Top 10 real estate trends from the Urban Land Institute

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Now in its 37th year, the “Emerging Trends in Real Estate” report for 2016 is one of the most highly regarded annual industry outlooks for the real estate and land use industry. It includes interviews and survey responses from more than 1,800 leading real estate experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants.

ConstructionDive.com did a great recap of the top 10 trends. Here are the top 5 with the balance along with top real estate markets below.

1. Success in 18-hour cities

ULI and PwC first took note of the growing popularity of “18-hour cities,” or secondary markets — besides the 24-hour traditional “gateway cities” — in last year’s report. These markets that are becoming increasingly “hip” include Austin, San Diego, San Antonio and Denver.

2. Suburban spree

The suburbs that will appeal to millennials won’t look like the “suburbs of their parents.” Instead, popular suburban locales will feature the benefits of both urban and suburban areas, including transit-oriented and mixed-use properties. In what the report authors consider the country’s top 40 metro areas, 84% of all jobs are located outside of the center-city core, “and that’s the basis for optimism for the suburban future.”

3. Evolving office sector

The office industry has seen steady growth as employment numbers improve with businesses constantly seeking ways to redesign the traditional office space with the goal of both attracting and keeping talent, as well as adapting to changes in workplace style. Coworking spaces have become “a major office leasing force in some large markets.”

4. Alternative housing options

Housing demand will take off across all residential sectors in the long-term with an influx of buyers demanding new and alternative housing options, such as microhousing and cohousing. Millennials and baby boomers have shown they tend to want more affordable and smaller home choices. “Creative ideas … will likely depend upon the real estate sector’s savvy if they are going to be effective.”

5. Parking lots a thing of the past?

Department of Transportation and American Automobile Association studies have found that miles traveled by car for people 34 or younger are down 23%, and the percentage of high school seniors with driver’s licenses fell from 73% between 1996 and 2010. As fewer young people are driving, existing parking “represents a suboptimal use of land.”

6. Infrastructure innovations

The U.S. gets a D+ for its struggling infrastructure. The report notes that America’s “conventional approach to infrastructure improvement is utterly disheartening.” Public-private partnerships, or P3s, and infrastructure real estate investment trusts have emerged as new tactical approaches to the infrastructure problem.

7. Food in your backyard

In cities where residents’ incomes are stagnant but their desire for fresh food is skyrocketing, the use of urban land to produce food has become a major trend. One operation in New York City, for example, produces more than 300 tons of vegetables in three hydroponic operations in Queens and Brooklyn.

The report authors said the trend of creative uses of urban land is just getting started. “Just as the reinvention of the suburbs is an emergent story for the decade ahead, so is the creative adaptation of inner-city uses.”

8. To merge or to specialize?

There has been an increasing trend of mid-sized companies choosing whether to grow through consolidation or to downsize and specialize in a niche area — which are both profitable options. Firms may find themselves in the middle and will need to choose which side — smaller or larger — they wish to be on. The era of the mid-sized company may be slowly coming to an end.

9. New capital raises questions

According to the report, new capital will be invested in: additional markets, especially 18-hour cities; alternative assets, as the real estate label is always expanding to include more options; renovation and redevelopment of older spaces; and alternative properties, such as senior housing, data centers and medical offices.

10. Return of the humans

The report said the U.S. is currently transitioning from the “dazzle” era of technology and big data to the wise application of such technology — which it considers a “more difficult task.”

 

5 Markets to Watch

A snapshot of the top five markets ranked by survey respondents and their outlook for each market:

  1. Dallas/Fort Worth – Impressive employment growth is the story behind this area’s rise to the top of this year’s survey (it ranked #5 last year), which is supported by a business-friendly environment along with an attractive cost of doing business and cost of living.
  1. Austin – Austin (same spot as last year) fueled by another year of diverse job creation, it remains an attractive place to live for all generations. One concern from surveyed participants – the market is growing faster than the local infrastructure.
  1. Charlotte – This city (up from #7 last year) embodies many of the components of the 18-hour city. Good job and population growth along with the development of urban centers makes the market attractive to residents.
  1. Seattle – Seattle (#8 in 2014), is popular with domestic and global investors, offers a diverse industry base and is benefiting from growth in the technology, advertising, media and information industries.
  1. Atlanta – The market (which ranked #11 last year) enjoys strong growth in key sectors of the economy without the typical concern of oversupply. The lower cost of doing business is attracting corporate relocations which contribute to market growth.

 

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