A Pivotal Moment – November 13, 2023
For decades, the Urban Land Institute (ULI) and PwC US have collaborated on Emerging Trends in Real Estate, an annual report unveiling critical data and trends in the development sector. “The Great Reset” is the overarching theme of the latest edition.
“It’s clear that the real estate industry is entering a new era of thinking, building and operating,” said Anita Kramer, SVP of ULI’s Center for Real Estate Economics and Capital Markets. “The emergence of hybrid work models, the strength of the retail sector and the growth of Sun Belt markets underscore the new reality on the ground, specifically in our top cities — Nashville, Phoenix, Dallas/Fort Worth, Atlanta and Austin — to watch in 2024.
“Overall, our data this year shows slightly lower ratings across US markets in terms of development and investment prospects, reflecting a certain degree of caution at the start of the new era,” she continued. “And ratings among top cities are tighter, indicating a sense that there is less difference among market prospects than has been the case. Now, industry professionals are at a turnkey moment that will require both innovation and adaption to shape a resilient real estate landscape for the future.”
Andrew Alperstein, a leader with PwC’s US real estate practice, added, “Firms must learn to ride out the current short-term risks and adapt their growth strategy to succeed in this period of higher-for-longer interest rates.”
Even at a pivotal moment, some things haven’t changed. In common with its predecessors, the 2024 edition of Emerging Trends spells out the key themes ULI and PwC predict will dominate the coming year. They include the following:
- Retail outlook is exceeding expectations.
- Hybrid work is here to stay.
- Outlook still sunnier in the Sun Belt.
- It’s all about the debt.
- CRE learning to navigate AI.
- Adapting for future climate challenges.
- Downtowns need to reinvent themselves – again.
- Housing crunch.
The ULI/PwC top 10 markets to watch also include San Diego, Boston, San Antonio, Raleigh/Durham and Seattle. And while market prospects are less of a differentiator among cities than they once were, the new report does distinguish among the 80 top markets, grouping them into four main categories: Magnets, The Establishment, Niche and Backbone.
Within each of these main categories are three subgroups. In the case of Magnets, for example, the subgroups include Super Sun Belt, Supernovas and 18-Hour Cities, while for Backbone cities, they include The Affordable West, Determined Competitors and Reinventing. In the current state of the economy and the commercial real estate industry, “reinventing” sounds like a watchword no matter where you’re located.