Emerging Trends In Real Estate: ULI Report Offers Outlook
(Source Urban Land Institute)
The Urban Land Institute has released its annual report on the key emerging trends that will shape the real estate market in 2015. Commenting on the report, Mitch Roschelle, a U.S. real estate advisory practice leader with PwC, stated, “Unlike previous reports and previous cycles, we are seeing sustained growth. In the past several years, we reported that real estate market participants’ main fears revolved around the uncertainty with the economy. Now, the trepidation in their eyes has more to do with the ability of the growing real estate markets to adapt to a series of mega trends impacting society and the global economy.”
Making sense of the story
– The report states that housing is well on the way to recovery, according to survey respondents, and they rank urban/infill as the top opportunity for 2015. Yet, the after-effect of the housing bubble has not fully dissipated, and this will partially shape demand for the next several years.
– While the tendency of millennials to postpone homeownership and rent longer will affect the apartment sector over the next several years, many survey interviewees noted that investors should consider how the housing preferences of millennials could change in the 2020s.
– The report anticipates further industry changes resulting from the emergence of the smaller “Generation Z.” Planning for a nation with fewer household formation, fewer new consumers, and a meager number of workforce entrants is the challenge ahead for a real estate industry with its eye on the 2020s.
– Downtown transformations have combined the key ingredients of housing, retail, dining, and walk-to-work offices to generate urban cores, spurring investment and development and raising the quality of life for a roster of cities. Buyers have more markets to consider now that the 18-hour centers are putting the elements in place to attract investment.
– The trend in residential real estate, according to interviewees, looks to be returning to the classic principles of supply and demand. As this major segment of the economy returns to textbook fundamentals, confidence in the residential sector should continue to rise.
– In most cycles, overbuilding and excess leverage would likely have already started building momentum by now. To the degree that hasn’t happened, the industry looks like it has learned some lessons in self-regulation and self-correction.
– Key markets to watch for real estate, according to the report, are Houston, Austin, San Francisco, Denver, and Dallas/Fort Worth because they present opportunistic-style investments in major markets.