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Real Estate Trends for 2015

As the holidays and New Year sink into the rear view mirror, a strong focus of what 2015 is worth considering. A recently reviewed a report on trends in real estate for 2015 from PriceWaterhouse Coopers and the ULI – Urban Land Institute provides interesting insight. I found the information to be valuable in my 2015 planning. Should you want a full copy of the report or wish to contact me, please email or phone 941.961.7109.

Highlights from the Emerging Trends in Real Estate 2015 issued by PriceWaterhouse Coopers and the ULI – Urban Land Institute

Top Trends in Real Estate

1. The 18-Hour City Comes of Age: Downtown transformations that focus on the ingredients of housing, retail, dining, and walk-to-work offices. Essentially creating a live-work-play environment eliminates the downtown being active from 9 to 5. This trend makes for interesting residential and commercial opportunities in downtown areas across the Country.

2. The Changing Age Game: The Millennials and Baby Boomers should continue to have a significant impact on real estate in 2015. Recently, the Millennials have made the decision to rent as opposed to own their residents. Tracking whether this continues or they decide to move to the suburbs and own their home is the subject of debate.

The Baby Boomers, which totals 77 million people, are in the retirement cycle of life. The historical thought on this group was that they would gravitate to the “Sunbelt”. However, the report highlights a developing trend of the Baby Boomers worth watching of this group owning properties near their children.

3. Labor Markets are Trending toward a Tipping Point: With the Baby Boomer retirement pace accelerating and the peak of the millennial labor for entrance into the labor market already passed, the report predicts that there is the possibility of “labor shortages”. This is especially focused on skilled workers. The issue is whether growth is stagnated based on companies being unable to find the employees to execute the plan. Without the growth, all areas of real estate are affected.

4. Real Estate’s Love/Hate Relationship with Technology Intensifies: There is no form of real estate that is exempt from the expansion of technology. Technology creates change in space use, location, and demand levels that appears to be occurring at an accelerated pace. The report highlights that adaptation is both the trend and the key to survival.

5. Event Risk is Here to Stay: With an ever more complicated global economy and an increasing number of geopolitical risks, many investors seek a “flight to safety”. However, this does create an interest of real estate investment in the United States. For the 12 months, ending July 31, 2014, $50.3 billion in globally secured capital purchased U.S. Real Property.

Canadians represented the largest share with $15.1 billion. However, the investment spans the globe from Norway, China, Japan, Hong Long, Germany, Israel, and Australia all reaching investment levels of between $2 and $ billion. The international investor provides an opportunity in every asset class especially well located commercial, residential condominiums, and land.

6. A Darwinan Market Keeps the Squeeze on Companies: Competition is always going to be a factor in the marketplace. Under performing managers, brokers and other industry professionals run the risk of getting replaced. The largest investors generally align with relationships that they have a track record with. As these investors decide what the long term strategy for their assets, being able to provide value added service at competitive rates is going to be critical.

7. A New 900-Pound Gorilla Swings into View: US retirement assets hit $23 Trillion in 2014. OF that amount, more than half was in a defined contribution or individual retirement account. This could lead to billions of investment into real estate.

8. Infrastructure: Time for the United States to Get Serious?: We are now well into the 21st Century and we rely upon roads, bridges, transit, and other infrastructure that is up to 100 years old. Like many things in this world, it is taken for granted until it fails. The trend of public/private partnerships are worth watching. The private sector, in many cases despite commanding a return, can complete this work in a more cost effective way than the public sector. Contributing to the infrastructure creates jobs but funding is still an issue.

9. Housing Steps Off the Roller Coaster: Housing seems to be putting the over-supply of the last cycle behind it. Even with the burst of the last bubble, the trend seems to be going back to the fundamental principles of supply and demand. In fact, the last recession created a significant under supply of homes that amount to around 9 million. Obviously, this is an important statistic to tract going forward.

10. Keeping an Eye on the Bubble – Emerging Concerns: The Real Estate Cycle starts with the fact that Upcycles breads optimism but when it becomes excessive, it can promote reckless investing. As such, there always is a concern for a bursting of the bubble. Interest rate increases and relaxed underwriting are specific areas of potential concern. Further, the sales price of existing assets in relation to replacement cost is always worth monitoring. Steady sustained growth is the path that most would like to see over the long run.

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