10 Trends For 2016

Super User

Below are the most important points for real estate professionals and builders from the PwC and Urban Land Institute predictions for the Top 10 real estate trends in 2016:

  1. 18-Hour Cities 2.0

The real estate industry is expressing growing confidence in the potential investment returns in these 18-hour markets. The growth in investor sentiment is evident in the 2016 top ten rankings—with the exception of San Francisco and Los Angeles, the balance of the markets are 18-hour gateway cities.

  1. Next Stop: the Suburbs

As the cost of living and housing prices have risen in the core gateway markets, it is apparent that a fresh look at suburban opportunities is gaining investor favor. In the top 40 U.S. metro areas, 84 percent of all jobs are outside the center-city core—and that’s the basis for optimism for the suburban future.

  1. Offices: Barometer of Change

The office sector has been benefiting from the strengthening employment numbers and a rethinking of how employees can maximize their productivity through improved workspaces that are seen as more open and that promote collaboration. Some surveyed respondents see the redesign as a way to accommodate an alteration in work style itself, while others view it as a way to attract and keep desired talent—and for others, it’s both.

  1. A Housing Option for Everyone

Economic and demographic factors are influencing the housing market as it deals with issues around providing the type of housing desired by the peak of the baby boom generation, aging millennials, a population making an urban/suburban choice, and finding a way to provide affordable housing to support a vibrant workforce. Developing improved housing options for everyone is passing from the realm of “nice to do” to “must do”—and that will be shaping the housing trends going forward.

  1. Parking for Change

Miles traveled by car for people 34 years old or younger are down 23 percent (United States Department of Transportation, Federal Highway Administration), while the percentage of high school seniors with driver’s licenses declined from 85 percent to 73 percent between 1996 and 2010, according to the American Automobile Association. The urbanization trend and gen-Y preferences already suggest that existing parking represents a suboptimal use of land; and in both 24-hour and 18-hour cities, that’s creating change.

  1. Infrastructure: Network It! Brand It!

In light of urban population growth, cities are looking to urgently prioritize repair and maintenance, and at the same time tackle critical needs in areas such as water supply and distribution, public education, aviation, vehicle and pedestrian traffic, and rail safety. This is leading to creative solutions such as high-frequency bus networks and green infrastructure. As the need to do more with less becomes more acute, innovative solutions to infrastructure needs are likely to mark the latter half of this decade and beyond.

  1. Food Is Getting Bigger and Closer

There are many cities where neighborhood land is cheap or older buildings sit idle, and where median incomes are low and the need for fresh food is high. What is trending is the new vision that has urban land as the most precious and flexible of resources. Just as the reinvention of the suburbs is an emerging story for the decade ahead, so is the creative adaptation of inner-city uses.

  1. Consolidation Breeds Specialization

The evolutionary trends in development, equity investment, and lending are showing that “small can be powerful.” Developers may find it difficult to access sufficient capital unless they have scale, but this means fitting the quality demands of conservative lenders. That requires finding niche lenders and investors willing to fund the smaller projects; and small developers with their lenders may be accessing the most innovative parts of the business. Firms may find themselves in the middle and will need to choose which side—smaller or larger—they wish to be on.

  1. We Raised the Capital; Now, What Do We Do with It?

New capital will be invested in the following: additional markets (capital is expected to flow more freely in 18-hour cities), alternative assets (what constitutes real estate will continue expanding), old is new again (older space is being embraced and it’s making the market consider a wider range of potential investments), and alternative property types (medical office and senior housing may see a benefit from changing demographics—and data centers and lab space may be in demand due to technical changes).

  1. Return of the Human Touch

The industry is trending toward more-intensive active management. Risk management of hacking issues is of critical concern—and attention to cybersecurity will penetrate more deeply into the real estate business. Attention to individual decision-making is needed as much as ever.

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