Monday, October 29, 2007

Texas Triangle a Top 10 Global Mega-Region

Caught this Richard Florida blog post on the rise of global mega-regions - essentially continuous urban areas like the Boston-NYC-Philly-DC corridor. In that post he links to a recent paper he collaborated on identifying the top 40 mega-regions in the world:
This paper uses a global dataset of nighttime light emissions to produce an objectively consistent set of mega-regions for the globe. We draw on high resolution population data to estimate the population of each of these regions. We then process the light data in combination with published estimates of national GDP to produce rough but useful estimates of the economic activity of each region. We also present estimates of technological and scientific innovation. We identify 40 mega-regions with economic output of more than $100 billion that produce 66 percent of world output and accounts for 85 percent of global innovation... (yet cover only a tiny fraction of the habitable surface of the earth, and are home to less than 18% of the world’s population)
Unfortunately, something in their methodology led them to split Texas into two mega-regions, the Dallas-San Antonio corridor, and the Houston-New Orleans corridor, extending all the way the Florida panhandle (see map on p.27). Of course, anybody familiar with Houston's economy knows it has far more connections to the rest of the Texas Triangle cities than it does to NOLA and points east, and I let him know in the comments. The true mega-region is the Texas Triangle Megalopolis, as identified by the Federal Reserve Bank.

He has a table of the 40 mega-regions on p.31, and if you combine our two into a single extended Texas Triangle mega-region, our economy totals up to $700 billion in GDP (2000), which makes it the 10th largest in the world, just barely behind Charlotte-Atlanta (most of 4 states, $730B) and Southern California ($710B), and 5th largest in the U.S. (Boston-NYC-DC and the Chicago-Pittsburgh greater Midwest are #2 and 3 in the world respectively). #1 is greater Tokyo, with 55 million people and $2.5 trillion of GDP.

Our combined region has 20 million people (#23), a patents rank of 11, and scientific citations rank of 8. From an aviation perspective, Houston is connected nonstop to 15 of the top 20 (outside of ourselves), with gaps to 2 regions of Japan beyond Tokyo, Italy, Seoul-South Korea, and the French-Spanish Riviera.

Somewhat surprisingly, some of the most talked-about Asian mega-cities fell in the bottom half economically, but you can expect them to move up eventually given their rapid economic growth and gigantic populations: greater Hong Kong (45m), Shanghai (66m), Beijing (43m), and Delhi-Lahore with a whopping 121 million people.

Labels: , ,

Thursday, October 25, 2007

WSJ on the Ashby tower and Houston development

Last week the Wall Street Journal had an article specifically discussing the controversial high-rise residential tower proposed for Ashby at Bissonnet (details and FAQ), but also broadly talking about the lack of zoning in Houston. Unfortunately, the article had definite overtones of "check out this crazy city without zoning," but there are still some good excerpts worth passing along:

The latest controversy has reignited the land-use debate at a heady time for Houston, a port city of more than 2.1 million people. Buoyed by its surging energy industry, Houston has added tens of thousands of jobs in recent years amid rising rents for office and retail properties. To some developers, the lack of zoning creates an advantage because it keeps options open.

But other developers and investors say such land-use leniency creates unpredictability; unsavory projects might pop up nearby and sap the value of their investments.

Mayor White, a businessman who worked in real estate, law and other industries prior to his 2003 election, doesn't see zoning as the answer to Houston's issues. "Not on my watch," he said in an interview. "I do think, as we are in a strong economy and we live closer and closer together, there will be both new development and more rules to protect our common interests. But we will respect consumer choice and not have some bureaucrat in City Hall become the taste patrol for the city."

Isn't it refreshing to have a thoughtful mayor that avoids pandering to the NIMBYs?
...proposed a tower complex that would include 23 stories of either 187 condos or 236 apartments, a restaurant, boutique grocery store and parking for 450 vehicles. They paid the city's impact fees for the development and financed $500,000 in sewer upgrades for the project at the city's request. Their initial study of the traffic the project would generate found "no adverse impacts" on surrounding streets. They anticipate that a second study with a broader scope will deliver the same verdict.

Bowing to the city's demands for a smaller project isn't an option, the developers say. They decline to say what they paid for the property. "Doing anything less dense is not economically feasible," Mr. Morgan says.

This is something people have a hard time understanding: this land was valued and sold to these developers assuming a large-scale redevelopment, so just scaling it down or converting to townhomes is not an option when they've already paid many millions for just the land.

Despite the fervor of their opposition, neighbors aren't sure zoning is the answer. Houston voters have defeated proposals to implement citywide zoning three times, in 1948, 1962 and 1993.

Lam Nguyen bought a two-story house adjacent to the project's site two years ago, intending to renovate it and move in. Now he's not sure what he'll do, though he has peppered his front yard with signs opposing the condo tower. He says Houston's lack of zoning "helps the city grow. However, it should not be treated as a blank check, and that's what this developer is doing."


Fearing that the condo tower would leave her townhome in perpetual shadow,

Um, sorry, but the sun doesn't work that way. It comes up on one side and goes down on the other, so you're pretty much guaranteed sun at least half of the day (think of it as a giant sundial). And wouldn't a little shadow be great in Houston's summers?
Ms. Miller wrote an opinion piece for the local newspapers depicting the lack of land-use controls as a "threat to Houston's very soul."
Huh? Isn't "Houston's very soul" continuous growth, redevelopment, adaptation, and vibrancy?

I've been thinking about it, and there are already residential towers all over Houston that coexist just fine next to residential neighborhoods in River Oaks, on Montrose and Shepherd, next to Hermann Park, on Alabama at the 59 spur, and all around the Galleria area. Traffic should certainly be a consideration, but you'd be surprised how much traffic even a simple two-lane road can move, and they seem to have passed their traffic studies.

If I were the developer, I would defuse this firestorm by offering the immediate neighborhood free access to the fitness center, spa, and pool - essentially no cost to him but a very nice perk for them. Combine that with the walkable access they'll be getting to a restaurant and a grocery store, and I think this development might actually make their property values increase, if anything.

Labels: , ,

Monday, October 22, 2007

Houston becoming an "Emerging Global Portal"

Michael Boyd is an aviation expert and consultant who is frequently quoted in articles on the airline industry. He posted today on emerging trends from his recent Boyd Group Aviation Forecast Conference:
International-generated traffic is now the #1 most important sector for airlines.
The Emerging Global Portal. Because of growing intra-regional traffic flows, particularly between Asia and Latin American, certain US points have potential to become "international" connecting hubs, or Global Portals. These will inter-connect traffic from points just as do domestic hubs, but will do so between points in each region which by themselves cannot support nonstops.

The net result will be enormous economic growth for the cities where the Global Portals are located. This is because, just as domestic hubsites are over-served by virtue of the inter-connecting traffic support, the Global Portal will have far more international service access, supported by the feed traffic going through the hubsite. Potential Global Portals: AA/DFW, NW/DTW, CO/IAH, and DL/ATL. These will also enhance the value of alliances, both domestic and international.
Not sure how Detroit got on that list, given that they have minimal nonstop international service to Asia, Europe, or Latin America. But Houston definitely has tremendous potential here. If you use a string on a globe to find the shortest "great circle" route from the Asian Pacific Rim to Central America and the most populated parts of South America, you'll find it goes right through Houston. I've heard before that there is actually a reasonable amount of traffic that connects through from Continential's Tokyo flight on to Latin America. Asian trade with Latin America is increasing dramatically as they supply China and other countries with much-needed food and raw materials.

This will be key to Houston supporting nonstop flights to China, since, geographically, we are badly positioned to feed domestic traffic there. Now that Continental has been awarded slots to both Beijing and Shanghai from Newark, we have to hope that they will apply for future slots from Houston.

Competition will be stiff. American is at a bit of a disadvantage with DFW, because most of their Latin America flights are concentrated out of Miami, and there also seems to be some issue in their pilot contract which prevents flights to China because they're too long. But Delta is growing strongly out of Atlanta, not only to Europe and Latin America, but they were also recently awarded a China slot starting next year - and they already have flights to Tokyo and Seoul. We have the natural advantage with more regional ties, more Latin American flights, and the port, but they're a bigger hub with more total flights and destinations, and certainly have the potential to beat us to "global portal" status if we don't move aggressively.

Are you listening, Continental? Maybe time to order some more 787s?...

Labels: ,

Thursday, October 18, 2007

Big news on Metro rail

The Metro board met today to make some big decisions on the rail plan (Chronicle story). The bombshell is that all the lines they thought were going to start as bus rapid transit (BRT) are being upgraded to full light rail (LRT). Evidently the numbers look good enough and the federal matching fund requirements look achievable, so they're going for it. That really surprises me, because everything I've read says the feds are more biased towards BRT over LRT than ever before (more bang for the buck). I'm still not sure it's the best use of money, but it does have some nice benefits that Christof points out:
  • The Main St. line will be able to continue further north without a transfer
  • Two of the lines on the east side will be able to share tracks on Scott Street
  • It opens up the possibility for some University line trains to turn into Uptown rather than going out to the Hillcroft Transit Center, enabling a single seat ride to/from the Galleria area and avoiding transfers
Here are the reasons for the switch as stated on the Metro blog:

Later, after a press conference, John Sedlak, executive vice president at METRO, explained that METRO recommended immediate light rail to the board because the federal rules changed and allowed METRO to qualify its projects under the federal process.

"The change of federal rules allowed us to look at a system connectivity factor - to look at all the corridors tied together at one time. That allowed us to have a better performance on the overall system. That change allowed us to re-run our models, and they have a better ridership," said Sedlak.

In addition, the federal rules allowed METRO to include a factor known as "rail bias." While people accustomed to cars won't ride buses, they will board a train.

"We have been able to prove here in Houston that people ride the Houston light rail system just because it is rail," said Sedlak.

Third, since Houston has no zoning or land use controls, METRO was able to adjust its models to include a higher level of growth and development in the inner corridor of the city.

"That's been happening over the last decade, and in particular, around the rail line. And the federal government has accepted that change," said Sedlak.

Chalk up another benefit to our lack of zoning!

As expected, they chose to go to Cummins on Richmond for the west side of the Universities line before it turns down to Westpark, which is the route with the most ridership and lowest cost (hey, so now maybe Westpark road can grow wider than 3 lanes with the unused right-of-way, and take some of the local east-west load off of Richmond?). On the east side, it goes down Wheeler to TSU, then up to Alabama and UH. The ultimate plan calls for it to go all the way to the Eastwood Transit Center (which would enable east side bus riders and southeast HOV bus riders to access it), but it's unclear whether the money will be available in phase 1. Christof talked to Metro Chairman David Wolff and seems optimistic they'll find the money.

Christof has put together a great map of the final system. Click here for the larger, more detailed and readable version. Update: Here's the Chronicle's map with facts/stats.

Labels: , , , , ,

Tuesday, October 16, 2007

Addressing global warming

I actually got this idea a while back in April when Thomas Friedman wrote a long article in the NY Times Magazine on "The Power of Green" (also a good short video summary there), arguing that America could build a great export industry around green technologies. But with Al Gore recently winning the Nobel Prize for his movie and work on climate change, it seemed like a good time to bring it forward (who knew those frozen northlanders, the Swedes, of all people, would be opposed to a little global warming?). Friedman points out that, on a global basis, even drastic measures in the U.S. will be negated by truly massive amounts of "dirty" and high-CO2 energy coming on-line in the developing world like China and India, primarily coal. He argues that what we really must develop are clean technologies that can compete with coal on a direct cost basis.

I think the technology will eventually get there, but in the meantime, it might actually make good sense to subsidize clean energy technologies globally so those 30+ year capital investments in dirty energy don't get made in the first place. One answer might be a tariff on imports from those countries that then gets invested back in clean energy in those countries - primarily nuclear (it would need to include a design and inspection regime to prevent diversion to nuclear weapons), but also clean coal and natural gas. It's one of those solutions that might actually get political traction.

Here's why developed nations like the U.S. might like it:
  • Helps them have more time to adjust their local economy to globalization by increasing import prices.
  • Fee on goods from places like China feels more like "their money" rather than ours, really a "voluntary tax" if you choose to buy imports. Politicians are not directly raising involuntary taxes.
  • The money gets spent with our firms using high-tech to build the plants, stimulating our own economy via these exports.
The developing world may not be extremely happy with it, but they might tolerate it because of the subsidized high-tech energy plants they're getting that also help them address their own mounting pollution problems (not just CO2).

A few caveats. As my regular readers know, I'm usually a free-market and free-trade guy. Yes, I realize this does create economic costs that have to be weighed up against the benefits. I also find much of the science and economics of climate change very controversial (it's quite possible we're better off adapting to it than trying to fight it). So I'm not really sure this is the right answer, but it does seem like one that is politically feasible (a critical criteria often ignored with all the talk of a carbon tax) while potentially having a large positive impact at a relatively low cost. And, of course, it has the potential to be a boom for the emerging clean energy technology industry in Houston...

Labels: , ,

Thursday, October 11, 2007

Red vs. Blue State Real Estate

Virginia Postrel has an excellent new article in The Atlantic Monthly on how regulation spikes up housing costs and affects the red-blue state divide (her blog has some excerpts if the free link has expired). It starts as a story of two different townhomes she's owned, one in LA and one in Dallas, and how much more the LA one appreciated vs. the Dallas one. It then has this great chart of the cost premium for land-use regulation in various cities. Houston's not on it, but you can safely assume it's somewhere below Dallas at the bottom.Moving on to the excerpts, even though Dallas does have zoning and Houston does not, you could replace "Dallas" with "Houston" throughout the article and still be accurate.

Dallas and Los Angeles represent two distinct models for successful American cities, which both reflect and reinforce different cultural and political attitudes. One model fosters a family-oriented, middle-class lifestyle—the proverbial home-centered “balanced life.” The other rewards highly productive, work-driven people with a yen for stimulating public activities, for arts venues, world-class universities, luxury shopping, restaurants that aren’t kid-friendly. One makes room for a wide range of incomes, offering most working people a comfortable life. The other, over time, becomes an enclave for the rich. Since day-to-day experience shapes people’s sense of what is typical and normal, these differences in turn lead to contrasting perceptions of economic and social reality. It’s easy to believe the middle class is vanishing when you live in Los Angeles, much harder in Dallas. These differences also reinforce different norms and values—different ideas of what it means to live a good life. Real estate may be as important as religion in explaining the infamous gap between red and blue states.

The Dallas model, prominent in the South and Southwest, sees a growing population as a sign of urban health. Cities liberally permit housing construction to accommodate new residents. The Los Angeles model, common on the West Coast and in the Northeast Corridor, discourages growth by limiting new housing. Instead of inviting newcomers, this approach rewards longtime residents with big capital gains and the political clout to block projects they don’t like.

The direct results of these strategies are predictable: cheap, plentiful housing in some places, and expensive, scarce housing in others. A remodeler working on my L.A. town house a couple of years ago wistfully recalled visiting a cousin in Arlington, Texas, between Dallas and Fort Worth. He wanted to move there himself. In Arlington, he said, “you can buy a million-dollar house for $200,000.” According to Coldwell Banker’s annual survey, a 2,200-square-foot, four-bedroom “middle-management” home costs around $141,000 in Arlington (or, for big spenders, $288,000 in Dallas), compared with $1 million or more in the L.A. area. One man’s million-dollar dream home is another’s plain old tract house.

Many people do pack up and move, if not to Arlington, then to Las Vegas or Charlotte. Historically a magnet for educated migrants, California has begun losing college-educated residents, on net, to other states, in large part because of the high cost of housing. Most of the South’s population growth since the 1980s has come from the lure of cheap housing created by liberal permitting policies, according to new research by the Harvard economists Edward Glaeser and Kristina Tobio. By lowering the cost of housing, these policies give residents higher real incomes compared with similarly paid workers elsewhere—a strong incentive to move, even if you don’t like bugs or hot summers. The mobile middle class gravitates to the cities where housing is affordable. “If you’re your basic $85,000-a-year person, you can’t own in Los Angeles. You can’t do it,” says the Wharton School economist Joseph Gyourko. And if you’re your basic $45,000-a-year person, closer to the U.S. median household income, you’d better pack for Texas.


But high-price areas could put many more units on the land they have. Research by Gyourko, Glaeser, and Raven Saks found that the lowest-density areas around expensive cities tend to have the least new construction and the most land-use restrictions.


The right to build was nearly a quarter million dollars less (in Dallas) than in L.A. Hence the huge difference in housing prices. Land is indeed more expensive in superstar cities. But getting permission to build is way, way more expensive. These cities, says Gyourko, “just control the heck out of land use.”

The unintended consequence of these land-use policies is that Americans are sorting themselves geographically by income and lifestyle—not across neighborhoods, as they used to, but across regions. People are more likely to live surrounded by others like themselves, creating a more-polarized cultural map. In the superstar cities, where opinion leaders congregate, the perception is growing that the country no longer has a place for middle-class life. Yet the same urban sophisticates who fret that you can’t live decently on less than $100,000 a year often argue vociferously that increasing density will degrade their quality of life. They may be right—but, like any other luxury good, that quality commands a high price.

As far as her characterization of superstar cities like LA - "stimulating public activities, arts venues, world-class universities, luxury shopping, restaurants that aren’t kid-friendly" - I'd actually say we score a lot better on these measures than we're given credit for. But the perception still exists in these "superstar" cities that moving to someplace like Houston would be a cultural wasteland on par with the way we think about, say, Amarillo. Sigh. I suppose in one way those outdated perceptions are a good thing: if the secret got out, we'd get mobbed by enough blue-state cost-of-living refugees to require a few dozen post-Katrina Astrodomes...
Update: Postrel follows up with more on her blog.

Labels: ,

Monday, October 08, 2007

Evidence for Opportunity Urbanism

Digging through some of my older stuff looking for some good blog material, I came across this Demographia analysis of Sydney vs. DFW. Their main point is that Sydney's extremely tight land use restrictions drive up housing costs, which are three times higher in Sydney than DFW, even though it's a much smaller metro with plenty of land around it - they just don't allow housing to be developed on it.

Looking through the stats on page 5, you can also see that it has severely constricted Sydney's growth, and that their (forced) 2x density vs. Dallas dramatically reduces average speeds and increases commute times, even with a comprehensive transit network in place.

But the stat that really jumped out at me is that even though their median household incomes are very similar ($61K vs. $64K), DFW's GDP per capita is 43% higher! ($35K vs. $50K) Now, there may be something going on here with exchange rates and purchasing power parity (see the tables), but I think there may also be some evidence here backing up Kotkin and I's Opportunity Urbanism model (report, my op-ed), which says that lower housing costs leave more discretionary income available to pump up a vibrant local economy. Even though incomes are similar, Sydney residents are paying three times as much for their housing, leaving a whole lot less discretionary income to circulate around their city and drive local GDP. Keep that in mind next time you hear calls for more zoning and land use regulation in Houston...

Labels: , , , ,

Thursday, October 04, 2007

Houston moving on up list of Best Performing Cities

The Milken Institute recently released their 2007 list of Best Performing Cities, based mostly on job and salary growth, and Houston has moved on up from #129 to #32 out of 200 cities since 2005. 32 may not sound great, but that's partly a reflection of them focusing on job growth, and, on a percentage basis, it's very hard for a mega-city like Houston to compete with fast-growing smaller cities. The move up of 97 places is the fourth biggest move in the list, and the most of any large city, behind 3 small cities under 500,000 people each.

When you rank the metros by population, we're the #3 performer out of the 25 largest. Only Phoenix and Riverside-SB rank higher, and their data is before the real estate bust, where they are two of the hardest hit cities. I would expect them to fall sharply in future rankings. On the other hand, since their 5-year block of data includes only the early part of the oil boom, I would expect us to keep moving up strongly in future rankings.

Here are a couple Houston excerpts from the report:
Houston-Sugar Land-Baytown has experienced tremendous post-Katrina population growth. Industries that support the energy sector, such as fabricated metal and related machinery manufacturing, have also been positively affected.
Houston-Sugar Land-Baytown, Texas, moves up to 3rd place among the ten largest metropolitan economies, a jump from 8th last year. Even more impressive, Houston leaped ninety-seven spots among the 200 largest metros, to 32nd overall in 2007. The resurgence in oil and gas markets has increased demand for its world-class energy exploration firms. A surge in international demand for oil exploration equipment is propelling fabricated metals and machinery, and the attendant engineering services. Houston’s economic expansion accelerated in 2006 as jobs rose by 4.1 percent. The quality of the jobs generated in the energy exploration sector is manifest in the 9.0 percent gain in personal income in 2006. Some of the growth is attributable to payouts to Katrina victims. International trade is booming through its port, and related logistic support functions are the beneficiaries. The first phase of the new Bayport Container Terminal will increase container processing capacity significantly. Houston has a low cost of living, favorable business costs, and a pro-business culture that aids economic development. Strong job growth, coupled with only a modest increase in new home construction over the past few years, will mitigate potential fallout from the housing retrenchment. Houston has an important medical research and delivery presence with MD Anderson Cancer Center, Baylor College of Medicine, and several prominent hospital groups.
You can play with sorting the rankings yourself here, or check out the full report here.

Labels: , ,

Monday, October 01, 2007

Summer 3Q07 Highlights

Time for the quarterly highlights post. These posts have been chosen with a particular focus on significant ideas I'd like to see kept alive for discussion and action, and they're mainly targeted at new readers who want to get caught up with a quick overview of the Houston Strategies landscape. I also like to track what I think of as "reference posts" that sum up a particular topic or argument.

Don't forget we offer an email option for the roughly twice/week posts - see the Google Groups subscription signup box in the right sidebar. An RSS feed link (Atom) is also available. As always, thanks for your readership.

From Spring 2Q07:

From Winter 1Q07:

And don't forget the highlights from the first two years. For what it's worth, I think the best ideas are found there, often in the first year (I had a lot "stored up" before I started blogging).