What US States Will Show More in 2014 in Terms of Commercial Property Market
January 8th, 2014 by Alisa Sava
According to the economic forecasts, American real estate market will gain the highest point of its recovery in 2014. Rising mortgage rates, growing industry sector, favorable demographics and high customers’ demand – these are the main trends of the coming year. At first glance, most of them are similar to those of previous years. But, the difference is that in 2014 all these trends will finally reach their momentum and make a noticeable impact on the real estate market.
“With the economy in a position where the tailwinds are now stronger than the prevailing headwinds, 2014 should be a year when we see real estate fundamentals improve in sectors beyond the already very healthy multifamily sector,” notes one Wall Street fund manager.
Next year investors will no longer look only to the top six markets: their focus will switch to the secondary markets which demonstrate a solid growth and high level of confidence:
“The anticipated interest in secondary markets by investors is indicative of how far the US real estate recovery has come,” says Patrick Phillips, Urban Land Institute’s chief executive office.
Taking into account such fundamentals as investment, development and homebuilding, the Urban Land Institution has provided the “Emerging Trends in Real Estate” Report. The report is based on the analysis of the surveys submitted by 1.000 individuals – real estate professionals. According to it, we present 20 most perspective commercial real estate markets in 2014:
- San Francisco
- San Jose
- New York City
- Los Angeles
- Dallas/Fort Worth
- Orange County, CA
- San Antonio
- San Diego
- Salt Lake City
- Portland, OR
- Minneapolis/ St. Paul
To understand deeper which sectors will be a priority we have made a detailed look up on the top ten investment places listed below:
San Francisco Remains the Number One Market for Commercial Real Estate in 2014
San Francisco becomes a top-ranked city for the real estate business second year in a row. Despite being one of the most expansive markets, San Francisco will continue to prosper in 2014.
The analysts predict 36% of new residents moving into the metropolitan area, 4,2 % growth of gross metro product, 5.5% growth in personal income as well as job growth at a rate of 2 % next year.
Thus, San Francisco will be the best “buy” for all types of property. The analysts feel particularly good about San Francisco’s hotel sector.
Houston Is Seen as an Overwhelmingly “Buy” Market
Houston has become the first-rated market for investment and the second-rated market for homebuilding prospects. It has spiked from number-five position in last year report to the second place.
The “buy” rates for Houston are very high: buy recommendations for all 5 property types given by the respondents have been scored higher than average. Growing employment rates along with nonresidential construction boom and development of exploration industries will be the key economic drivers.
San Jose Will Benefit Developing Tech Industry
San Jose ranks a third place in the list for the second year. All three components – investment, development and homebuilding prospects have received high scores by the survey’s respondents.
The rising income and high employment rates will support real estate demand in this area. Leading tech firms, innovative companies and highly educated population – all these factors will remain the main drivers of San Jose economic rise. High prices will continue to be the only concern.
New York City: Hotel Sector Will Be a Priority
The investment and development scores for New York are still good, however, they are down from last years’ levels and there is a growing concern that prices will become higher in 2014.
The best opportunities for developing and investing in New York are rental apartments and hotels sectors. The economic situation will continue to improve due to the high employment rates. Moreover, it is predicted that job growth will get even more support from goods and tech industries in 2014.
Housing, visitor-dependent industries as well as entertaining and advertising sector will remain the main factors of economic growth and real estate recovery. According to the California Association of Realtors’ 2014 housing forecast:
“California home prices and sales are expected to continue rising next year, but price gains will be more modest as a more traditional market takes hold.”
Los Angeles has been characterized by respondents as a “buy” city for all property types. Apartments, industrial and retail sectors will in the highest demand. Moreover, the analysts see 2014 as year to hold hotel or office.
Dallas Has Made a Big Jump in Homebuilding Prospects
Dallas has been rated highly for its investment and development opportunities, but it was the highest homebuilding prospects that helped Dallas to move up in the list. The report says:
“The Dallas economy will continue to benefit from high concentrations of technology, corporate headquarters operations, excellent distribution infrastructure and above-average population gains.”
Concerning “buy” recommendations, the respondents advice to bet on the industrial/ distribution property in 2014.
Seattle Will Become a Hub for International Investments
If we look at three sectors – investment, development and homebuilding – Seattle is the sixth strongest market in the country. One of the reasons for Seattle’s rapid economic growth is a “high rate of educational attainment.” Due to the growing concentration of tech companies, such as Amazon.com, Classmates.com, WhitePages.com, etc., a huge influx of foreign investments is expected in 2014.
Austin’s Expansion Will Lead the Texas State Over the Coming Year
Austin remains in the top ten prospective US markets. However, it has dropped in the list on three positions. Rapid development of technology industries will stimulate the migration of tech professionals as well as demand for housing construction, particularly the multifamily one. The high vacancy rate will also benefit the construction development next year.
Among other factors that will attract investors and developers are lower taxes, highly-qualified workforce and relatively lower business costs. So, with these advantages Austin is going to lead the state in the coming year.
In spite of climbing rental rates and tight vacancy, Miami-Dade County remains one of the nation’s top real estate markets in the U.S as well as an attractive tidbit for the foreign investors.
“Miami is still the South American playground…, it doesn’t operate off the real estate fundamentals like other markets, it operates in its own universe.”
The Miami market is definitely on the rise and the latest figures clearly indicate that now is the best time to invest in local real estate. New demand for rental housing has emerged this year as evidenced by newly-constructed 1,700 units. In the past two years, local developers have launched dozens of new residential projects, including a considerable number of elite apartments.
Instead of the single-family homes that dominated during the “bubble” years, nowadays, we notice a shift towards multifamily buildings, both apartments and condominiums.
Boston has lost three points comparing with the last year’s survey. But, despite this decline there are some factors that make it attractive for investors. Thus, Boston will benefit from developing technologies, population and job growth as well as strong gains in health care.
According to the survey, apartment, office, retail and hotel sectors will be the best “buy” in 2014.
With a moderate reshuffling, the list of ten top real estate markets in 2014 will remain almost the same. San Francisco will maintain the first position, followed by Houston, San Jose, New York, Los Angles, etc. These cities have clearly shown that the recovery is possible only in markets with employment and salary growth, tech-influenced markets with attractive costs of doing business.
In this context, next year can be even more fruitful, because the focus will be on top 20 markets, not the top six. This will be an excellent chance for investors to explore new opportunities and earn higher return.
|san francisco commercial real estate market|