AUSTIN, Texas – October 29, 2024 –

Since 2010, Austin has ranked seventh or higher in each Emerging Trends in Real Estate® report. The capital city placed No. 5 in the 2024 forecast, No. 4 in the 2023 forecast, No. 4 in the 2022 forecast, No. 2 in the 2021 forecast and No. 1 in the 2020 forecast. Other noteworthy Texas cities earning spots on the list include Dallas-Fort Worth at No. 1, Houston at No. 3 and San Antonio at No. 13.

Austin is one of many cities within the top-ranked category, called Super Sun Belt markets, which includes each of the four top-ranked markets and 13 of the top 20-rated markets. The study mentioned that like several Sunbelt regions, Austin’s previously strong migration in flow is now moderating, with net migration barely positive. House prices are growing, as are office vacancy rates. However, strong economic diversity and employment means this Sunbelt staple still holds its charm.

The report’s overarching theme is “The Time Has Come.” The skies are finally clearing over commercial real estate markets, even if some dark clouds still linger. Industry people are more sanguine than a year ago, though also realistic. Better times are ahead, but the healing will take time. Anticipation of an inflection had been building over the past year as inflation started to ease, though the wait took longer than most real estate people had expressed hope for in our prior report. The pivot arrived in summer 2024 with eight magic words from Federal Reserve Bank Chair Jay Powell: “The time has come for policy to adjust.” With that pronouncement at the Fed’s annual Jackson Hole Economic Symposium in late August, Powell clearly communicated to markets that inflation had been tamed and the COVID era of tightening was ending.

An Emerging Trends in Real Estate discussion will be the focus of the ULI Austin December 11 Breakfast, taking place from 8-10 a.m. at the Austin Central Library. Guests will hear national evaluation and insights from one of the report’s co-authors, after which a local panel will provide a unique perspective on the high-level results.

Austin Falls to No. 15 Ranking in Emerging Trends in Real Estate® Annual Forecast,

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To view the full report, visit https://digitalmkg.pwc.com/etre-2025-pwc-uli/1.

The five emerging trends to look for in 2025 and beyond include:

1. Be Careful What You Wish For. Interest rates are coming down—finally! That’s what we all desperately wanted, right? But at what cost? Interest rates were ultra-low for ultra-long, and the real estate industry came to depend on them. “We’ve gotten spoiled by cheap credit for a long time,” admitted the former head of one leading investment management firm. “People have used leverage, not because they’ve needed to, but because it’s been a tactical tool to enhance returns.”
2. A New Cycle Begins. Real estate capital markets are recovering. “We’re on the early end of the healing process, but we’re excited about the opportunities we’re seeing,” said one investment banker. “Liquidity is steadily improving every day. [Capitalization] rates aren’t necessarily going back to those historic lows because growth rates aren’t there. But every few weeks, you’re seeing more bids in the market, you’re seeing pricing get a little bit tighter, you’re seeing debt spreads get tighter.”
3. Building Boom, Tenant Boon. The pandemic triggered profound shifts in how tenants use different types of space: how much, where, and what kind. The changes began with the lockdown as many sectors of the economy were forced to adapt to new ways of operating, and many of those adaptations have endured in some form. By now, these shifts have either largely played out, or their direction is reasonably foreseeable. Office workers commute to the workplace less frequently; consumers shop more online; and more goods than ever are stored in warehouses. All these effects have altered space usage patterns.
4. Now Where? The pandemic rattled property markets in some fundamental ways. In the preceding trend, we highlighted some of the ways in which tenants have shifted the kinds and amount of space they demand. They have also shifted where they want to work and live, both within and among regions. The pandemic prompted households and businesses to move from central cities to more outlying suburban and exurban areas. It also strengthened preexisting migration patterns from colder Northeast and Midwest metropolitan areas to warmer Sunbelt climates in the south and west.
5. Many Solutions, No Answers. When evil spirits returned to invade her family’s home again, the little girl in the Poltergeist sequel famously warned, “They’re baaaaack!” In a similarly horrifying way, “housing costs and availability” returned as the top social/political issue in this year’s Emerging Trends survey, topping “political extremism” and “immigration policy” by wide margins. Housing affordability was also very much on the minds of many of the industry leaders interviewed for this report.

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Thus, it returns as a top trend for the 2025 edition of Emerging Trends, as it has for eight years running.

The 2025 Property Type Trends include:

1. Industrial Smart Growth: The Next Stage of Tactical Network Optimization. Industrial real estate tenants are employing a new smart-growth strategy for the next phase of leasing, placing greater emphasis on asset selection for warehouse space when considering future expansions. Infrastructure requirements for logistics real estate have expanded to include high power availability, automation capabilities, and sustainable building features. Supply network diversification, including through nearshoring and onshoring of operations, has become a key driver of location selection for industrial users.
2. Data Centers: Navigating Power Constraints and Skyrocketing Demand. Data centers are a relatively new major property type with ties to both infrastructure and net-lease, and they are on a path to be one of the largest property types in the country over the next 10 years. Demand is being fueled by numerous drivers, including cloud storage, mobile data traffic, overall internet traffic, and artificial intelligence (AI), among other new and growing uses (e.g., autonomous vehicles). The surge in AI is notably driving a significant increase in the need for data centers and computing capacity.
3. Senior Housing: Building New Muscles. The historical playbook for senior housing has achieved a great deal for the sector and should not be tossed aside. However, much can be gained from a fresh lens on the future. As developers wait for the capital environment to free up greater access to affordable capital, planning in this space should be bold and innovative. Here is an opportunity to truly understand the customer needs and preferences and position the industry for success in the decades to come.
4. Retail Resilience: Weathering Every Storm. Despite an uptick in bankruptcies, retail leasing remains strong buoyed by non-merchant categories. Vacancy levels are at, or near, 20-year lows across most US markets after three consecutive years of resurgent demand and little new development. While rents are climbing, the post-pandemic spike in construction costs has meant that few new developments have moved forward. Though contraction in the drug store industry will close thousands of stores over the next couple of years, many expect this to become a major redevelopment opportunity.
5. Innovating the Suburbs: Is Life Science Growth Sustainable? The bio medical industry, the source of demand for life science real estate, is a multifaceted growth story across the United States, experiencing tremendous growth as new scientific

Austin Falls to No. 15 Ranking in Emerging Trends in Real Estate® Annual Forecast,

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discoveries lead to new medicines and therapeutics. While off all-time highs set during the COVID-19 pandemic and with lackluster performance during 2022 and 2023, publicly traded biotechnology companies are once again on a growth trajectory.

Now in its 46^th year, Emerging Trends in Real Estate®, undertaken jointly by PwC and ULI, is one of the most highly regarded annual industry outlooks for the real estate and land use industry. It features proprietary data and insights from more than 1,600 leading real estate industry experts, exploring shifts post-pandemic and analyzing both U.S. and Canadian markets.

About ULI Austin:

The Urban Land Institute (ULI) is a member-led organization shaping the future of the built environment for transformative impact in communities worldwide. ULI is a network of people in every profession and sector in real estate development and land use from all over the world and in every career stage. While global in scope, ULI is local in impact through sharing knowledge and making connections. The Austin District Council was founded in 1994 and now includes over 1100 members. Our members are involved in all aspects of the development and city planning process – private, public, and nonprofit. For more information, visit Austin.ULI.org.

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