Real Estate Trends to Watch in 2018

 

I’ve been tracking trends in residential and commercial real estate all year. Jury seems to be out on whether 2018 will be great – or just limp along.

However, there are 3 things everyone agrees on:

  1. Conditions are becoming less favorable with construction labor in short supply and building materials becoming more costly. Major housing shortages are anticipated.
  2. The investment action is shifting away from major metro gateway cities (e.g. NYC, Chicago, Houston) to secondary markets e.g. Pittsburgh, Salt Lake City. However, developers are not unified as to whether secondary markets can hold up in an economic downturn.
  3. Niche sectors represent biggest opportunities e.g. co-working/co-living, senior housing and logistics (e.g. e-commerce warehousing). Not feeling the love: retail and traditional office space.

Read on below for the five emerging trends to keep an eye on should real estate be your thing.

 1. CO-LIVING / GROUP LIVING (Source: The Mercury News)

 

This seems to really be taking off – and I must say if I were in my 20’s or 30’s I would be all over this.

  • I am most familiar with Brad Hargreaves’ Common which started in Brooklyn and has now expanded to multiple locations including the West Coast.
  • Several companies are doing the same in the Bay Area.

Here’s how it works:

  • The companies work with developers and building owners to create apartments that are conducive to roommate life.
  • Most units have three or four bedrooms and a common area that includes a kitchen and living room.
  • Potential renters apply through the company for a room.
  • Different companies offer varied lease situations e.g. WeLive (from WeWork) offers single nights but at Common, the minimum lease is six-months.
  • The apartments come fully furnished, including living room furniture, beds, kitchen supplies, washers and dryers, and even linens and cleaning supplies.
  • There is no bill splitting. The company charges a flat monthly rent that covers rent, utilities and cleaning services for each apartment.
  • In the Bay Area, rooms run from $1400 to $2500 (San Francisco proper). While not cheap, it is less expensive and way nicer than the kind of studio you might be able to get in a really sketchy neighborhood for $1600 (plus you would need furniture, deposits, etc.).
  • Sounds like a really good deal to me.

 

2. CUSTOM HOME TRENDS (Source: Ted Cummins/Morningstar Custom Homes Houston)

Wi-Fi: With more technology becoming Wi-Fi enabled, clients are installing more gadgets that give them control over everything from locks and cameras to thermostats and music through voice command. Smart home automation is shaping up to the one of the hottest trends in residential.

One-story designs: More homeowners are ditching two-story designs for one-story floor plans.

Removal of formal dining rooms: Clients are ditching the formal dining room in favor of combined dining/kitchen areas that they use every day vs. dedicating space for a room they only use a few times a year.

 

3. SENIOR HOUSING TOPS THE LIST OF MOST PROMISING RESIDENTIAL SEGMENTS:

  • Seniors are projected to grow by 25 million in the next 15 years.

 

 4. GENERATION Z WILL AFFECT THE FUTURE OF RETAIL AND WORK SPACES:

  • Stores will need to transform to meet the “gadgeteria” ethos of this new generation with omni-channel marketing and Instagrammable shopping experiences.

 

5. TOP EUROPEAN MARKETS FOR INVESTMENT IN 2018 (Source: PwC/ULI)

  • Copenhagen and Madrid will join the ranks of Berlin, Frankfurt, and Munich as the top cities for real estate investment and development in 2018.
  • Berlin is #1 for fourth year in a row. Frankfurt has risen to second place after a year of solid growth, much of which has come from the financial sector in the aftermath of Brexit.
  • Tied with Frankfurt is Copenhagen, whose booming residential sector has captured the attention of the international real estate industry.

 

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