From the December Issue of Units Magazine.
by Jeffrey Lee
Participants in the Emerging Trends in Real Estate 2011 survey believe the 24-hour cities will always dominate and outshine secondary markets.
This year, the top markets selected by survey respondents offer no surprises. Washington, D.C., pulls away from the pack, followed by San Francisco, Boston and Seattle, as the pre-eminent gateway cities. Houston and Denver solidify rankings, and respondents show faith in Southern California’s resiliency, despite recent setbacks.
While ratings improved for markets from coast to coast over 2010’s results, the gap between top and bottom continues to widen. More than 60 percent of surveyed cities still fall below “fair” ratings for commercial and multifamily housing investment prospects. Following is a snapshot of the top 10 markets ranked by survey respondents:
Washington, D.C. Never far from the top, the nation’s capital will hold onto its top ranking as long as the economy labors. The federal government never downsizes, while lobbyists and consultants swarm legislators and agencies hoping to influence or stop regulatory changes. All the activity cushions property markets and attracts investors. No market benefits more from core buyers’ recent flight to quality, driving prices back up.
New York. TARP and Fed funds directed at banks helped financial markets and eased job cuts, triggering the biggest
ratings jump for New York. Apartment rents rebound along with coop/condo prices, which registered only minor drops in top neighborhoods.
San Francisco. The country’s most volatile 24-hour market, the City by the Bay now offers investors excellent near-market-bottom buying opportunities, particularly in apartments and hotels. The market also sidesteps some of its state’s fiscal mess, performing better than Southern California. Tech and life science industries flourish around top-flight universities (Stanford, UC Berkeley), help attract brainpower, and sustain expensive regional living standards.
Austin. A smaller Texas market that scores high ratings. Survey participants note, “Everyone wants to live in Austin.”
As the state capital and home to a major university (hook ’em, Horns), Austin is one of the few cities in the Sunbelt with growth restrictions.
Boston. This venerable 24-hour city registers high marks for livability, controlled development, and a highly educated labor force, but lacks economic vibrancy. Apartment rents will track back up as expensive for-sale housing keeps tenant demand high for multifamily units.
Seattle gets a boost from in-migration to the area, adding 160,000 new residents since the recession.
San Jose aligns with San Francisco gateway benefits, including a flourishing tech and life sciences industry.
Houston is expected to emerge stronger from the recession than most cities, creating more real estate demand.
Los Angeles remains an attractive location with Southern California serving as the most important gateway to the Pacific Rim and Latin America.
San Diego tracks closely to Los Angeles with its desirable climate.