Going by the Urban Land Institute’s (ULI) annual Emerging Trends report, the one certain outlook for real estate trends in America, in 2019, is uncertainty. The emergence of advanced technology, demographic shifts and the shaky ground beneath America’s housing affordability issues are a series of complex conditions that have birthed an environment of unpredictability rather than a strong narrative. Adding to this narrative, a joint report by Price Waterhouse Coopers (PWC) and ULI predicts an overall economic slowdown this year. However certain emerging trends and markets in flux, could provide the groundwork for new opportunities in real estate.
The Congressional Budget Office projections show an average GDP growth of 1.9 percent in 2019. This number, much lower than last year, is the harbinger of an economic slowdown that will likely mean a drop in real estate activity as well. This reduces the opportunity to identify and capitalize on emerging markets, adaptive reuse, and new office spaces.
On the flip side, there has been a long seen, upward trend in real estate markets in smaller U.S. cities and their suburbs, especially those in or near walkable, transit-oriented developments. America’s housing affordability issues and the rise in mobile workspaces, has fueled a big demographic change that is seeing millennials making inroads into the suburbs. The Census Bureau’s statistics show that over 2.6 million people annually moved from principal cities within metropolitan areas to the suburbs in 2016 and 2017.
While there is a demographic change underway, urban real estate has been dealing with a rise in a new breed of high earning tenants, who are looking for better quality and quantity when it comes to amenities. Landlords are falling over themselves to provide their properties with a valuable USP that will get tenants hooked and allow them to rent higher. These tenants are not easily lured in by gyms and rooftop access, they are looking for much more. Movie theatres, communal gardens, tech smart homes are only a few hooks for this market. By the looks of it, this trend is likely to carry on strong into 2019.
In an era where services overshadow merchandising and urban real estate is getting increasingly upscale, the entire real estate market is being overhauled. Standard long-term leases are fast moving toward temporary contracts and pop-up leases. Sustainability is the word of the day and more and more investors and building managers are making the move toward adopting green practices. In conclusion, the dreaded retail apocalypse is an exaggeration. It needs to be looked at, not as an extinction, but more a culling or a remodeling to restore balance. Commercial developers and investors need to step up their game and support a more efficient, sustainable use of space.