How to Take Advantage of the Retail Apocalypse

This article first appeared in The Orange County Register.

Amazon’s stunning acquisition last week of Whole Foods signaled an inflection point in the development of retail, notably the $800 billion supermarket sector. The massive shift of retail to the web is beginning to claw into the last remaining bastions of physical space. In the last year alone, 50,000 positions were lost in the retail sector, and as many as 6 million jobs could be vulnerable nationwide in the long term. Store closings are running at a rate higher than during the Great Recession.

Yet, there’s an opportunity opening for cities and regions to take advantage of new space for churches, colleges, warehouse space and, most importantly, housing. Nationally, an estimated 15 percent of all mall space will need to find new uses within the next decade. As many as 275 malls, according to Credit Suisse, will close in the next five years — roughly a quarter of the total. America already has four to five times as much retail space per capita as countries such as the United Kingdom or Japan.

The Infill Opportunity

The biggest opportunity for Southern California lies in the production of new housing, which would help to make up for providing less than half the needed supply for the past decade. To date, misguided state policy has created a raft of poor outcomes — rising prices, low inventory, declining affordability, the second-lowest homeownership rate in the nation — in effect, chasing middle-class, younger families out of the state.

State policy has made things worse by putting ever more regulatory burdens on housing, particularly for those who build single-family homes on the peripheral areas, where lower-cost residences have historically been built. But the state’s policy of pushing “infill” development has also foundered, as the price of new apartments has shot up, in part due to the limited land for developments.

These policies understandably upset residents of many urban neighborhoods, who feel that developers are seeking carte blanche to make their areas ever more congested and uniform. In contrast, a strategy of focusing on redundant retail properties — think attached townhomes or detached townhouses — would actually produce fewer cars than even a poor-performing mall, and would appeal to such key demographics as first-time homebuyers, immigrants, minorities and downshifting baby boomers.

The Future of Retail: A Physical Community

Despite the grim predictions, physical retail does have a future, and a potentially bright one. In some cases, the more high-end malls, such as The Grove, South Coast Plaza or Fashion Island, will continue to thrive by attracting tourists and high-end customers. Primarily, it’s the low- and mid-range retailers, such as Sears, JCPenney and Macy’s, that are in the deepest trouble, while chains like Nordstrom seem to be able to maintain their businesses.

The real revolution will take place in declining older malls, as well as the ubiquitous strip malls. In these places, there’s already a noticeable trend toward those businesses that are hardest to duplicate online, such as restaurants, gyms, tutoring academies and professional services. Traditionally, these developments are anchored by food stores, an area of brick-and-mortar commerce that has shown more resilience, and part of the reason why Amazon decided to buy Whole Foods.

Savvy developers like LAB Holding’s Shaheen Sadeghi are now focusing largely on artisan-driven retail — which is far less vulnerable to online business — that will also include housing and workspaces in cities across Southern California. LAB is working to revive a small-town, communal feel to once interchangeable and utterly predictable developments. In many cases, such as the Haven City Market in Rancho Cucamonga, the focus is less on traditional retail, with a greater emphasis on food and dining, something that Amazon may not be able to provide.

A Need for a Historic Compromise

California now has a unique opportunity to address its deepening housing crisis by combining some peripheral development with bold infill of retail space. This would replace the current doctrinaire “cramming” approach that clearly has failed to reduce prices or rents, and has made it increasingly difficult to build the single-family product preferred by the vast majority of consumers, including older millennials.

This transformation would be greatly helped if cities were given incentives….

Read the rest of the article at The Orange County Register.

Photo credit: Coolcaesar via Wikimedia under CC 3.0 license

Joel Kotkin on California’s Descent into Socialism

This piece first appeared at KFIAM640

California prides itself on being the resistance. Resist Trump, fight climate change, be progressive, it’s all a bunch of nonsense. There’s no way the left’s ideas can really work. California has become a dangerous liberal experiment. Read more

California’s Descent to Socialism

Excerpt from an article that first appeared in the OC Register.

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy. Read more

The California economy’s surface strength hides looming weakness

Excerpt from an article that first appeared in the OC Register.

If you listen to California’s many boosters, things have never been so good. And, to be sure, since 2011, the state appears to have gained its economic footing, and outperformed many of its rivals.

Some, such as Los Angeles Magazine and Bloomberg, claim that it is California — not the bumbling Trump regime — that is “making America great again.” California, with 2 percent job growth in 2016, gained jobs more rapidly than most states. The growth rate was about equal to Texas and Colorado, but behind such growth centers as Florida, Nevada, Oregon, Washington, Utah and the District of Columbia.

Bay Area: Still the tower of power

Over the past few years, the Bay Area has grown faster in terms of jobs than anywhere in the nation. But this year, according to the annual survey of the nation’s 70 largest job markets that I do with Pepperdine University public policy professor Michael Shires for Forbes, there is a discernible slowing in the region. For the first time this decade, San Francisco lost its No. 1 slot to Dallas, which, like most other fastest-growing metros, boasts lower costs and taxes, and has created more middle-class jobs than its California rivals.

The San Francisco area, which includes suburban San Mateo, remains vibrant. More troubling may be the weakening of the adjacent San Jose/Silicon Valley economy, which dropped six places to eighth — respectable, but not the kind of superstar performance we have seen over the past several years.

This partly reflects an inevitable slowdown in information job growth. As the startup economy has stalled, and the big players have consolidated their dominance, sector growth has dropped from near double digits to well under half that. Perhaps more telling has been a shift in domestic migration, which was positive in San Francisco earlier in the decade, but has now turned sharply negative. These are clear signs of a boom that is cooling off.

Southern California: Stuck in second gear

Southern California continues to lag. San Diego managed only a mediocre 29th-place finish. That’s better than Orange County, which managed an even less impressive 37th, and Los Angeles, by far the state’s largest job market, which reached only 40th place.

In Southern California, many seem to mistake high housing prices for economic vigor…. Read the rest of the article at OC Register.

Fading Promise: Millennial Prospects in the Golden State

Cover of Fading Promise ReportMany of California’s problems are self-inflicted, the result of misguided policies that have tended to inflate land prices and drive up the cost of all kinds of housing. Since housing is the largest household expenditure, this pushes up the cost of living.

California still has the landmass and the appeal to power opportunity for the next generation. It is up to us to reverse the course and restore The California Dream for the next generation.

Read the full report here
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Are Millennials Getting Priced Out of California?

This article appeared in CBS Sacramento.

by Drew Bollea

Millennials want what their parents have. They want to eventually have kids, a good job, and to own a home, but attaining that future is becoming more and more challenging in California, that’s according to Joel Kotkin, an RC Hobbs Presidential Fellow in urban futures at Chapman University. Read more

California’s Reactionary Housing Policy Burns Millennials

This article appeared in The American Interest.

The Golden State’s soaring home prices—exacerbated by NIMBY zoning restrictions, development plans that prioritize “density,” and arbitrary environmental rules—are exacting a catastrophic social and economic toll on the rising generation of young people looking to start families and lay down roots. So argues a bracing recent report from Joel Kotkin’s Center for Demographics and Policy at Chapman University. Read more

California Squashes Its Young

This article appeared in City Journal.

In this era of anti-Trump resistance, many progressives see California as a model of enlightenment. The Golden State’s post-2010 recovery has won plaudits in the progressive press from the New York Times’s Paul Krugman, among others. Read more

California’s War on the Emerging Generation

This article appeared in the OC Register.

It should be the obligation of older citizens to try to improve the prospects for their successors. But, here in California, as seen in a new report issued by the Chapman Center for Demographics and Policy, we seem to have adopted an agenda designed to make things tougher for them. Read more

California’s Tribal Politics

To my fellow residents, and particularly fellow taxpayers of California, I have a special message: Your concerns don’t matter much anymore. Rather than a functioning democracy, California has become a one-party state dominated by a series of tribes whose special priorities are sacrosanct, however much they might hurt the rest of us. Read more