From right to left: ULI Trustee and ULI Foundation Board Member Owen Thomas, chief executive officer of Boston Properties, an Icon meeting sponsor; ULI Governing Trustee Gayle Starr, managing director of capital markets at Prologis; Hessam Nadji, president and chief executive officer of Marcus & Millichap; and Mitch Roschelle, partner at PwC, speaking at a general session at the 2018 ULI Fall Meeting.

The presence of a talented workforce and economic diversity are the main characteristics of this year’s top cities in the latest Emerging Trends in Real Estate® 2019, released at the ULI Fall Meeting in Boston. Findings from the report, copublished by ULI and PwC, were discussed by an expert panel comprising ULI Trustee and ULI Foundation Board Member Owen Thomas, chief executive officer of Boston Properties, an Icon meeting sponsor; ULI Governing Trustee Gayle Starr, managing director of capital markets at Prologis; Hessam Nadji, president and chief executive officer of Marcus & Millichap; and Mitch Roschelle, partner at PwC.

The report ranks Dallas/Fort Worth as the top market in the United States for overall real estate prospects in 2019, based on its young workforce and high business startup activity. Rounding out the top five markets are Brooklyn, Raleigh/Durham, Orlando, and Nashville. Tampa, which is ranked 10th, and Orlando made the top 10 list for the first time in the report’s 40-year history.

According to Emerging Trends, investors find Brooklyn attractive for its urban, industrial appeal and to businesses’ need to find a “last mile” for e-commerce delivery. Investors are drawn to Orlando and Tampa/St. Petersburg for the cities’ demographic growth, friendly business climate, and attractive cost structure. The appeal of Raleigh/Durham, Nashville, Austin, and Boston are due to investors following the science, technology, engineering, and math (STEM) jobs, which are projected to grow more than 70 percent faster than the broader job market through 2026 and provide annual wages more than double the average in these tech-heavy markets.

In its 40 years, Emerging Trends in Real Estate® has grown with the market it covers. From its early days examining the $1.2 billion institutional real estate investment market, the report has expanded to coverage of the $7 trillion marketplace analyzing real estate investment trusts (REITs), real estate private equity funds, commercial mortgage–backed securities, mortgage debt funds, and crowd-sourced investments.

Top trends from the report include the following:

  • Amenities gone wild: New office buildings and multifamily assets are going well beyond the fitness center and recreational areas to include child and pet care, bike storage, and even a “curated garden” growing fresh fruits and vegetables for residents.
  • Retail space is not dead: The rumors of retail’s demise may have been exaggerated. With low prices, it is a good time to look at retail space to repurpose it for alternative uses such as urgent-care medical facilities, health and fitness providers, restaurants, financial services, and entertainment venues.
  • 18-hour suburbs: The generation that drove the urbanization trend and 18-hour cities may finally be ready to move to “the ‘burbs.” As the oldest millennials reach their mid-30s, they are looking to buy homes that meet the right criteria, with urban amenities such as walkable neighborhoods in proximity to shopping and entertainment along with green space and good schools.
  • Disrupters are disrupting real estate: From package delivery to bike sharing to ride-hailing services, everything from building lobbies to sidewalks to roads are more congested. This business-to-consumer activity is one of the forces behind “amenity creep” and is an issue that residential and commercial property investors need to watch closely.
  • ESG practices important to investors: Sensitivity to environmental, social, and governance (ESG) issues has increased for U.S. real estate regardless of the direction of national policy. Funds with an ESG investment plan in place could see an advantage in attracting capital, especially from institutional and international investors and public REITs.
  • Last-mile industrial development needed to meet e-commerce demands: With the expansion of e-commerce far from over, the need for facilities to accommodate a denser distribution network is acute and will increase over time, especially infill opportunities, providing last-mile break-bulk sites.
  • Easing into the future: The challenge to real estate markets is a prospective slowdown in demand, varying across geography and property types. But slower growth does not mean there will not be opportunities. Functional obsolescence in all kinds of space, the need for affordable housing, and responses to technologies all will require new investment and development.

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 nearly 2,400 leading real estate experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants. ULI members can access the full report, as well as a library of previous years’ reports, at knowledge.uli.org.

The report was also previewed in a live streamed press lunch at the ULI Fall Meeting. You can view the video here: