What’s ahead for US real estate?
A new survey and report by Price Waterhouse Coopers and the Urban Land Institute highlights a range of 2016 Emerging Trends in Real Estate. Some of these may seem like old news if you’ve been leading the industry for a while. Others might come as a surprise. Watch these trends, stay ahead of the curve, and win…
1. Secondary Cities Enter the Spotlight
Curbed puts this as 18 hour cities seeing more real estate activity than 24 hour cities thanks to affordability, and growth. These property investment trends could really pick up in 2016.
2. Millennials Leave for the Burbs
According the new data six in 10 Millennials say they plan to live in a detached single family home. We’ve called this one for a while. There may be ongoing urban infill and redevelopment, but the migration to the suburbs shouldn’t be underestimated.
3. Investing in the Future of Office Space
The PwC and ULI report shows great improvements in the commercial office market. New floor plans, the popularity of coworking, and declining vacancies, have strengthened investor positions. However, the needs of businesses are still changing, and sizable investments in designing what’s next will be required.
4. New Housing Solutions
While the outlook for the US real estate market is bright, affordability is an issue. The report pulls no punches about this, but acknowledges that we’re moving from being able to do the “nice to do” to “must do”. In some ways lending has eased for those being crushed by high rents, but tiny houses and truly sustainable and green building hasn’t gained as much traction as it should. It’s still just too profitable to build luxury units, and too hard to finance affordable projects.
5. Redevelopment of Urban Parking Lots
Transportation is changing. Private personal car ownership trends are changing. If not yet, it could certainly mean many existing surface parking lots are deemed not to be the ‘highest and best use’ of that property. This could create great redevelopment opportunities. It could also create some risk for those slow to move by themselves and who may face eminent domain.
6. Investment in Infrastructure
America has a lot of aging and outdated infrastructure. Looking forward there could be great opportunities for public-private partnerships to solving these issues and pioneering new solutions.
7. Urban Agriculture
Urban agriculture has been growing since 2008. Whichever direction the economy heads from here this trend is only likely to expand. Upscale restaurants pride themselves on locally sourced ingredients, farm to table specialties, and artisanal everything. If the economy tanks again sustainable gardening and urban farming will continue to be a necessity in many communities.
8. Niche Lending
Real estate lending continues to diverge. Main street banks continue to face challenges. New and innovative lending conduits are gaining popularity and traction. We’ve now got several forms of real estate crowdfunding, transactional lenders, hard money lenders, peer-to-peer lending, and hedge fund backed portfolio loans and lines of credit. This is not only benefiting the consumer, but smaller banks and finance houses as well. As these niche lenders hone their craft, report the data, and others catch on investors should find access to capital easing.
9. Rising Investment Volumes
Real estate acquisition volume rose almost 25% to just under $500B by mid-2015. Analysts expect 2016 capital flows to top that again. Much of this fresh capital is anticipated to flow into secondary cities and alternative real estate investments in 2016.
10. A Return to Common Sense Decision Making
2014 may have been all about ‘big data’. 2016 may finally see a return to common sense decision making. Data, metric, and analytics can all aid real estate investors. However, chasing metrics and data based decision making alone has also been a major distraction for some. Get ready for big data blended with personal touch. And that means a need for veteran experts with intuition.
Summary
2016 is expected to be an even stronger year for real estate than last year. In many way the market is still transitioning, with various trends finding their legs and gaining more awareness and buy-in. Those that get ahead of these curves will position themselves to win as the rest of the world catches up.
