Texas Cities Leading the Way and Other Commercial Real Estate Trending News for 2015

Three Texas cities were identified as among the top places nationwide to build and invest in real estate. Houston, Austin and Dallas-Ft Worth, along with Denver and San Francisco, were the top five choices identified in a poll of more than 1,000 property market leaders.

Here’s a breakdown on how top Texas markets fared overall:
#1. Houston – ranked number one in both investment and development and second in homebuilding.
#2. Austin – ranked number two in investment, fourth in development and first in homebuilding
#5. Dallas-Ft. Worth – ranked number nine overall in investment, eighth in development and third in homebuilding.

The rankings appeared in an annual list of best markets in the Emerging Trends In Real Estate Report, published by the Urban Land Institute and PriceWaterhouseCoopers. Following is a recap of other findings released in the report:

  • Many city downtowns that historically have been nine-to-five business hubs are continuing to experience their evolution into 24/7 thriving, vital urban centers. Key elements of housing, dining, retail, and offices located close enough by that employees can walk to work have helped to generate this movement, which in turn spurs investment and development.
  • Investors need to consider the potential for the Millennial generation changing housing preferences. Currently, Millennials – those born in the years between the early 1980s through the early 2000s – are postponing homeownership and renting longer. By the 2020s, investors need to prepare for that to change and to recognize the potential impact on investment and development. After that generation could be even further changes. With the emergence of the smaller Generation Z comes the need to plan around fewer households, fewer new consumers, and a smaller number entering the workforce. Baby Boomers, both as workers and retirees, are expected to continue to maintain their significant impact on real estate development and investment for at least another two decades.
  • Job growth was placed at the top of the list of most important issues in real estate, which was followed closely by concerns of growth in income and wages. The idea that jobs are chasing people will grow into the norm in the labor market and within a few years the industry will have moved from “jobless recovery” mode to focusing on labor shortages instead of surpluses. That’s because most Millennials will have already entered the labor market and, again, Generation Z behind them will be a much smaller group.
  • The expansion of technology will provide new business tools and environments that can open new business paths. It will push changes in the uses of space, locations, and user demand.
  • In the year ahead, survey respondents said they consider international investors the best prospects for increasing investment volume. A primary reason is because of their increasing concerns about global unrest, natural disasters, geopolitics and other event risks.
  • Recent spin-offs in the office, hospitality, and retail REIT sectors could again be a trend in 2015, according to survey interviewees. Investor expectations for efficiency and effectiveness in service delivery and cost will trickle down to service providers.
  • The trend in residential real estate appears to be returning to classic fundamentals of supply and demand, which should see increasing confidence in the residential sector.
  • This year’s survey provides a mostly positive outlook but there can be a downside. Upcycles nurture optimism but excessive optimism can lead to bad investment patterns. However, evidence of those patterns, such as overbuilding and excess leverage, would most likely have already been in place and even growing by now. But that hasn’t happened, the report concluded, indicating the industry has benefited from self-regulation and correction.
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