ULI Austin Updates

December Breakfast Recap: Emerging Trends in Real Estate

ULI Austin Monthly Breakfast Series Recap:
Emerging Trends in Real Estate
December 13, 2017        Provided by Hahn Public Relations         Platinum Underwriter: 


Moderator:  Industrial: Scott Flack, President at Live Oak-Gottesman

The Emerging Trends in Real Estate© report is an annual publication with a 38-year history published by ULI and PwC. The report follows extensive surveys and interviews with the most senior property professionals. Over the years, this annual report has provided key indicators of sentiment in their respective regions. (Download the 2018 report.)

Key Takeaways:

  • This year, Austin ranks 2nd overall behind Seattle; Dallas/Fort Worth ranks 5th, San Antonio ranks 18th and Houston ranks 60th
  • Top issues Austin is facing:
    • Austin ranks 1st in land and construction costs
    • Austin ranks 2nd in housing costs and availability
    • Austin ranks 3rd in infrastructure/transportation issues
    • Austin ranks 4th in job and income growth
    • Austin ranks 5th in qualified labor availability
  • Other Austin rankings:
    • Austin ranks 1st in population growth rate projections and actual population growth in the south
    • Austin ranks 3rd for investment in the south
    • Austin has the highest number of positive rankings of any market in the south
  • There is a stronger influence of foreign capital this year – 22 percent of all office transactions have some element of foreign capital
  • Office trends:
    • Tenants are looking for office space that is walkable to food and bars
    • Tenant improvement costs for second-generation space is between $40-70/sf, up from was $25-40/sf
  • Retail trends:
    • It’s currently a very tight market and space is really hard to find; there has not been much retail growth in the past 10 years, if you can get a project out of the ground, leasing is really strong
    • Millennials are starting to move out of the urban core into the suburbs, meaning new suburban retail is starting to reflect the design of urban retail spaces
    • Gyms are starting to move into malls – not only are they taking space but they are producing daily traffic: some malls have seen a four percent year-over-year increase in retail sales where gyms have been added
  • Multifamily:
    • Tenants want to be able to walk to a restaurant or experiential retail, construction costs remain a concern with labor shortages
    • There are currently 20,000 units in the supply pipeline, but 7,000-8,000 are urban infill – people want to be in Austin
    • Units are generally getting smaller over the past 7-8 years with more one-bedroom units in demand than two-bedroom units (AMLI doesn’t think micro units are a long-term trend)
    • Don’t design just to Millennials or Baby Boomers; at Mueller, for example, AMLI was seeing a strong focus on younger demographic renters, but now an older demographic
  • The Amazon/ecommerce trend is generally impacting retail unfavorably (although 90 percent of retail sales are still completed at brick-and mortar-locations), but it is having a favorable impact on the industrial sector; brick-and-mortar and online is colliding: places like Best Buy are still doing OK and online retailers are starting to move add brick-and-mortar locations for the many customers who still need to experience the product
  • Millennials want to live as close to downtown as possible but have to afford it with starting families; the new Millennial concentrations are in the 183/Arboretum area and just south of downtown
  • The panelists all agreed there are positives and negatives associated with a new Amazon headquarters in Austin: it could create 150,000 jobs created just from one employer (direct and indirect jobs), but it would also impact on affordability and transportation; Amazon’s innovative culture, however, could help Austin come up with innovative solutions to infrastructure challenges
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