Uncovering a few silver linings in ‘The Era of Less’

December 07, 2010 |
Rob Cassidy

The Urban Land Institute says the real estate world is about to enter an “Era of Less” in 2011, characterized by “a shrunken industry, lower return expectations, restrained development prospects, reduced credit availability, and crimped profits.” Yet there are a few glimmers of hope.

The source of this gloomy picture is the ULI’s recent report, Emerging Trends in Real Estate. It is replete with phrases like “unnerving short-term pessimism,” “limping assets,” “high vacancies,” “rolling-down rents,” and “problematic workouts”—not to mention the prospect of “uncertain refinancing prospects” for the hundreds of billions of dollars of commercial loans that are about to come due. Still, a few rays of sunshine manage to pierce even this dark veil.

Chief among these is the rental apartment market, which the ULI says will “outperform everything else.” Those who cannot afford to buy homes or stay in their current homes will turn to rentals.

But where will this apartment resurgence most likely take place? Not as much in suburbia. The ULI sees a shift from big homes on the suburban fringe to infill locations closer to 24-hour markets.

In a reversal of decades of flight from city centers, the report states that more people will regroup in areas “where life is easier, more efficient, and less car dependent”—i.e., closer to shopping and work, in cities or denser, close-in suburbs. The market for mid- and high-rise apartments and townhouse projects built around commercial districts and shopping centers looks enticing.

Speaking of commercial real estate, the ULI report sees three bright spots. The first is “select retail,” defined as infill shopping centers anchored by top supermarket chains and so-called “fortress malls.” These should sustain performance in the face of consumer pullback, says ULI.

Another commercial gem: 24-hour “gateway” office buildings in premier downtown locations, notably New York, Washington, D.C., and a select few 24-hour markets in “global pathways,” primarily along the coasts. The report gives a big thumbs-down to suburban office space and greenfield developments outside urbanizing nodes.

There’s even a surprise in ULI’s grab bag of potential winners for 2011: “downtown full-service hotels in major markets.” But forget about high-capital-expenditure resorts or limited-service brands in “commodity areas.”

In addition to the “flight to quality” hot spots of New York, Washington, D.C., and certain coastal areas, some smaller markets get high ratings: Austin and San Antonio, Texas, Portland, Ore. (for its quality of life), Raleigh-Durham (for “brain-power jobs”) and Charlotte, N.C., Salt Lake City, Minneapolis, and Nashville, among others.

Comments at the recent ULI National Conference reinforced many of these emerging trends.

At one point in the program, for example, a representative from a mega-bank told the audience, “If you’ve got a viable multifamily rental project, come see me at the end of the program. We’ve got cash.” Doesn’t that sound poetic?

There was also talk of hidden cash from China, something like $300 billion in U.S. Treasurys that the Chinese are eager to invest in U.S. real estate deals—and which, in fact, they’re already doing, but very, very quietly (shhh!).

Finally, major U.S.-based AEC firms revealed that more than half their billings were derived from outside the U.S., much of it in China. But avoid India, they said: too much corruption.

Rob Cassidy | BD+C Editors

Robert Cassidy is Executive Editor of Building Design+Construction and the Editor of Multifamily Design+Construction. A city planner, he is the author of several books, including “Livable Cities,” and was a co-founder of the Friends of the Chicago River.

Related Blogs

Peloton bikes at Weinstein Properties, Bexley Triangle Park, Raleigh, NC

Peloton bikes at Weinstein Properties, Bexley Triangle Park, Raleigh, NC. Courtesy Weinstein Properties

   

September 04, 2019 | Multifamily Housing | BD+C Editors

Peloton will no longer sell its bikes to apartment communities.

Suffolk Smart Lab in New York City, 2019 Giants 300 Report, 3 ‘Giant’ AEC market trends for 2019-2020  Photo: J. Michael Worthington, Jr., courtesy Suffolk Construction

The rise of data and data tools, like the Suffolk Smart Lab in New York City (pictured), is leading to more research projects among AEC firms. Photo: J. Michael Worthington, Jr., courtesy Suffolk Construction

  

August 15, 2019 | Giants 300 | BD+C Editors

We’re starting to see a shift toward custom research, thanks in part to the influx of data, data tools, and...

Amenities war no more? Research report explores multifamily market

The skylit 75-foot, three-lane lap pool at Hub, a 54-story rental tower of 750 apartments (150 affordable) in Brooklyn, N.Y., designed by Dattner Architects. Photo: Evan Joseph, courtesy Dattner Architects

July 31, 2019 | Multifamily Housing | BD+C Editors

Multifamily developers show no signs of pulling back on specialty spaces and unique offerings in an effort...

Annual mortgage payment plus property tax per average square foot of housing in US cities.

Source: World Business Chicago

April 30, 2018 | Multifamily Housing | BD+C EditorsRobert Cassidy

It's inaccurate to focus on property taxes as a percentage of home value without acknowledging the actual c...

MIT’s Simmons Hall, designed by Steven Holl

MIT’s Simmons Hall, designed by Steven Holl

January 05, 2018 | Big Data | BD+C EditorsDavid Barista, Editorial Director

At a time when research- and data-based methods are playing a larger role in architecture, there remains a...

Illustration: Pixabay

December 30, 2016 | Building Team | BD+C Editors

Women AEC professionals need you to take action. 

Lissette Méndez-Boyer (left) and Natalya Shimanovskaya work on their FABRICation project at Beyer Blinder Belle’s New York office. Photo courtesy BBB

September 06, 2016 | AEC Tech | BD+C Editors

AEC firms are taking a page from the tech industry, by infusing a deep commitment to innovation and disrupt...

Intel Co-founders (l. to r.): Andrew Grove, Robert Noyce, and Gordon Moore. Photo: Wikimedia Commons   

June 27, 2016 | AEC Tech | BD+C Editors

“Sooner or later, something fundamental in your business world will change.” The late Andrew Grove (1936-20...

Photo: Mass Communications Specialist 1st Class Corey Lewis , U.S. Navy, via Wikimedia Commons; photo filter via BeFunky.com

May 31, 2016 | AEC Tech | BD+C Editors

As buildings become increasingly connected, opportunistic hackers have countless avenues into a building’s...

Lexus RX 450h self-driving car. Photo: Wikimedia Commons

May 09, 2016 | AEC Tech | BD+C Editors

Despite popular belief, the country is not in a great age of technological and digital innovation, at least...

Overlay Init