Entering the Era of Less—that’s the title of Emerging Trends in Real Estate 2011, which I author for PricewaterhouseCoopers and the Urban Land Institute. Based on 875 confidential interviews and surveys with industry leaders, this year’s report is the most upbeat since we started into the crash three years ago and registers anticipated improvement across all U.S. real estate markets and property sectors. Next year promises continued thawing of lending markets, increased transaction volumes, and decent though tempered investment returns.
But for players hoping for a return to a semblance of the heady and extremely profitable transaction mania days of the past 15 years, Emerging Trends signals don’t hold your breath. The Era of Less instead offers a shrunken industry, lower overall performance expectations, restrained development, and crimped profits very much in keeping with the somewhat diminished prospects for the overall U.S. economy as we dig out from our self created debt oblivion. Not surprisingly real estate outlooks will be restrained by sustained high unemployment and Americans’ more austere lifestyle choices now that our spending on credit has been significantly curtailed.
Living and working in the Less Era also means using less space per capita. Not only is consumer binging over, but e-commerce gradually eats into the share of bricks and mortar retail. Distribution strategies change—generally reducing the need for as much warehouse space. Companies squeeze down space per employee needs and find productivity enhancements, not only by using smaller cubicle and office layouts, but also relying more on freelancers who can work from home and off-shoring strategies to reduce costs. Technology has also reduced the need for as many support personnel as in the past.
Less space extends to housing needs as well. We’ll see more seniors living with their children and grandchildren as some families pool resources. Many more retirees won’t be able to live on their own with depleted pensions and lost house values. Young adults find fewer and less remunerative jobs opportunities—they can’t afford to get their own place either. It will be back to the future—a return to “The Waltons” style households for these families. Increasingly, people also will look to cut commuting, housing, and heating costs by living in smaller places closer to work. We’ll see more demand for apartments and infill housing and less for big houses on the fringe.
Moving from more to less does not mean U.S. real estate needs will shrink. The country is expected to grow by about 30 million people over the next decade—that means more housing, stores, and work places. But by necessity we’ll be living more efficiently and somewhat more frugally. We just couldn’t sustain habits that used so much space. We are finally figuring out that less is more.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
