Real estate in 2017 is to be shaped by cities that meet not only the economic standards of a sustainable market, but also the demand for distinct neighborhoods within those markets.
This is according to the Urban Land Institute’s (ULI) and PwC’s latest report, “Emerging Trends in Real Estate® 2017,” which analyzes trends-to-come in both the U.S and Canada housing markets. Ten “gateway” markets, as defined in the report—those with both a diverse economy and “niche” neighborhoods—will stand above the rest:
- Austin, Texas
- Dallas/Fort Worth, Texas
- Portland, Ore.
- Seattle, Wash.
- Los Angeles, Calif.
- Nashville, Tenn.
- Raleigh-Durham, N.C.
- Orange County, Calif.
- Charlotte, N.C.
- San Francisco, Calif.
Dominating the report’s list are markets in California, North Carolina and Texas, which have become ideal investment areas in both the commercial and residential sectors.
“Viewed as a fluke when it hit the study’s top 10 list five years ago, Austin’s rise to the top of the list signals the durability of the city’s long-term appeal to investors,” says Mitchell Roschelle, real estate research leader and PwC partner. “Austin, along with many of this year’s top 10 cities, boasts attractive, niche neighborhoods and a vibrant, diverse economy.”
Five up-and-coming markets, in addition to the top 10, are also on the rise, according to the report:
- Columbus, Ohio
- Richmond, Va.
- Pittsburgh, Pa.
- Charleston, S.C.
- Salt Lake City, Utah
Market-based trends aside, 2017 will also be marked by construction labor shortages tightening affordable housing inventory—a trend that can be reversed if all real estate-related constituents contribute to a solution, the report’s authors, Alan Billingsley, Hugh Kelly, Anita Kramer and Andrew Warren, state.
“This is a real opportunity for the real estate industry to lead a way toward solutions. Real estate in all its guises—construction, property management, brokerage, and even finance—offer ample opportunities to create entry-level jobs that are not ‘dead-end jobs,’ but the first step on a career path.”
Municipalities that have begun to address affordable housing shortages have set the example to follow in 2017, as well, according to the report. Many have resorted to a conventional standby: inclusionary zoning.
“The most widely used approach by far…is an old idea that has roared back to life: inclusionary zoning,” the report’s authors state. “Through such zoning, cities require or encourage developers to create below-market-rate rental apartments or for-sale homes in connection with the local approval of a proposed market-rate development project.”
“Optionality,” in addition—the ability for both landlords and tenants to determine the use of a space—will be a trend next year, according to the report.
“Both on the investor side and the user side of the market, optionality—not just one use, not just one user, not just one user profile—may be gaining favor as a way to navigate the cross-currents of volatile markets,” the report’s authors state. “Optionality from a user standpoint allows for the adjustment of space needs to vary in terms of size, location, and use on an as-needed basis.”
Advancements in real estate-related technology will also occur, furthering the accuracy, speed and transparency involved in real estate transactions—“an ‘auto-correcting’ real estate cycle.”
View the full report here.
For more information, please visit ULI.org.