What’s on the Horizon for Real Estate Investment? ULI Fall Meeting Provides Clues
They say that there is no crystal ball when it comes to real estate. Perhaps the next best thing is the Urban Land Institute’s (ULI) annual Emerging Trends in Real Estate report, which was released and discussed at last week’s ULI Fall Meeting in Washington, D.C. This year’s meeting took advantage of being held in our nation’s capital by showcasing a variety of development project case studies, including Amazon’s proposed HQ2 project at National Landing. It also brought in experts from across the country to weigh in on everything from moving the needle on housing affordability to Opportunity Zone deal velocity and technology disrupting retail.
For cities, tracking real estate is an important way to gain insight on how a local investment pipeline may grow or shrink from one year to the next and, consequently, how budgets’ direct and indirect tax revenues may be impacted in the long term.
According to ULI, these are the top trends to watch as we move toward 2020:
- As this economic cycle becomes the longest on record, real estate will continue to perform (even in a downturn), but its rate will slow and its demand will soften.
- The pressure of capital can be powerful; however, hasty deployment, investing in the wrong asset, or not understanding the full selection of investment choices may be perilous in the coming decade. Real estate is predicted to continue to be a strong alternative.
- Smart developers will increase their specialization in a broader list of market types. Instead of being measured by just size or growth trajectory, traditional markets will begin to be defined by other metrics, like “capital magnets” and “treasures ripe for discovery.” Think Oakland/East Bay or Salt Lake City.
- Although the challenges that arise when developing housing seem insurmountable, real estate remains optimistic and will adapt out of necessity by continuously identifying solutions to add supply. Meanwhile, other stakeholders like large employers are tackling the issue themselves, which could create an interesting disruption in the traditional investor/developer model.
- Technology is ironically enabling a major shift toward more community-based real estate (think green markets, urban plazas) with newer generations. “Collaborative consumption” is playing out in offices, residences, and a litany of other settings to the point that older generations are also adopting this mindset.
- ULI has coined a new term: “hipsturbia.” Need I say more? While you can take the hipster out of the urban center (as lifestyle changes with families and pets), you can’t take urban amenities away from them. Thus, the influx of more contemporary retail/dining/service concepts is taking hold in the ’burbs.
- Due to innovation in healthcare and resulting increased longevity, the baby boomer generation is working longer. Of course this affects housing demand trends, but it also impacts office and workplace environments that need to cater to a truly multi-generational workforce.
- There is an already high and growing focus on environmental, social, and governance (ESG) factors when it comes to real estate investment. Millennials and younger generations are ultimately driving this phenomenon because the support or influence they can wield over projects is causing investors to increasingly consider ESG when making decisions.
- Technology is disrupting real estate, and has been for some time — particularly in industrial and retail. Growing automation and digitization is both speeding up the ability to produce, analyze, and create new operations requirements for organizations, including cybersecurity and data science.
- The story of federal investment in infrastructure continues to be a sad one. As a result, cities and local agencies are picking up more of the slack. ULI highlighted that local governments and metro regions are demonstrating leadership in deploying capital funds like never before.
Cranes abound in D.C. Metro; development project along the Rosslyn-Ballston corridor
View of Washington, D.C., from atop JBG Smith’s new Central Place office building in Rosslyn
View of National Landing, future home to Amazon’s HQ2, in partnership with JBG Smith and Virginia Tech University
Conversion of indoor mall to indoor/outdoor experiential/entertainment-driven center in Ballston Quarter