Next Big Cities are Smaller, Younger and Highly Educated; Dallas Takes #5 Spot
“Smaller and Secondary” are the leading themes running through this year’s top cities in the latest Emerging Trends in Real Estate® 2018, released by PwC US and the Urban Land Institute (ULI) with Seattle taking the top spot this year, namely because of its job opportunities, diverse economy and young, educated workforce. The city, number four last year, ends Texas’ hold as number one over the past three years with Austin (2017) down a position to number two and Dallas/Fort Worth (2016) now at number five. Houston (2015) drops to 60, a fall attributed to the disruption in the energy industry.
Salt Lake City (#3) and Fort Lauderdale (#6) jumped into the top 10 for the first time in the study’s history as investors look to replicate the level of success found in Denver and Miami with their competitive costs of living and high quality of life. Salt Lake City is the smallest market ever to make the top 10.
Manhattan experienced the largest year-over-year negative move to number 46, due to the high cost of assets and over-saturation of construction in the area, with what many interviewed said were “too many cranes in the skyline.”
The Top 10 Markets in Emerging Trends in Real Estate® 2018:
- Seattle, WA
- Austin, TX
- Salt Lake City, UT
- Raleigh/Durham. NC
- Dallas/Ft. Worth, TX
- Fort Lauderdale, FL
- Los Angeles, CA
- San Jose, CA
- Nashville, TN
- Boston, MA
“The growing interest in smaller cities by real estate investors is influenced by their relative affordability, coupled with a concentration of young, skilled workers,” says Mitch Roschelle, PwC Partner and Co-Publisher of the report. “The diverse, robust economies of these smaller cities make them very desirable to investors.”
“The trend of smaller markets displacing larger ones as investment hubs is setting a new course for urban development that is reshaping cities across the nation,” said ULI Global Chief Executive Officer Patrick L. Phillips. “These cities are positioning themselves as highly competitive, in terms of livability, employment offerings, and recreational and cultural amenities.”
Top Trends from the Report Include:
- The Gen Z Effect on Retail and Work Space: For brick and mortar stores to succeed, they will need to transform to meet the needs of the “gadgeteria” ethos of this generation with omni-channel, social media worthy shopping experiences. Workplace design will also be affected. Where millennials were all about collaborative, open workspaces, gen Z appears to want more structure, suggesting a return to offices (with doors) and more personal office space.
- A Housing Shortage: With millennials and gen Z numbering 150+ million and the baby boomers remaining in their homes longer, the younger generations are meeting a housing shortage, an opportunity for homebuilders willing to scale product to their preferences—smaller and more energy-efficient homes, townhouses, condos, and “affordable” starter homes.
- Multifamily Remains a Strong Investment: With a need for more affordable rental units for the millennials and gen Z, multifamily housing prospects remain strong, especially in secondary markets like Pittsburgh, Salt Lake Cityand Fort Lauderdale.
- Senior Housing Momentum Growing: A demand for more senior housing tops the list of all residential segments as present inventory does not meet the needs of this group that is projected to grow by 25 million in the next 15 years.
This year’s survey was conducted before Hurricanes Harvey and Irma.