Smaller and secondary” are the leading themes running through this year’s top cities in the latest Emerging Trends in Real Estate 2018, released by PwC and the Urban Land Institute.
Seattle took the top spot this year because of its job opportunities, diverse economy and young, educated workforce. The city, No. 4 in 2017, ends Texas’ hold as number one over the past three years, with Austin (No. 1 in 2017) down a position to second place, and Dallas/Fort Worth (No. 1 in 2016) now in fifth place. Houston (No. 1 in 2015) has dropped to 60, a fall attributed to the disruption in the energy industry. (The survey was conducted before Hurricanes Harvey and Irma.)
Salt Lake City (No. 3) and Fort Lauderdale, Fla., (No. 6) jumped into the top 10 for the first time in the study’s history, as investors look to replicate the level of success found in Denver and Miami with their competitive costs of living and high quality of life. Salt Lake City is the smallest market ever to make the top 10.
“The growing interest in smaller cities by real estate investors is influenced by their relative affordability, coupled with a concentration of young, skilled workers,” said Mitch Roschelle, PwC partner and co-publisher of the report, in a statement. “The diverse, robust economies of these smaller cities make them very desirable to investors.”
Patrick Phillips, CEO at ULI Global, added: “The trend of smaller markets displacing larger ones as investment hubs is setting a new course for urban development that is reshaping cities across the nation. These cities are positioning themselves as highly competitive, in terms of livability, employment offerings, and recreational and cultural amenities.”
Top trends from the report include:
- The gen Z effect on retail and work space: For brick-and-mortar stores to succeed, they will need to transform to meet the needs of the “gadgeteria” ethos of this generation with omni-channel, social media–worthy shopping experiences. Workplace design will also be affected.
- A housing shortage: With millennials and gen Z numbering more than 150 million and the baby boomers remaining in their homes longer, the younger generations are facing a housing shortage, an opportunity for home builders willing to scale product to their preferences and produce smaller and more energy-
efficient homes, townhouses, condos and affordable starter homes.
- Multifamily remains a strong investment: With a need for more affordable rental units for millennials and gen Z, multifamily housing prospects remain strong, especially in secondary markets such as Pittsburgh, Salt Lake City and Fort Lauderdale.
- Senior housing momentum growing: A demand for more senior housing tops the list of all residential segments, as present inventory does not meet the needs of this group, which is projected to grow by 25 million in the next 15 years.
Jody Barhanovich is a reporter for Institutional Real Estate, Inc.