As was predicted over the past two years, an increasing number of commercial real estate companies are investing in secondary markets. Specifically, in the "18-hour markets" in second tier cities. Emerging Trends in Real Estate 2016, published by the Urban Land Institute and PwC, names 18-hour cities as the number one trend for 2016, and indicates several second-tier cities, including Austin, Charlotte, and Nashville, in its top 20 markets for real estate and development. Projects that traditionally would have considered a top-tier city first for building are now going up and finding success in cities in the secondary market.
So what makes the 18-hour city such an attractive investment to commercial real estate companies? And within these secondary markets, which cities are primed for more domestic and global commercial real estate investment and development in 2016?
What is an 18-Hour City?
Meeting Planners International has defined a second-tier city as a city with a population of more than 300,000 and less than one million. But the potential for employment and economic growth, as opposed to just population numbers, is what truly defines an 18-hour city. For example, both Austin and Houston are accurately described as 18-hour cities. However, Austin’s population has a population of 912,791 (according to the July 2014 U.S. Census Bureau estimate), whereas Houston has a population of over two million and (still) growing. 18-hour cities are also distinguished from “24-hour gateway” cities, such as New York City and San Francisco, in that they offer a lower cost of living and lower cost of doing business.
18-hour cities have become an inbound destination for both millennials and baby-boomers seeking an urban lifestyle and the amenities of living in mixed-use communities as opposed to the suburbs. Many 18-hour cities are benefiting from revitalization in downtown areas, areas typically left empty and unpopulated when the work day is done. Commercial and residential development in these areas typically includes restaurants and bars that cater to both younger and older demographics, which in turn encourages businesses to maintain their offices downtown. The term “18-hour” refers to the hours kept by commercial establishments to discourage all-night noise that might disturb downtown residents.
Emerging Trends in Real Estate 2016 includes several southern cities in its list of top 20 markets to watch. Let’s take a look at why these cities are so attractive to investors.
Hot Markets in Texas and the South
Strong, continuing employment growth has made both Dallas/Fort Worth and Austin two of the top real estate investment and development markets in the U.S. Job growth continues in Dallas/Fort Worth, thanks to a low cost of living and doing business, low taxes, a business-friendly regulatory environment, and corporate relocation. In the past year, Toyota, State Farm, and Liberty Mutual are planning to or already have opened offices or large, mixed-use campuses in the Dallas/Fort Worth area. Austin is also enjoying significant job creation across a wide range of industries, including STEM and technology, advertising, media, and information (TAMI) positions. Austin is currently awaiting completion of its land use code, which is expected to help developers create more affordable housing in the city's downtown.
Charlotte, Atlanta, and Nashville are also named among the top 10 markets to watch in 2016. These cities share many of the same characteristics, including:
- Job growth
- Population growth
- Strong local economy
- Low cost of doing business
- Business-friendly regulatory environment
Special mention should be made of several Midwestern cities, including Cleveland, Cincinnati, Indianapolis, St. Louis, and Kansas City, which are also seeing a rise in urban revitalization and an increase in their downtown populations. In the wake of the recession, aggressive urban and mixed-use development in these and other cities throughout the Midwest is attracting companies and talent looking to relocate from the suburbs or other parts of the U.S. to now-thriving, business-friendly downtown areas.
About PinPoint Commercial
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