Recipe for revitalization: going vertical
Is a trend toward taller, smaller units in N.H. cities in the offing?
New Hampshire touts a high quality of life, which in fact we have. But ours is more suburban and focused on high home ownership. Demographic trends indicate that the younger “X’s,” “millennials” and “Z’s” aren't into “stuff,” or home ownership. Look what they can fit into an iPad or iPhone — they practically live out of their backpacks.
At the recent fall CRE meeting in San Francisco, one of our sessions was on new housing trends, including mini-apartments, which started with students but now attract all age levels. Units of less than 300 square feet have proven to be too small, but 340 to 440 square feet are becoming popular for student housing, young professionals, older workers for a weekday urban flat (with a family living in the burbs) and empty-nesters – well, single ones anyway. I don't see how you could get two people into 450 square feet, 24/7/365 – that would be a recipe for disaster.
With urban land costs in the stratosphere, going vertical is the only way these projects pencil out. I recently toured a 25-story, 100-unit project in downtown Brooklyn. These units averaged almost 600 square feet, but were selling starting at $375,000! I am conscious of residential square feet, as I am in the early stages of downsizing, going from 3,000 square feet to half or less. So I see a trend toward taller, small units in New Hampshire's cities, starting with Portsmouth. But other cities and larger towns would love to follow.
Capturing young professionals in town where they shop and support downtown restaurants is huge for downtown revitalization. College towns like Hanover, Keene, Plymouth, Henniker, Manchester, Concord, Nashua and even Durham all look to maximize economic development from these colleges, with their young people and their spending money. But to be truly successful, they have to be multi-generational. Revitalization based only on students is “too thin” and brings too much risk. But a mixture of students, young professionals, empty-nesters and seniors is the key to success.
Alas, the Great Recession continues to dampen this economic segment. Seniors can’t sell their big houses at a price that would allow them to downsize and have a small nest egg.
At the same time, college debt is a major weight on the younger demographic segment. In fact, students need to seriously consider the cost benefit of these high college costs. Will $160,000 or $200,000 be a good investment for these young people? The upside is not clear but the alternative (no college) is clearly not the way to go. Only so many of these young people can go into tech. The rest are looking at professions that seem bloated. It is a tough point in the economic cycle to be coming into the workforce.
One community and region that has weathered the Great Recession well is Hanover and the Upper Valley. This region of the state seems recession-proof. Growth is slow but steady due to land-use and development constraints. Next month, Plan NH will visit Hanover to look at the West Wheelock Street Corridor. Requested by the Hanover Housing Commission, this has the opportunity to provide some new insights and ideas, including smaller urban residential units.
Chip Brown, Norton Asset Management's Upper Valley representative, has been busy completing several leases and one sale. Week after week and month after month, I marvel at the resilience and steady growth of the Upper Valley.
Having Dartmouth College, Tuck Business School, Thayer Engineering School as well as Dartmouth Medical School and the Dartmouth Hitchcock Medical Center makes for lots of activity, energy and entrepreneurs. Hypertherm completed a new facility. Unlike the southern part of the state, where there are several/many properties for every tenant or buyer, in the Upper Valley, the space is scarce, so tenants and buyers feel frustrated, and securing space takes much longer.
Hanover and Portsmouth continue to be the strongest commercial real estate markets in New Hampshire. Keep an eye on them as they evolve over the next few years. The new forms of development may serve as good examples for our other communities.
Bill Norton, president of Norton Asset Management, Manchester, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at email@example.com.