Four ULI senior resident fellowsIn the midst of economic uncertainty, there are still some elements of certainty – such as  demographic shifts, financial industry restructuring, global competitiveness, and sustainable building – that will guide real estate investment and reshape urban growth trends in the years ahead, according to Finding Certainty in Uncertain Times (Finding Certainty), a new report from ULI’s senior resident fellows.

In an exclusive full-member presentation today at ULI’s 2010 Fall Meeting, four of ULI’s five senior resident fellows — Edward McMahon, John McIlwain, Thomas Murphy and Michael Horst, along with ULI Executive Vice President Maureen McAvey, discussed the report, which examines trends in population growth, consumer housing preferences, employment, real estate finance, environmental conservation, energy efficiency, venture capital investment and public leadership. These factors, according to the speakers, are converging to shape a new era of urban economics within which cities and urban regions will have to compete in order to be successful in the 21st century. 
“These trends will continue regardless of location, of which political party is in power, and of how quickly we recover from the recession,” McAvey said. “Taken collectively, they will create the ‘new normal.’” 
Finding Certainty lists several urban areas as showing promise (some now, others in years to come), based on their ability to: attract talented workers and new investment; transform their economies from manufacturing to service-oriented sectors (particularly education and medical services); offer a variety of housing options; capitalize on natural resources as amenities; and demonstrate political and civic leadership. The winners: 
  • Global gateways – Chicago, Los Angeles, New York, San Francisco/San Jose, and Washington;
  • International hubs – Atlanta, Boston, Dallas/Ft. Worth, Denver, Houston, Miami, San Diego and Seattle;
  • Creative and nimble regions –  Austin, Coastal Carolinas, Charlotte, Minneapolis/St. Paul, Nashville, Portland, Raleigh/Durham/Triangle and Tampa/Orlando;
  • Comeback Kids – Cleveland, Detroit, Las Vegas, New Orleans, Philadelphia, Phoenix, Pittsburgh and Sacramento.  
On capital markets: Conditions in the commercial sector are expected to improve moderately over the next year, positioning real estate as offering attractive, but not double-digit investment potential. Expectations regarding real estate performance will also be influenced by changing consumer preferences regarding living and working environments.
On housing: The U.S. residential market will be forever transformed by steady, if slower, population growth; population diversity (almost half the growth will be among immigrants and ethnic minorities); increased market segmentation; slower housing appreciation; urbanization of the suburbs; highly fragmented resort and second-home markets; and major reform of housing finance systems. 
On sustainability: The push for more environmentally conscious development practices will be driven at the state and local levels of government, and by the private sector, rather than at the federal level. Market forces, regulatory incentives and mandates will continue to pressure real estate owners and property managers to enhance the sustainability of their portfolios. Building location will increasingly be viewed as a “green” factor, in addition to energy-efficiency.
On economic diversification: The forces of global trade, new requirements for energy and infrastructure, climate change impacts, technological innovation, and demographics are redefining the elements for cities to compete and succeed. The shared vision and leadership of anchor industries, public leaders and private entrepreneurs can forge new economies. 
On leadership: Successful cities have politicians and citizens who are thinking ahead, mapping their future in terms of land use patterns that will create environments to attract employers and provide residents with a high-quality environment in which to live and work. Strong political leadership and empowered citizen leaders are key factors of enhancing certainty in an uncertain environment.