Emerging Trends in Real Estate® - US and Canada

The outlook for 2018

Markets to watch in 2018

Now in its 39th year, Emerging Trends in Real Estate is one of the oldest, most highly regarded annual industry outlook for the real estate and land use industry. The market outlooks included in each edition are based on an extensive survey, multiple interviews, and individual market focus groups. Readers’ interest in all markets continues to increase, so the 2018 edition provides a regionally based look at all 78 markets included in this year’s survey. Throughout the report, we’ll explore a variety of trends we’re seeing in the industry, as well as analyze the prospects for 78 metropolitan markets for the coming year.  

Seattle soars to the top

This year’s survey respondents have selected Seattle as the top-ranked market, up from being ranked number four last year. Seattle’s ascendancy to the top spot in some ways reflects this more measured strategy in the industry. Many may know Seattle as being home to tech giants or for having a well-educated labor force. However, our survey respondents identified Seattle as being strong across a number of factors, including demographics and liveability, cost, and technology readiness. Click on the Seattle link below to explore more about this top-ranked, 18-hour city.

 

Our top cities for 2018

One of the most interesting revelations in this year’s report is how positive the outlook is for 2018. The following market summaries give readers a look at the major issues expressed by each focus group.

 

Seattle 

Local property/Market outlook

  • Positive outlook for all property sectors in Seattle, with the strongest outlook for investment and development in Industrial and Single Family housing
  • Local economic outlook, strong investor demand and an abundance of capital available for real estate investment and development

Demographics and livability

  • Population growth in Seattle is twice the national rate and the market is expected to gain nearly 29,000 new residents a year over the next five years, with the population aged 15 – 34 rising by a total of 17.3% during that same period
  • Seattle has a young, educated population (17% with graduate or professional degrees and 37% with associates or bachelors degrees)
  • Top ranking for outdoor activities, with 93% of residents with walkable access to a city park
  • Seattle is rated as a top 5 culinary market
  • Top rated microbrew market with 1 brewery per 19,000 residents

Cost

  • High productivity market with cost of doing business of 103%
  • 5-year disposable income growth is projected to be good
  • Home prices are at 123% of previous peak
  • Affordability index at 106.2, rent as a % of household income 20.8%

 

Technology readiness

  • Twice the U.S. percentage (12%) of employees in STEM occupations, with 4.5% of the workforce employed in computer programming related occupations
  • 6.63 patents awarded per 1,000 residents

Connectivity

  • 94% of households have a computer and 88% have access to high speed internet
  • Top destination for international visitors
  • 4.5% of total employment in Foreign Owned Entities

Ease of doing business

  • 10.2% of firms have been in business less than 3 years and employ 2.6% of total employment

Austin

Local property/Market outlook

  • Outlook for all property sectors is positive, especially housing both multifamily and single family
  • Local economy has no shortage of investor interest or available capital

Demographics and livability

  • Population growth is projected at 2.8% in 2018, well above the U.S. average and Austin expects to add 42,000 residents a year over the next five years
  • Nearly one-third of the population is between the ages of 15 – 34 and this group is projected to grow by 20.3% through 2022
  • One of the top ranked Green cities
  • Solid ranking for outdoor activities
  • Vibrant culinary scene where
  • One micro-brewery per 38,000 residents

 

Cost

  • Average productivity market with cost of doing business of 104%
  • 5-year disposable income growth is projected to be good
  • Home prices are at 156% of previous peak
  • Affordability index at 148.1, rent as a % of household income 19.9%

Ease of doing business

  • The Austin market has a vibrant start-up economy, with 11.5% of firms in Austin having been formed in the past 3-years.  These start-ups account for 3.3% of total employment

Salt Lake City

Local property/Market outlook

  • Investment and development of multifamily, office and single family properties
  • Local economy is strong, but real estate investor demand could trail larger markets and that capital for investment and development could be harder to obtain than in other markets

Demographics and livability

  • High percentage of population are between the ages of 15 – 34 (30%)
  • Outdoor activities top ranked, culinary ranking 2nd highest quintile, brewery per 78,000, Cultural rank in 2nd quintile

Cost

  • Cost of doing business is 88% of national average
  • 5-year disposable income growth is 1.7x national average
  • Affordable housing, housing affordability index of 139.0, and rent requires 16.1% of household disposable income

Technology readiness

  • STEM employment 6.7% of total computer 1.8%

 

Ease of doing business

  • New business creation, with 11.1% of firms less than 3-years old, employing 2.9% of total employment

Connectivity

  • Very connected 93.4% (computer), 82.7% (high speed internet access)
  • Good airport connectivity with high level of international passenger volume

Raleigh/Durham

Local property/Market outlook

  • Positive sentiment regarding office and single family, local economy, investor demand, capital availability, development community

Demographics and livability

  • 61,000 annual net migration, ages 15-34 up 15.4% next 5 years
  • Culinary ranking – 2nd to highest quintile
  • Outdoor activities - 2nd to highest quintile
  • One brewery per 38,000 residents

Cost

  • Cost of doing business is 88% of national average
  • Disposable income growth is 1.4x national average
  • Housing affordability is very strong at 173.5 (median income can afford a house priced at 173% of the median home price)

 

Technology readiness

  • Computer related employment – 5.2% of total employment
  • Patents per Capita - .77 per 1,000 highest quintile

Dallas/Ft. Worth

Local property/Market outlook

  • Positive sentiment regarding industrial and single family, local economy, investor demand, capital availability, investment opportunity, local development community

Demographics and livability

  • 87,000 new residents a year for next five years, 10.9% growth in population ages 15-34
  • Growing productivity, cost of doing business is 94% of national average, 6.9% disposable income growth
  • Strong housing affordability 153.7 (median income can afford a house priced at 173% of the median home price)
  • Strong healthcare ranking

Technology readiness

  • STEM employment 6.5% of total, computer 1.4%
  • 35 patents per 1,000 residents

 

Connectivity

  • 4.4% of employment in Foreign Owned Enterprises (FOE), top airport connectivity ranking, high international passenger volume

Ease of doing business

  • Start-up environment is high with 10.9% of firms are less than 3 years old, employing 3.1% of total employment

Fort Lauderdale

Local property/Market outlook

  • Positive sentiment regarding multifamily, industrial and single family, local economy, investor demand, capital availability

Demographics and livability

  • 5-Year annual 29,000 resident growth, total 5-year 12.4% growth in population ages 15- 34
  • One brewery per 238,000
  • High outdoor activity index
  • High cultural ranking

Cost

  • 8.6% 5-year growth in disposable income, cost of doing business 102%,
  • Strong household growth, affordability 115.6, housing prices have not returned to 2008 peak

Technology readiness

  • High concentration in business and professional services employment

 

Connectivity

  • Global 4.1% of employment in Foreign Owned Enterprises (FOE)
  • High airport connectivity ranking, and international visitors

Ease of doing business

  • Business creation is high, with 13.4% of firms less than 3-years old, 4.4% of total employment

Los Angeles

Local property/Market outlook

  • Positive sentiment regarding multifamily and industrial, local economy, investor demand, capital availability

Demographics and livability

  • Organic population growth only. Market-wide negative net migration over the next five years, however positive growth in 15 – 34 year olds
  • Top ranked outdoor activity index
  • Top quintile ranked green market
  • Top quintile culinary ranking, and strong cultural ranking

Cost

  • High productivity market, Cost of doing business 107%
  • Housing affordability index 65.7, housing prices still at 98% of previous peak, rent over 31% household income

 

Connectivity

  • Global, 6.8% of employment works for Foreign Owned Enterprises (FOE)
  • Top ranked airport connectivity and international passenger volume

Ease of doing business

  • Entrepreneurial activity, with 10.6% of firms less than 3-years old employing 3.2% of total employment, .51 patents per 1,000 population

San Jose

Local property/Market outlook

  • Positive sentiment regarding multifamily, industrial and hotel, local economy, investor demand, capital availability

Demographics and livability

  • Organic population growth only. Market-wide negative net migration over the next five years, however positive growth in 15 – 34 year olds
  • Top ranked outdoor activity index, 72% of San Jose residents are within walking distance of a park

Cost

  • High productivity market, cost of doing business 123%, good per capita disposable income growth

Technology readiness

  • STEM employment 19.0% of total employment
  • High educational attainment, 22.7% graduate or professional degree, 33.2% bachelors or associates
  • 8.71 patents per 1,000 population

 

Connectivity

  • High connectivity market 94.4% of households have a computer, 88.3% have high speed internet access
  • High level of global connectedness, 6.4% of employment is for Foreign Owned Enterprises (FOE), low airport connectivity index, but higher level of international passengers

Ease of doing business

  • Entrepreneurial activity, 9.9% of firms are less than 3 years old, employing 2.2% of total employment

Nashville

Local property/Market outlook

  • Positive sentiment regarding local economy, investor demand, capital availability, local development community

Demographics and livability

  • 20,000 annual net migration projected over the next five years, 11.1% total growth in ages 15-34 
  • 2nd quintile culinary ranking,
  • Top ranked outdoor activities, one brewery per 84,000

Cost

  • Cost of doing business 98%
  • Good 5-year disposable income growth
  • Affordable housing market, affordability index 150.2, median home price at 135% of previous peak, low rent as a percentage of household income

Technology readiness

  • Higher percentage of business and professional services employment

 

Ease of doing business

  • Business creation, 9.7% of firms are less than 3 years old, employing 2.6% of all employment

Connectivity

  • 4.0% of total employment in Foreign Owned Enterprises (FOE)

Boston

Local property/Market outlook

  • Positive sentiment regarding multifamily, industrial and single family, local economy, investor demand, capital availability

Demographics and livability

  • In-migration of nearly 11,000 annually over the next five years, 5-year 15-34 growth growth in ages 15-34
  • 20.8% of population with graduate or professional degrees
  • Higher ranked Green Market
  • 2nd quintile ranked culinary market
  • Top cultural market
  • Top market for outdoor activities with 98% of the population within walking distance of a park
  • One brewery per 80,000 residents

Cost

  • High productivity market, cost of doing business 130%
  • Good 5-year disposable income growth

 

Technology readiness

  • STEM employment 8.3% of total population
  • Patents .95 per 1,000

Connectivity

  • Global 5.8% of employees in Foreign Owned Enterprises (FOE), high airport connectivity and levels of international visitors

 

Full list of city rankings

Ranking City
1 Seattle
2 Austin
3 Salt Lake City
4 Raleigh/Durham
5 Dallas/Ft. Worth
6 Fort Lauderdale
7 Los Angeles
8 San Jose
9 Nashville
10 Boston
11 Miami
12 Charlotte
13 Portland, OR
14 Charleston
15 Northern Virginia
16 Orlando
17 Atlanta
18 San Antonio
19 Tampa St. Petersburg
20 Oakland
21 Orange County
22 Greenville
23 Denver
24 Cincinnati
25 Minneapolis/St. Paul
26 Pittsburgh
Ranking City
27 San Francisco
28 Philadelphia
29 Kansas City
30 Brooklyn
31 Boise
32 San Diego
33 Northern New Jersey
34 Phoenix
35 Washington D.C.
36 Las Vegas
37 Indianapolis
38 Inland Empire
39 Des Moines
40 NY Other Boroughs
41 West Palm Beach
42 Chicago
43 Long Island
44 Columbus
45 Richmond
46 Manhattan
47 Sacramento
48 Suburban Maryland
49 Birmingham
50 Jacksonville
51 Westchester/Fairfield
52 SW Florida
Ranking City
53 St. Louis
54 Tacoma
55 Louisville
56 Providence
57 Cleveland
58 Spokane/Couer d'Alene
59 Baltimore
60 Houston
61 Norfolk/Virginia Beach
62 Hartford
63 Portland, ME
64 Madison
65 Milwaukee
66 Detroit
67 Honolulu
68 Omaha
69 New Orleans
70 Knoxville
71 Tucson
72 Albuquerque
73 Memphis
74 Oklahoma City
75 Gainesville
76 Tallahassee
77 Buffalo
78 Deltona/Daytona

Top trends for 2018

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.

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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.

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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 City and Fort Lauderdale.

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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.

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Contact us

Byron Carlock, Jr.
US Real Estate Leader
Tel: +1 (214) 754 7580
Email

Mitch Roschelle
Partner and Business Development Leader
Tel: +1 (646) 471 8070
Email

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