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December 5, 2017 > Real estate report suggests soft landing

Real estate report suggests soft landing

Submitted By Kelly Kline

The ever-present question about how long we can expect the good economy to last seems more pressing than ever. And where better to explore that question than at the fall convening of the Urban Land Institute in Downtown Los Angeles? While this yearÕs ULI Real Estate Trends forecast doesnÕt answer that question directly, it does recognize that we are not in a boom/bust scenario, but rather a long cycle which presents varying data points market by market, property by property.

The ULI/PWC report data was based on a survey of 1,000 people in 590 organizationsÑmost of which expect profitability in the next year (continuing a seven-year upswing). When asked for one word that describes the upcoming year, the top five answers ranged from thriving to uncertainty: competitive, cautious, measured, uncertain, growing.

The words making the most headway this year may portend more volatility: sanguine, neutral, troublesome, frenzy, treacherous.

The report highlights nine specific trends, including the so-called Ôsoft landingÕ mentioned in the title, which recognizes conflicting market forces, and a Ôdefensive postureÕ from the investment community. These trends were balanced by more positive indicators such as low unemployment and high asset prices.

Additional trends include:
¥ Working Smarter and Working Harder. With increasing productivity, compliments of the gig economy, our multi-generational workforce may impact office needs of the future. One thing is known for sure: reinvestment in older office product is way overdue, especially related to wellness features.

¥ Procession of the Generations. Before we change all of our office product to an open floor plan, it was cautioned that the new Generation Z (all 65.4 million of them) are more concerned about privacy than those before them. Also, their DIY (do-it-yourself) orientation may Òpresage yet another wave of urban gentrification.Ó

¥ DonÕt Forget the Baby Boomers. We all know that Boomers are working longer (by default and by choice). But where they will live, and what jobs they will have are in flux. Senior housing is looking to be a solid bet into the future.

¥ ItÕs Different This TimeÉIsnÕt It? Say hello to secondary markets because the Ònext big marketÓ is likely to be smaller. The so-called ÒGateway MarketsÓ (San Francisco, Los Angeles, New York, D.C., Boston, and Chicago) are victims of their own success. Said one investor, ÒWhy deal with the uncertainty of a global market when there are opportunities in secondary markets like Salt Lake City and San Antonio?Ó And from a residential perspective, Òsecondary markets are 45 percent more affordable than primary markets.Ó

¥ Housing at a Technological Tipping Point. While cost factors continue to squeeze margins, the ability to leverage technology is beginning to be embraced by the construction industry. The same forces that are changing manufacturing (i.e., 3D printing, workflow systems, and advanced processes) are key to reducing costs and increasing safety.)

¥ Retail Transforms and Stores Remain. There is no question that retail stores are still undergoing massive change, although e-commerce still only accounts for 9 percent of total sales. Everyone agrees that the real enemy of retail stores is boredom. Maintaining market position will hinge on incorporating services and entertainment into the shopping experience. And while it is recognized that the U.S. has an Òover-supplyÓ of retail space, Òinvestors are still widely attracted to well-conceived, well-positioned retail real estate assets.Ó

You can read more about the report, and downtown load the document at

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