Niche neighborhoods and economic diversity are driving forces behind the strong showing of this year’s top ten U.S. cities, according to Emerging Trends in Real Estate® 2017, released by PwC and ULI. Austin, Texas, wins “top city,” thanks to its authentic, niche neighborhoods and depth of economic diversity, from manufacturing to education, health care, and technology. Construction labor shortages and the rapid spread of digitization throughout the industry also are playing key roles in fueling 2017 real estate trends, along with “optionality,” the multipurposing of in-demand spaces.
Now in its 38th year, Emerging Trends in Real Estate® is one of the most highly regarded annual industry outlooks for the real estate and land use industry. It includes interviews with and survey responses from more than 1,800 leading real estate experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants.
“Viewed as a fluke when it hit the study’s top-ten list five years ago, Austin’s rise to the top of the list signals the durability of the city’s long-term appeal to investors,” says Mitch Roschelle, PwC partner and real estate research leader. “Austin, along with many of this year’s top-ten cities, boasts attractive, niche neighborhoods and a vibrant, diverse economy.”
“This year’s report shows that there are opportunities stemming from a shift in how, where, and when people work,” says ULI Global Chief Executive Officer Patrick L. Phillips. “One of the trends leading to new opportunities is multipurposing of commercial space. We’re seeing different types of tenants using the same space for different uses at different times of the day, particularly in tight markets. Buildings with open, flexible space have a competitive advantage.”
- Niche neighborhoods and economic diversity: Market characteristics such as authentic, niche neighborhoods with strong economic diversity are driving growth outside of gateway markets. The attractiveness to both workers and employers alike is supporting real estate growth.
- Labor shortages: Construction labor shortages are driving up construction costs and stretching out project timelines, directly affecting the availability of affordable real estate across all residential sectors.
- “Optionality”: A new driving force that landlords can use to protect revenue potential by allowing multiple uses of the same space at different times, and permitting tenants to use only the space they need when they need it (e.g., an office by day and a party/event venue by night).
- Digitization and transparency: The digitization of real estate is revolutionizing the industry by improving accuracy, transaction speed, and transparency, which in turn is fueling an “auto-correcting” real estate cycle. Rising property prices slowing transaction volumes while new supply remains under control is holding off the traditional “boom/bust” of previous cycles.
Top Ten Cities in Emerging Trends in Real Estate® 2017:
- Austin, Texas
- Dallas/Fort Worth, Texas
- Portland, Oregon
- Seattle, Washington
- Los Angeles, California
- Nashville, Tennessee
- Raleigh/Durham, North Carolina
- Orange County, California
- Charlotte, North Carolina
- San Francisco, California
Dropping out of the top-ten-market ranking this year are Atlanta and Denver, due to concerns that new supply may be getting ahead of demand. Despite the drop, both markets remain in the top 20.
Top five markets to watch and why:
- Columbus: A major university town, Columbus, Ohio, is seeing a surge in entrepreneurial activity.
- Richmond: The “hip factor” of downtown Richmond, Virginia, is on the rise.
- Pittsburgh: Emerging tech and other startups are flocking to Pittsburgh because of the access to talent from nearby universities and a 4 percent lower-than-the-national-average cost of doing business.
- Charleston: The Charleston economy is firing on all cylinders with strong demographic growth and expanding technology, manufacturing, and transportation industries.
- Salt Lake City: Salt Lake City is benefiting from a unique synergy between financial services and technology firms.