Emerging Trends in Real Estate 2012 - Urban Land Institute

Exhibit 3-5
Metro Area Investment Prospects by Population
Metro Areas with 3 Million or More Population
1 Washington, D.C. (1) 6.93
2 San Francisco (3) 6.92
3 New York City (4) 6.85
4 Boston (5) 6.60
5 Seattle (6) 6.60
6 Houston (8) 6.46
7 Los Angeles (9) 6.30
8 San Diego (10) 6.17
9 Denver (11) 6.16
10 Dallas/Fort Worth (12) 6.10
11 Northern New Jersey (13) 6.10
12 Orange County, CA (14) 6.01
13 Miami (17) 5.81
14 Westchester, NY/
Fairfield, CT (19) 5.74
15 Chicago (21) 5.57
16 Phoenix (23) 5.45
17 Philadelphia (24) 5.44
18 Baltimore (25) 5.44
19 Minneapolis/St. Paul (26) 5.38
20 Inland Empire, CA (28) 5.30
21 Atlanta (36) 4.65
22 Detroit (51) 2.88
Source:
Source:
Emerging
Emerging
Trends
Trends
in
in
Real
Real
Estate
Estate
2012
2012 survey.
survey.
Note: Overall rank is in parentheses.
Metro Areas with 2 to 2.99 Million Population
1 San Jose (7) 6.58
2 San Antonio (16) 5.83
3 Portland, OR (18) 5.81
4 Orlando (29) 5.19
5 Pittsburgh (31) 5.16
6 Tampa/St. Petersburg (33) 4.79
7 Kansas City (35) 4.73
8 St. Louis (39) 4.48
9 Sacramento (46) 4.20
10 Cincinnati (48) 3.97
11 Cleveland (50) 3.48
generally good fair generally poor
Metro Areas with Less than 2 Million Population
1 Austin (2) 6.92
2 Raleigh/Durham (15) 5.96
3 Charlotte (20) 5.58
4 Honolulu/Hawaii (22) 5.47
5 Nashville (27) 5.32
6 Salt Lake City (30) 5.17
7 Virginia Beach/Norfolk (32) 4.93
8 Indianapolis (34) 4.76
9 Oklahoma City (37) 4.61
10 New Orleans (38) 4.54
11 Jacksonville (40) 4.48
12 Albuquerque (41) 4.43
13 Milwaukee (42) 4.33
14 Memphis (43) 4.22
15 Tucson (44) 4.21
16 Providence (45) 4.20
17 Columbus (47) 4.03
18 Las Vegas (49) 3.91
and various fee hikes. Investors should
steel themselves and closely monitor
any negative impacts on tenants and
location preferences. Potholed streets
and closed bridges could affect mobility;
increasing crime rates and less street
cleaning would compromise quality of
life; and fewer teachers dealing with
larger class sizes could deal another
blow to struggling public schools. The
24-hour gateways will be hard pressed to
escape detrimental market impacts, and
most suburbs, once a refuge, will not be
immune either.
The Top 20
Washington, D.C. (1). Should this
survey’s number-one choice for investment,
development, and homebuilding
carry an asterisk The rock-solid D.C.
market “may cool down if (and it’s a
30 Emerging Trends in Real Estate ® 2012
big if) the government ever shrinks.”
Development activity revs up, including
the ambitious 2.5 million-square-foot,
mixed-use CityCenterDC project at the
old convention center site, raising yellow
flags: torrid cap rate compression, “pricing
in a lot of growth which may not keep
pace,” forces buyers to swallow awfully
hard. But no other market performs better
during a recession or near recession,
and the area’s jobs base has diversified
well beyond just government and lobbying
into technology, communications,
and biomedical industries. “No matter
what happens” in the congressional
hammer-and-tong budget give-and-take,
“companies want to be there.” Office
vacancies level off in the high single digits,
and a shortage of large blocks forces
rents up in class A space. “More national
retail tenants want presence” in the market,
which features an affluent population
and attracts a steady flow of top-tier gen-Y
talent, coming to help change the world.
“Apartments and infill housing do better
in Washington, too”; home prices recover
ahead of other cities. Close-in suburbs
perform very well, especially in multifamily
and retail space. Northern Virginia
apartment development near Metro stops
8
7
6
5
4
3
2
1
0
'94 '96
'98
Washington, D.C.
'00
'02
'04
'06
'08
'10
'12
6.93