A new survey, looking at the top locations for real estate investment prospects in 2015, has Texas cities topping the list, according to 1,000 leading real estate experts, investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants who participated in the study.
According to Emerging Trends in Real Estate 2015, a report co-published by PricewWaterhouseCoopers (PwC) US and the Urban Land Institute, real estate investors continue to be willing to pay record prices for assets in the major markets due to the fact that these markets offer less volatile returns of capital that can only be found in a limited number of markets across the globe.
This year, interviewees reflected a desire to take on a measured amount of new risk in search of higher yields. Two strategies mentioned repeatedly with interviewees focused on moving to more opportunistic-style investments in the major markets or in markets close to a major metropolitan area, or looking for the best assets in markets outside of the core major markets. This year’s market rankings reflect the attractiveness of markets for both of these strategies.
A snapshot of the top five markets ranked by survey respondents and their outlook for each market:
No. 1 — Houston – Houston offers a significant amount of investment opportunity. Investors believe that the energy industry will continue to drive market growth and that will support real estate activity in 2015. Houston was ranked number one in both investment and development expectations for next year; housing market expectations are ranked number two.
No. 2 — Austin – Interviewees like the industrial base, the appeal to the millennial generation, and the lower cost of doing business in Austin. The market was a top choice for both the office sector and the single-family housing sector and the number two ranked market for retail. Interviewees are also attracted to Austin’s diverse employee base, and the market is an example of “jobs chasing people.”
No. 3 — San Francisco – The decline from the number one spot last year, according to surveyed participants, is due more to growth in the other cities than any identifiable flaw in the San Francisco market. The strong local economy and improved domestic and international travel have made San Francisco the number one choice for hotel investment in 2015. Respondents ranked the office market number three and the retail market number four.
No. 4 — Denver – Denver joins Austin and San Francisco as markets popular with the millennial generation. Denver’s industry exposure to the technology and energy industries has also attracted investor interest. The results of the survey put Denver retail at number five and office at number six.
No. 5 — Dallas/Fort Worth – Interviewees raise the possibility that despite being ranked lower than Houston, the economic diversity could make the current growth rate more sustainable in Dallas/Fort Worth. The market continues to be attractive to real estate investors because of its strong job growth, which benefits from the low cost of living and doing business. Single-family housing in the market is the highest ranked property sector – and it also has the highest ranked industrial sector (number four) among the top five markets from this year’s survey.
Now in its 36th year, Emerging Trends inReal Estate® is one of the most highly regarded annual industry outlooks for the real estate and land use industry. It includes interviews and survey responses from more than 1,000 leading real estate experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants.
About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in sustaining and creating thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.
About PwC US
PwC US helps organizations and individuals create the value they’re looking for. We’re a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We’re committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.
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