Top Commercial Real Estate Trends to Watch in 2020
- Industry players expect sustainable but slower growth for the U.S. economy and real estate market in 2020.
- Baby boomers and millennials will have significant impacts on housing, office and other property sectors.
- Austin topped the list of the markets to watch due to its strong population growth and investor demand.
The United States is currently experiencing its longest expansion in history, leading many in the real estate industry believe we’ll continue on the path of slow and steady growth as we head into 2020. The Urban Land Institute and PwC recently released the Emerging Trends in Real Estate 2020® report, which reflects the views of 750 individuals and 1,500 survey respondents from the real estate industry on where they see the market going in the coming year.
While presenting the report’s findings at the 2019 ULI Fall Meeting in Washington, D.C., PwC director of real estate research Andy Warren noted that while last year there was more of a concern regarding a potential recession, this year there is more of an acceptance that “we’ve hit a point where long-term economic growth would be sustainable but slower.”
He added that this current economic environment is prime for investment in real estate, as significant amounts of capital are looking for safe havens to put their money. Real estate can often provide more stable returns than other asset classes and is still experiencing strong fundamentals.
Demographic Trends Take Shape
Among the 10 trends the report identified as ones to watch in 2020, several focused on how demographics will impact real estate. As millennials age, they are looking to move out of the urban core and into suburban areas. However, they want to live in suburban communities that emulate the live-work-play feel of a “24-hour city.” The report identified New Jersey communities like Summit and Hoboken as prime examples, with access to transportation, strong walk scores, and a significant amount of retail, restaurants and other activities.
“As more and more suburbs—not all, but those with the right recipe—attract a critical mass of ‘hip’ residents, their success will become increasingly visible,” the report said.
On the other end of the spectrum, baby boomers will likely impact the real estate industry significantly. They are living longer, retiring later and generally have healthier lifestyles, which has implications for various sectors of real estate.
The 2020s will be a significant decade for this cohort, as many are still too young for seniors housing product and have different preferences than previous generations. The majority of baby boomers will not turn 80 until 2044, and the number of Americans between the ages of 65 and 80 is projected to grow from 43.5 million to 53.5 million in the next decade, the report noted. What this means for housing is uncertain, but industry players are certainly discussing potential strategies to cater to this age group.
Top Markets for Development and Investment
As part of the annual report, ULI and PwC reveal the top markets for overall investment and development prospects in 2020, based on scored awarded by the report’s survey participants. Austin dethroned Dallas/Fort Worth this year as the top market, followed by Raleigh/Durham, Nashville, Charlotte and Boston rounding out the top five.
The top 10 included:
Most of the top 10 cities are midsized markets that are projected to have among the highest population growth and net migration, the report noted. While larger metros like Boston and Los Angeles have slower population growth, they have strong and highly sought-after real estate markets that continue to attract capital.
These metros have been primary targets for real estate investment, accounting for 25.8% of total transaction volume from 2016 to 2018 and 26% of aggregate investment in the first half of 2019.
For more insights, read the full “Emerging Trends in Real Estate 2020” report.