Future of master-planned communities is big topic for Urban Land Institute

By Bob Sharpe
Inside Tucson Business
May 16, 2013

Tucson’s shrinking inventory of lots for builders, the lack of competition in the industry locally and the inflationary pressure on construction costs and land prices were among topics explored in a panel discussion I moderated last month at an event titled “Residential Futures” put on by the Urban Land Institute (ULI) at the Marriott University Park Hotel.

Featured panelists were John Graham, CEO of Sunbelt Holdings; David Mehl, whose Cottonwood Properties developed Dove Mountain; and Greg Vogel, CEO of Land Advisors Organization.

Attendees included elected officials, planning staffs and local and national homebuilders from throughout Southern Arizona.

One of the highlights of the day-long event was a “brain-storming” session on the feasibility of infrastructure funding and community building.

A “Real Deal, Real Numbers” mobile case-study tour of Rancho Sahuarita took place in the morning. Rancho Sahuarita is an award-winning, 3,000-acre master planned community, at Interstate 19 and Sahuarita Road that features entitlements for almost 12,000 homes, and more than 400 acres of commercial development.

The tour included a full overview of the development of the Sahuarita Town Center in the heart of Rancho Sahuarita. This integrated mixed-use urban center is planned to support retail, office, employment, medical, education, residential and hotel uses. The area currently includes a municipal complex for the Town of Sahuarita, a post office, a fire station, a library, schools, churches, retail and other commercial services, which together create a destination and cultivate a sense of community and place for residents.

The all-star audience attending the afternoon portion of the program dealing with the future of master-planned communities focused on issues in a discussion paper, which I recently compiled with the help of ULI’s Terwilliger Center for Housing. Our report, “Residential Futures: Thought-Provoking Ideas on What’s Next for Master-Planned Communities” represents the best thinking on community development by some of the smartest community developers in the country.

The report continues to stimulate conversations nationally like the one we had in Tucson by exploring new trends that will dominate the real estate industry.

While certain aspects of the future of real estate investment and development remain uncertain, there are several discernible trends:

• A sense of increasing consumer optimism.

• A preference for amenities that are not only affordable, but also allow developers to create a competitive difference.

• Smaller may not necessarily be better.

In addition, there is a growing emphasis on consumer research, and new models and strategies to ensure financial sustainability.

In terms of the homebuyer, it’s important to focus not only on who they are and what they want, but also what they need, can afford and get financed. Data gathered for the paper from experts suggest affordability and the advantages of new home ownership will be primary drivers of future purchase behavior.

The demographic of first-time home buyers, who will account for 30 percent of the market, will be young women, new families, and buyers who previously rented.

These buyers have a strong desire for not only good schools and employment opportunities nearby, but also safety and a sense of community. By providing a sense of destination and place, as we have done in Rancho Sahuarita, residents can experience a more fulfilling lifestyle at an affordable price.

Also important will be the changing landscape of development and in particular locational attributes, and the types of communities that can prosper in spite of new market challenges. Panelist John Graham highlighted some good news for Tucson, as his company, Sunbelt Holdings and other development firms are considering entering the market due to its stability and the fact that it is not as “frothy” as larger markets, such as Phoenix.

The new consumer is also attracted to technology-ready and environmentally sustainable communities, while traditional features, like parks, pools, schools, trails and open space still retain value. Community amenities and housing features that provide value by making life easier and more convenient will be very popular.

Marketing and communications is also experiencing some changes. While traditional methods still work for some buyers, Web-based messages and social media strategies are increasingly vital. Platforms, such as Facebook and Twitter, not only allow developers to communicate with buyers, but can also activate and engage them in an efficient, low-cost way.

The message can also different, as financial security and developer credibility are more important to them than ever before. The focus of marketing efforts will also shift to the customer in a new way in which the product itself is secondary in a relationship-based approach.

Mehl noted a major “takeaway” from the past is how simply creating great places to live is still key to building successful master-planned communities, and lifestyle marketing should promote communities in that light.

Finally, the future of community development also rests on the strategies of its developers. The days of record-breaking land sales and profits are over. Development companies need to be financially sustainable and have a consistent management approach in order to build innovative communities that appeal to home buyers. That is the new reality for community builders.

Bob Sharpe, president of Sharpe & Associates, has been a managing partner in more than 50 real estate ventures and is currently developing Rancho Sahuarita, considered one of the top master-planned communities in the United States.