I’m out in Los Angeles presenting Emerging Trends in Real Estate 2012, which I author for PricewaterhouseCoopers and the Urban Land Institute, at the ULI Fall Meeting. The headline for the annual forecast is next year and the year after for that matter will be a “long grind” for the real estate industry. Jobs growth will not spur enough demand for space to push fundamentals into a healthy recovery. And although commercial markets have stabilized and we’ve seen cap rate compression in the top 24-hour gateways, rent growth isn’t in the cards to provide much in the way of future gains. In addition, most secondary and tertiary markets will remain in a limbo state of non-recovery as we wait out an economic rebound. Well, don’t hold your breath.
The top Emerging Trends market is again “recession proof” Washington DC, but ironically it’s the only market among the 51 surveyed that showed a rating decline-albeit small--from last year’s report. Survey respondents still believe DC and New York (#4 in the survey) are the best places to park dollars over the long-term, but they are a bit concerned about investing at recent pricing levels—considering possible federal government cutbacks in the nation’s capital and looming financial industry retrenchment in the Big Apple.
Austin ranks number two in the survey. Here’s a secondary market that has a lot going for it—the state government cushion plus a major university, which helps incubate high tech brain power businesses, all supported by the state’s relatively vibrant energy industry. High tech and energy help propel the rankings of other cities including San Francisco (survey #3), Boston (#5), Seattle (#6), San Jose (#7), Houston (#8), Denver (#11) and Dallas (#12). In the Southeast, Raleigh at #13 (the Research Triangle, state capital, local universities) vaults well ahead of overbuilt Atlanta (ugh #33)—again high tech and educational institutions can generate brainpower jobs in an economy otherwise having trouble mustering much employment growth.
Out here in LA (the #9 ET market), TV trucks crowd around the court house for the (yawn) Michael Jackson doctor manslaughter trial, the City Hall park has been taken over by a mangy tent encampment of Occupy Wall Street protesters, and the eastern part of downtown near the “historic district” appears frozen in time, but the core center city looks better than ever. I’ve never seen so much pedestrian foot traffic in the city and the entertainment district created around the Staples Center/Convention Complex presents a lively urban scene, almost 24-hour cityesque (can you believe it?). Although more people live downtown than ever (and that’s not saying much), it’s still no place to raise a family—there’s not even a hint of a kid friendly amenity. Still, the downtown makeover continues with the Eli Broad art museum project underway at the north end, prospectively adding high-end design and another attraction to the nearby Disney Center, designed by Frank Gehry, as well as the Dorothy Chandler Pavilion. Bravo.
For all the nay saying about California and its government problems, I wouldn’t bet against its top real estate markets, all of which (except Sacramento) score well in the Emerging Trends survey. LA/Long Beach remains the nation’s biggest distribution center, San Diego has the best climate, San Francisco features an outstanding 24-hour city center, and the state, standing on its own, remains one of the largest economies in the world—with an array of leading industries including defense, entertainment, agriculture, financial services, high tech, and bio tech.
Oh, and the Brian Wilson Beach Boys concert at the Fall Meeting was outstanding at least for all the graying 50 and 60 somethings bopping to the surf hits.
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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.
