody’s/REAL National All Property Price Index measures price changes on completed sales of apartment, office, industrial and retail properties. A 4.2% decline in the index since February stems in part from a surge in transaction volume among distressed properties, which accounted for more than 30% of March sales.

Click chart to enlarge

Mushrooming trading of distressed assets means that investors and lenders are realizing losses on their distressed assets on a massive scale. Experts say that process is painful, but those price corrections must occur in order for the nation’s commercial real estate market to regain its footing and for overstretched property owners to de-lever and bring cash flows into positive territory.

“Importantly, we’ve now set a post-peak low in the all-property index simultaneously with a post-peak high in distress transactions,” observes Tad Philipp, director of commercial real estate research at Moody’s Investors Service, which publishes the index.

In other words, the decline in the all-property index doesn’t necessarily mean commercial real estate values are dropping. The recent dip is more a reflection of the larger proportion of transactions involving distressed assets, which bring down the average. Indeed, in primary markets where distress represents only a small fraction of transaction volume, asset values are well into a recovery cycle.

Primary price leaders

“The commercial real estate world in the five or six primary markets is as active as it has ever been in terms of desire for the properties and pricing, the backdrop being that interest rates are low,” says Bill Collins, an executive managing director who oversees the capital markets group at Cassidy Turley in Washington, D.C.

With risk-averse investors focused on a handful of gateway markets that include places like New York City, San Francisco and the nation’s capital, competitive bidding has been pushing up transaction prices in those metros for some time, Collins says.

“You’ve got a lot of capital looking to be placed,” says Collins. “The fact that there’s only 60% leverage available and 40% equity required to close a deal really doesn’t matter; people don’t need to stretch their dollars because they have this accruing pool of dollars they need to place.”

Indeed, Moody’s researchers found that average prices in the primary markets already show marked improvement. An index of non-distressed, trophy properties — those valued at $10 million or more and located in one of six major U.S. markets — in March showed property prices have risen 26.7% from a trough in December 2009.

(The six cities covered in the index are Boston, Chicago, Los Angeles, New York, San Francisco and Washington.)

In fact, pricing gains are evident among trophy assets even when distressed transactions are included in the calculation. A separate Moody’s index measuring trophy property sales including distressed deals indicates that prices have risen 22.9% since that index bottomed in July 2009. “This is consistent with liquidity in the commercial real estate sector first returning to prime assets in capital-attracting cities,” says Philipp.

Crank up the volume

A recent pick-up in transaction volume is a sign that the U.S. commercial real estate market is on the mend, because moving distressed properties through the system sets the stage for recovery, according to Moody’s.

In March, there were 182 repeat-sales transactions totaling nearly $2.5 billion, a significant increase over February’s $1.26 billion volume and 115 repeat sales. March had the second-highest number of repeat-sale transactions since 2008, the total only exceeded by that of December 2010, which benefitted from being the end of the year.

Moody’s uses repeat sales, or multiple sales of the same property over time, to calculate price changes in its indices. Looking at the larger transaction spectrum, sales of U.S. commercial real estate valued at $5 million or more totaled more than $28 billion in the first quarter of 2011, up 77% from $15.9 billion one year earlier, according to Real Capital Analytics.

Moody’s national indices showed declining prices across property types in the first quarter. Industrial recorded the largest decline, falling 7.7% from the previous quarter to a post-peak low. Office was down 7.1% from the previous quarter but was up 1.9% from its low in the third quarter of 2009.

Apartments were down 4.7% from the fourth quarter of 2010, but were up 14.1% from that sector’s low in the third quarter of 2009. Retail was down 4.5% from the previous quarter but up 9.4% from a bottom in the second quarter of 2010.

Investors can expect the all-property price index to “bounce along the bottom” until more distressed assets move through the market, Philipp predicts.

On a positive note, the special servicers that handle distressed conduit loans in commercial mortgage-backed securities (CMBS) are resolving those debts at a rate about equal to the pace of CMBS debts falling into delinquency. That is resulting in a fairly stable delinquency rate, which stands at 9.22%.

Taken together with swelling transaction volume, the commercial real estate industry appears to be making progress in dealing with distress, says Philipp. “The resolution process for this transaction cycle appears to be well under way.”

Land Update: What is going on with the old Hooters location on St Rt 125

We pride ourselves at keeping the facts updated to the public.

We are certain most travelers passing the St Rt 125/Beechmont Ave exit at Interstate 275 have noticed the old Hooters restaurant was torn down recently, this type of change always leaves those passersby to wonder what is going on with that real estate. It has been a passion of ours to keep the local public informed on road, highway, commercial and residential building construction changes or additions, if locations of interest are noticed, please contact us and we will investigate and report our findings for you.

Hooters and their parent company have decided the land where the restaurant was located has a higher potential to lease the location without the building standing, opening the ground to more potential clients. A very high traffic piece of real estate is currently marketed by Edge Real Estate Group offering lease of the ground (1.017 acres)  “Preference is to ground lease or BTS.  Asking $75,000/annum on a ground lease.  May consider a sale, but at a steep multiple”, according to Dan Sutton of Edge Real Estate.

Edge Real Estate Group has put together this marketing brochure Hooters-Former_LAND_REV_2.2.11

Surge in Loan Workouts is Healthy Sign for Distressed Real Estate

 

Surge in Loan Workouts is Healthy Sign for Distressed Real Estate

 

The worst of the debt crisis may be over for the commercial real estate industry. Several measures suggest that the pace of loans newly classified as delinquent, in default or foreclosure has slowed and lenders are gaining ground in their efforts to resolve problem debts.

Some $6.3 billion in U.S. commercial real estate loans fell into distress in June, the smallest monthly increase since October 2008, according to New York-based Real Capital Analytics (RCA), which tracks loans on commercial real estate properties valued at $5 million or more.

In fact, the $56.8 billion in loans that moved into special servicing or delinquency in the first half of 2010 marked a 24% decrease from the distress that accumulated in the first half of 2009.

Lenders and special servicers resolved $14.6 billion in troubled commercial real estate loans during the first half of 2010, up 272% from $3.8 billion during the first half of 2009.

Resolution entails a 100% recovery rate or repayment of the loan amount, as opposed to a loan modification, which may bring a partial recovery through recapitalization, an extension or other changes that leave the lender exposed to the collateral.

The dollar volume of loan modifications also more than doubled to $15.6 billion, bringing total workouts to $30.2 billion, equivalent to the workout volume for all of 2009.

“This is the first clear evidence we’ve been able to gather that lenders are starting to resolve their troubled issues,” says Dan Fasulo, managing director at RCA.

Stabilized, core assets in primary markets have recovered much of the market value lost since the onset of the credit crisis and recession, Fasulo says. That is making it easier for lenders and borrowers to restructure debt or bring in equity partners to resolve loans, he says.

For example, an office tower at 333 Market St. in San Francisco sold in June for approximately $333 million, about 5% less than the $370 million it traded for in 2006.

In Chicago, a 60-story office tower at 300 North LaSalle traded for $655 million this month. The capitalization rate on the deal was close to 6%.

“That’s pricing we haven’t seen since close to the height of the market,” Fasulo says. “Clearly, we’ve seen a situation develop where owners that may have been under water 12 months ago may now be in the black again.”

The recovery in property values is limited so far to stabilized assets in markets and locations highly sought after by investors, Fasulo emphasizes. Property values remain depressed for assets out of favor with investors, including undeveloped land or buildings with high vacancy rates.

Recovery rates vary

Resolutions accounted for 48% of all workouts in the first two quarters this year, up from 43% of workouts a year ago. Recovery rates are uneven across lender types.

Regional and local banks recovered just 64% of the unpaid loan balance in their workouts during the first half of 2010, for example, compared with recovery rates of 71% for national banks and 77% for international banks.

The poorer performance of regional and local banks is due in part to a heavier concentration of construction loans on those balance sheets, according to RCA.

Commercial mortgage-backed securities (CMBS) special servicers had the lowest recovery rate at 63%. In fact, CMBS lags other forms of commercial real estate debt by volume of workouts.

Securitized loans accounted for 64% of new distress by dollar volume in the first half of the year but only 45% of workouts, according to RCA.

The low recovery rate in CMBS stems in part from a preference among special servicers to extend loans in hopes of more favorable market conditions down the road rather than liquidate debt.

Special servicers restructured $9.8 billion in delinquent loans in the first half of 2010, compared with just $3 billion in loan resolutions, according to RCA.

Hopeful signs for CMBS

Even so, there are signs that CMBS special servicers are making headway to address the level of distress. For one, the CMBS delinquency rate is slowing in its ascent after nearly a year of steady monthly increases on loans 30 days or more past due, in foreclosure, or taken back by lenders as real estate owned.

July’s all-time-high delinquency rate of 8.71% marked a gain of just 12 basis points from the previous month’s rate, according to Trepp LLC, a New York-based commercial real estate data and analytics firm. The rate climbed only 17 basis points in June.

June and July’s increases pale in comparison with the previous 10 months, when the delinquency rate jumped an average of 39 basis points each month, says Paul Mancuso, vice president of Trepp.

“Although the volume of distress in the CMBS market remains at historic levels,” he says, “the last two months give hope that perhaps the darkest days for the CMBS market are behind us.”

Nearly $3.2 billion in conduit loans were referred to special servicers in each of the first five months of 2010 before tapering to $140 million in June and $500,000 in July, according to Trepp.

Mancuso attributes the slower growth in CMBS delinquencies in part to increased loan modifications. In fact, the $12.1 billion in CMBS loan modifications that Trepp tracked in the first half of 2010 exceeds the $9.2 billion total for modifications in 2008 through 2009.

Fasulo of RCA acknowledges that lenders and CMBS special servicers still have most of their work ahead of them when it comes to resolving the current volume of distressed debt, but he is encouraged by this summer’s progress in the sector.

“Do they still have a long ways to go? Sure, especially the regional and local banks,” he says. “But incremental improvement is a positive sign for the marketplace.”

Surge in Loan Workouts is Healthy Sign for Distressed Real Estate

Global Commercial Property Sales Soar in First Half of 2010 as U.S. Deals Rebound

 

Global Property Sales Soar in First Half of 2010 as U.S. Deals Rebound

Aug 4, 2010 11:20 AM, By Denise Kalette, NREI Managing Editor

 

A new report on global commercial property transactions shows that sales of major properties valued at $10 million or more surged in the first half by 75% compared with the same period in 2009. 

Through the end of the second quarter, 2010 sales reached $231 billion, according to the report issued today by New York-based research firm Real Capital Analytics (RCA). That figure is 75% higher than a year earlier and includes the apartment, retail, office, industrial and hotel sectors.

Commercial property sales in top U.S. markets such as Washington, D.C., New York and San Francisco helped drive the global momentum and a 21% increase in transactions within the Americas from the first quarter to the second, according to RCA.  

“Activity in the Americas really exploded,” says Dan Fasulo, managing director at RCA. “It makes sense in that the U.S. has been two to four quarters behind Europe and Asia with recovery.”

Sales of commercial properties in the Americas totaled $22.1 billion, the highest since the third quarter of 2008, the company reports. Total volume in the first half reached $39.7 billion in the Americas, an 83% gain over the first half of 2009. Of that total, the largest share, $33.2 billion in property sales, took place in the U.S.

The biggest buyer in the Americas in the first half was Denver-based Dividend Capital Total Realty Trust, a non-traded real estate investment trust that spent $1.3 billion on a portfolio from iStar Financial (NYSE: SFI).  The portfolio included 32 office and industrial properties in 16 U.S. markets. 

The acquisition further diversified Dividend Capital’s commercial real estate holdings by property type, tenant base and region, the REIT’s president, Guy Arnold, said after the sale was completed in late June.

The number of properties trading in the Americas rose by just 12%, however, indicating that the transactions taking place this year have been significantly larger than last year — a sign of an improving marketplace, RCA reports.

Investors pause as prices rise

Although the year-to-date sales increased dramatically over the same period in 2009, the pace of global sales in the second quarter slowed from the first quarter of this year. One reason for the slower pace in the second quarter was uncertainty over prices, says Fasulo.  “Investors are digesting the new price levels,” he says.

Although commercial property prices have risen in Europe and Asia, prices have not appreciated as significantly in the U.S. “America has lagged recovery in Europe and Asia, but it is starting to catch up,” says Fasulo.

Worldwide, commercial property sales of at least $10 million in the second quarter reached a total of nearly $100 billion. That represented a decline from the $135.1 billion in transactions recorded in the first quarter of 2010. Still, the second-quarter sales were 33% higher than in the second quarter of 2009, according to RCA. 

The six-month transaction figures are a strong showing, even though they do not rise to the level of pre-recession sales, says Fasulo. As the market attempts to return to the earlier pricing levels, it needs to digest some of the overhang of properties still unsold. Fasulo foresees strong sales for 2011 and 2012.

“The year-over-year figures are very bullish. Barring another slowdown in the world economy, the global markets are well on their way to recovery.”

Global Property Sales Soar in First Half of 2010 as U.S. Deals Rebound

As a Hedge Against Inflation, Commercial Real Estate Investment Remains a Smart Play

 

As a Hedge Against Inflation, Commercial Real Estate Investment Remains a Smart Play

Aug 2, 2010 9:22 AM, By David J. Lynn, Ph.D., Contributing Columnist

 

In economic terms, inflation is defined as a rise in the general level of prices of goods and services in an economy over a period of time. When prices rise, each unit of currency buys fewer goods and services, eroding real consumer purchasing power. Although deflation also is a risk to the economy, moderate inflation is much more prevalent over the course of modern history.

In the long run, the most significant factor influencing inflation is the growth rate of the money supply. Inflation occurs when the nominal supply of dollars grows faster than the real demand to hold dollars. However, in the short and medium term, inflation may be largely affected by supply and demand pressures in the economy, and influenced by the relative elasticity of wages, prices, and level of interest rates.

In the U.S., inflation is estimated by calculating the rate of change of the Consumer Price Index (CPI). The CPI measures prices of a selection of goods and services purchased by a typical consumer. The magnitude of inflation — the inflation rate — is usually reported as the annualized percentage growth of the CPI Index.

Inflation outlook

Inflation rates vary from year to year [Exhibit 1]. Since 1949, the U.S. inflation rate as measured by annual change in the CPI has ranged from minus 1% in 1949 to a high of 13.1% in 1980. Over the past 60 years, the average annual inflation rate has been 3.7%.

Between 1991 and 2008, we experienced a prolonged period of low inflation with the CPI ranging between 1.6% and 3.3% annually. The average inflation during this 18-year period was 2.8%, considerably lower than in the 1970s and early 1980s.

The Federal Reserve’s monetary policies, which explicitly target maintaining low inflation, were partially responsible for this period of relative stability. Another factor was the tremendous productivity gains generated through the benefits of technology and lower costs of imported goods due to increasing global trade.

The CPI Index declined by 0.3% in 2009, just the third period of annual deflation since 1949. This data point has raised concerns about the potential for ongoing deflation, given a relatively weak economic recovery. In the near term, we believe that the outlook calls for a low inflationary environment, but we do not expect ongoing deflation. The low level of inflation is due to several factors:
•    an anemic economic recovery;
•    high unemployment;
•    deleveraging in both the business and consumer sectors;
•    high productivity;
•    low capacity utilization;
•    low cost imports from China and other emerging countries.

At the same time, we are concerned about the potential for higher inflation in the future for the following reasons:
•    record money supply;
•    record federal budget deficits ($1.5 trillion, or 10.6% of GDP);
•    record and surging national debt ($13 trillion, or 88.9% of GDP);
•    generally rising commodity prices due to demand from high-growth developing countries;
•    rising federal funds rate.

The consensus forecast from 45 leading financial institutions suggests that the inflation rate will remain low, but increase steadily over the next five years [Exhibit 2]. The consensus view is an average of a wide range of forecasts, reflecting the diversity of opinions on the topic.

Despite increased concerns of additional deflation, it is telling to note that only one of the 45 economists surveyed for the Blue Chip Financial Forecasts in July is calling for even a single quarter of deflation over the next two years. Like most observers, we believe that the pace of growth will be slow over the next year, but will be strong enough to allow prices to continue to rise.

We believe that as the global economy recovers over the next few years, demand for goods and services should climb accordingly, thereby increasing inflationary pressures. We believe it is reasonable to expect a return to the mean inflation rate over the past 20 years of approximately 3%. The significant monetary expansion in recent years could lead to even higher levels.

Effects on commercial real estate

Investors widely consider commercial real estate an asset class that can help offset the impact of inflation over the long term. In fact, that benefit is regularly cited as one of the advantages of adding real estate to a mixed-asset portfolio of investments.

Academic literature on the inflation-hedging benefits of real estate are mixed, but generally agree that private real estate is at least a partial hedge against inflation.

The ability to adjust rents over time is typically credited for real estate’s inflation-hedging benefits. Typically, robust economic growth should result in higher inflation, and therefore stronger rent growth.

The Great Recession has put downward pressure on both inflation and rents. Although empirical evidence suggests that rent growth seems to keep up with inflation over the long term, the changes in rent levels largely depend on short-term supply and demand fundamentals and lease terms.

Over the past 18 months, average rents across all property types have declined significantly faster than the inflation index. Based on our market forecasts, rent growth should outpace the inflation index as the U.S. economy recovers over the next few years, particularly in more supply-constrained markets.

David Lynn is managing director and head of U.S. research and investment strategy with ING Clarion based in New York.

As a Hedge Against Inflation, Commercial Real Estate Investment Remains a Smart Play

Signs of Life in Commercial Property Sales

 

Signs of Life in Commercial Property Sales

For several months now, the perception, at least, is that the frozen commercial property sales market is thawing. Now there is some basis for that notion grounded in reality.

Some $9.7 billion in properties valued over $5 million traded in June, according to New York-based researcher Real Capital Analytics. That’s the highest volume since September 2008.

So what’s happening exactly?

RCA notes that U.S. investors brushed off concerns about the sputtering economic recovery and its potential impact on the commercial real estate sector.

Certainly despite more recent fears of a “double dip” recession, sales velocity has increased of late, pushing total volume for the second quarter to $20.6 billion, up by 32% from the first quarter.

Sales in the first half of the year totaled $36.2 billion, which is an 11% improvement over the second half of 2009. It’s also a huge 67.1% gain over the first half of 2009. The gain is smaller when measured by the total number of transactions, up just 6% between the first half of last year and the first half of 2010, at a total of 1,790 properties. That means the average transaction size has increased.

According to RCA, several large corporate portfolios sales accounted for a disproportionate share of total volume in the first half of 2010, particularly in June, when volume was up significantly across the core sectors.

The 31-property iStar Financial portfolio, purchased by Dividend Capital Trust for $1.3 billion, accounted for 14% of June’s total closed volume. Other large June sales included several high-profile office buildings such as 300 N. LaSalle in Chicago ($655 million), 340 Madison in New York ($570 million), and the Wells Fargo Building in San Francisco ($333 million).

Generally speaking, the trendline shows that larger properties are trading at lower cap rates, which have seen their largest declines on apartment, industrial and retail properties.

Nationally, average apartment cap rates fell by approximately 25 basis points between the first and second quarters, to an average of 6.8%. Over the same period, average industrial and retail cap rates fell by approximately 35 basis points and 20 basis points, respectively.

Office cap rates, which had fallen by more than 100 basis points in Q1’10 from their peak in Q4’09, held steady in the latest quarter, declining by less than 10 basis points to 7.9%.

It’s perhaps not surprising, given the slower pace of economic recovery, that most deals are being done in so-called “top tier” coastal markets, including Washington, D.C., New York and Boston. There, investors are bidding up the few top-shelf investment-grade properties that have come to market.

Washington, D.C. reported an average office cap rate of 6.4% for the first half of 2010, while Baltimore, just to the north, saw an average office cap rate of 9.0%.

The New York and Boston metros each reported over $1.5 billion in total volume in the first half of 2010, corresponding with year-over-year sales increases in excess of 100%. At least one inland Midwest market, Chicago, posted similar results as these two coastal cities.

When it comes to pricing, the picture was mixed. Here are a few tidbits to consider, according to the most recent (June) Moody’s/REAL Commercial Property Price Index report:

  • The All Property Type Aggregate Index increased by 3.6% between March and April, down by 6.3% from one year ago, and 33% from April 2008.
  • Over the first half of 2010, four of five property types posted increases in average price-per-unit.
  • Hotel lead this group, rising by 68%
  • In the core sectors, industrial rose the most, by 29%.
  • Average per-unit pricing fell in the retail sector by 4%.
  • The average size of single property deals fell in both the retail and apartment sectors by over 30%, while in the office sector it fell by 77%.
  • In the hotel sector deal size increased by 50% in spite of a drop in per-unit price, because of large resolved and restructured volume in that sector.

Still, one of the biggest question marks overhanging the commercial property sector has not materialized. Where is the tsunami of distressed sales (nearly) everyone has been expecting? Simply put, it’s not here just yet.

As a share of total volume, sales of distressed properties slipped in the first six months of 2010, from 21% in the first quarter to 10% in the second quarter. In June, distressed sales accounted for less than 10% of all sales activity. The higher volumes of distressed sales in the first quarter reflected several large corporate portfolio workouts.

On a “positive” note, more than 25% of all apartment sales in June were classified as distress, the highest share for any property type. This is good news in the sense as fundamentals for both apartments and hotels are showing early signs of stabilizing, lenders may loosen their grip on these assets over the coming quarters.

OKCREview.com national news

Where Will Future Development Occur?

 

Where Will Future Development Occur?

Jul 1, 2010 2:40 PM, By Anthony Downs

A confluence of factors will result in most growth taking place on the fringes of major metros.

The location of new commercial real estate will be determined by how fast the economy recovers, how additional commercial development fits future residential strategies, and how decisions about growth are made. The U.S. economy will recover slowly. Consumers have reduced incomes and are saving more. Businesses are reluctant to expand without more customers, as jobs come back gradually.

 

Some urban planners contend this situation requires changing basic U.S. urban growth policies followed for 65 years. Instead of further low-density, outward growth on undeveloped land, they say metropolitan areas should shift residential growth into high-density infill in established communities.

Also, many suburbs were designed around vehicles, but millions of older residents will be unable to drive. They would be better off living where they could walk to grocery stores and other services.

“Walkability” proponents believe the remedy lies in more public transportation, developing high-density neighborhoods near transit stops and locating future population growth in established communities, but with higher densities. Such a strategy also would reduce future pollution from autos.

Whether growth occurs on urban fringes or in infill areas will affect where future commercial properties will locate. They will follow the residential growth.

Development on hold
In the near future, there will be little expansion of shopping centers, office buildings, hotels, and industrial buildings. There is too much vacant space of these property types to stimulate much more investment in the short term.

Moreover, the strategy of densifying existing metropolitan areas and making them more walkable, rather than expanding outward poses major problems. One is the sheer size of future population growth. The Census Bureau projects the population will grow by 55 million from 2010 to 2030, compared with 58 million from 1990 to 2010. In the latter period, the average density of new suburban growth was lower than the density of metropolitan settlements in the previous 45 years since World War II.

Dose of reality
It is unrealistic to believe that even half the additional 55 million people in 2030 can live in infill spaces, or that high-density development will replace large parts of existing built-up areas. So most future growth will continue to be on suburban peripheries.

New neighborhoods will not feature the high densities that are typical of transit-oriented developments like those in Manhattan and Arlington, Va.

A second issue is whether most of the added 55 million people will be satisfied with living in areas based heavily on public transportation. In 2000, only 4.5% of all commuting in America was done on public transportation, and over 80% of all personal travel was in automobiles or light trucks. Vast portions of our suburbs are unserved by public transportation. The reliance on private vehicles is not going to disappear anytime soon.

Moreover, public transportation — especially rail — always loses money. Yet there are no funding sources to increase its capacity. We need to slash our dependence on imported oil. But the best way to do that is to shift the engines in private vehicles to electricity, natural gas, or hydrogen, not to shift people out of private vehicles.

The third problem is that few U.S. metro areas plan growth on a regional basis. Local governments control almost all decisions about growth and the types of housing and neighborhoods they will contain. Those governments are dominated by homeowners who normally reject major changes in the status quo.

These realities mean that future commercial real estate development will arise slowly and will still consist mainly of outward expansion at metropolitan fringes rather than a radical shift to walkability, public transit, high density, and mainly infill developments.

Tony Downs is a senior fellow at the Brookings Institution. He can be reached at tonydowns3254@gmail.com

Where Will Future Development Occur?

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