5 Top Trends Set to Impact CRE in 2017

Released in October, the Urban Land Institute’s annual Emerging Trends in Real Estate Report profiles some of the biggest trends set to impact the real estate space in 2017. Although the U.S. market has seen a lack of security in recent months —from Brexit to the U.S. presidential election— the report shows a much more favorable outlook than the rest of the world.

No matter what your interest or role in the real estate market, keeping abreast of the trends is always a best practice. Below, we’ll take a look at some of the top trends ULI and PriceWaterhouseCoopers believe will impact us in the coming year.

#1. A Kinder, Gentler Real Estate Cycle

According to the report, “the disruption wrought by the global financial crisis violently upended financial markets around the world and hammered real estate markets in the United States.” At 85 months’ duration, this business cycle is already the fourth longest in U.S. history —but the report indicates we’ve entered a “mature” phase, with a market that seems poised to stay level.

#2. Optionality is Gaining Favor

Both on the investor side and the user side of the market, the report says optionality is in. From a user standpoint, these types of multi-use spaces allow for adjustment based on size, location and use. This trend can be seen in coworking. On the other hand, optionality gives property owners the ability to maximize highest and best use, based on immediate tenant demand.

#3. Transformation Through Location Choice

The report suggests that a new breed of CEOs has been “turning a widespread economic development approach on its head, transforming some cities in the process.” Rather than negotiate for the most generous package of public incentives, these leaders believe that private employers can catalyze civic revivals and can create an opportunity that benefits the community, as well as their enterprise.

#4. Understanding the Role of the Small Developer

Citing the amount of risk-averse capital, the ULI report suggest that mid-size developers are seeing tough times. However, the researchers seem to agree that now is a great time for growth in these smaller firms —with a wealth of opportunity in urban infill and smaller markets.

#5. Labor Scarcity in Construction Costs

For various reasons outlined in the report —from a clampdown on immigration to retirement of skilled craftsman and a boom in the oil and gas sector, which as pulled away skilled talent— the labor pool is rather shallow compared to other periods in our history. The real estate industry is seeing the impact and is pushing up development time on projects and is cutting into returns. Some even believe that this shortage slowed the number of units being built in 2016 and could have helped prevent overbuilding.

These are just a few of the major trends that ULI is predicting for 2017. For more trends, including housing affordability, the connectedness of cities and how augmented reality will play a role in 2017, download the full report here. What trends are you most anxious to watch play out?