Andrew Jubelt

Investors seeking information about real estate trends often look toward the annual PricewaterhouseCoopers (PWC) report, "Emerging Trends in Real Estate". This forecast is a well-respected outlook for the real estate and land use industry, and this year, it includes the following trends that will be of interest to commercial real estate investors:

The Changing Age Game

Baby boomers used to rule the roost in terms of numbers, but millennials are now an even larger group. Usually defined as people born between 1982 and 2004, this group is 87.3 million strong, with an average age of 24. 

Millennials often rent longer and postpone homeownership. Their preferences could change, however, as they start to get a little older -- as soon as the 2020s. Survey respondents are split, however, on what choices they think millennials will make as they age. For now, Denver, Austin, and San Francisco are benefiting from their popularity with millennials. These cities are ranked in the top five for job growth.

The smaller Generation Z will also emerge, and the real estate industry will have to prepare for a nation consisting of fewer new households, consumers, and people entering the workforce.

Baby boomers’ influence isn't over, however. Some will still be a part of the workforce, and others will retire, but they’ll have a significant impact on real estate investment and development for at least the next 20 years.

Labor Markets are Reaching a Tipping Point

Although we were worried about the "jobless recovery," trends are heading the opposite way in the long term. We’re likely to experience labor shortages, not surpluses, within a few years, according to the PWC report. Job issues are at the top of the list of the most important issues influencing real estate, respondents say. Job growth tops the list, followed by wage and income growth.

Job growth is expected to be fueled by technology and energy sectors. Several cities have benefited from an infusion of tech and energy-related jobs in the past two years, including Seattle, Atlanta, and Chicago. These industries are also having a particularly large impact on Texas, with the Dallas/Ft. Worth area and Houston having had the highest tech and energy job growth numbers in the country during the past two years.

Jobs are indeed chasing people, and cities expected to have the highest job growth in the next three years are clustered in the Southwest, the Southeast, and Texas.

Event Risk is Here to Stay

Event risk -- including global unrest, geopolitical risks, and natural disasters -- is a concern for an increasing number of interviewees. Geopolitical risks grew both in number and in intensity in 2014 and threatened to become even greater.

As a result, international investment in U.S. real estate has grown across dozens of markets. Real estate holds great appeal as an asset that remains durable in a volatile world. Foreign capital is highly concentrated in gateway cities like Phoenix, Houston, and Dallas for apartments, and Hawaii and South Florida for hotels. Los Angeles, Las Vegas, Miami, and Brooklyn are tops in attracting development capital.

This country’s diversity is a strength as well as a shield, according to PWC’s report. Its strength is that in a risky world, it’s a good place to invest money and find markets and real estate opportunities that match a variety of investors’ preferences. It’s a shield because the complexity of the U.S. economy makes for greater resilience.

If you want to learn more about the latest emerging trends in real estate, Andrew Jubelt, an experienced developer, owner, and operator of commercial real estate, can help. Contact him at ajubelt@avant-capital.com or 212-231-9779.