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Happy New Decade! – The Babuk Report

Happy New Decade!

Happy New Year.  It’s surprising to see that we’re already a decade into the new century.

Previous posts have spoken about vacant storefronts and even vacant buildings, all from the aftermath of the latest economic turn.  There is so much vacant space out there that based on current absorption rates, some markets have several years supply of some building types like… condominiums.  It could take several years to recover to get back to where we were. This empty space in empty buildings simply sits and waits.  No one has really caught on to the idea that this space could be re-adapted to different uses.

In the meantime, one may deduce a similar “oversupply” of the people who design and build. In this case, many of these people have “re-adapted” out of necessity.  While this is good for them, it has left an enormous void of talent, skill and expertise that has left the marketplace.  A colleague (formerly) in the print publishing business suggested that it may take as long as twenty years for the architectural profession to make up lost ground, lost to a “brain drain” caused by the current economy.

There are fascinating opportunities coming out of all this.  While cities that best depicted the late twentieth century – the Sunbelt – have stalled from an oversupply of built space that led to sharp drops in real estate prices; many cities of the early twentieth century – the Rust Belt – are retreating. 

It’s like Las Vegas vs. Detroit.

Las Vegas just opened an incredibly huge hotel complex; its economic viability is yet to be seen.  Residential housing prices in the Las Vegas area are still depressed, though many feel this reveals some “great buys” in the real estate market that services retirees.  The retiree market doesn’t depend on finding employment to sustain housing costs.

Detroit has even better deals – well, lower prices – in residential real estate.  At first glance, Detroit may seem to be unsustainable and unaffordable: although prices are low, the potential market is people who work.  In a city without jobs, housing at any price is unsustainable and unaffordable. 

I’ve heard many a seminar presentation about cities like Detroit recently, and Detroit is the oft-cited example. It was a much larger city in its heyday a few decades ago: having shrunk in population but not geographical area, it’s saddled with much more infrastructure than it needs and can support.  Many are projecting Detroit to be a very viable city if it trimmed its infrastructure and broadened its economic base to support a city of its current population levels – still one of the largest cities in the United States.  Some are even proposing urban agriculture for Detroit, a very novel “reuse / re-adapt” concept.

Michigan Central Railroad Station, Detroit
Michigan Central Railroad Station, Detroit

Speaking specifically about Detroit as a precursor and example, it has the potential to be a very vibrant smaller city; the buildings that supported a larger city have been left behind.  Several buildings buildings have been left in ruin – the former Michigan Central Railroad Station, various hotels and office buildings, even industrial complexes where automobiles were once assembled.

In archaeology, we know of classical ruins, of medieval ruins and the like.  Here, we have a new category:  modern ruins. Quite fabulous modern ruins, at that.

Regardless, it’s still a decade into the new century. Just as the nineteenth century economy was different than the twentieth century economy that followed; the nineteenth century set up the twentieth century’s economy.  The same may be true of the twentieth and the twenty first century’s economies.  The economic structure of the new century hasn’t revealed itself.