Posted: April 26, 2017 by Eli Randel, Director of Business Development
ICSC Trend Prediction II
Urbanization Will Dominate Suburbia In Population Movement Next Cycle
In preparation for ICSC, we are putting together several prediction pieces starting with last week’s opener Pre ICSC Retail Forecast – Part I.
Based on anecdotal data, interviews with institutional capital investors, and my personal belief, I predict next cycle will be one in which urbanization pulls many from the suburbs inward. This does not mean suburban real estate will drastically suffer, in fact, the result will create new opportunities and like many trends, when activity flows disproportionately in one direction, space becomes crowded eventually pulling the pendulum back to the less crowded market.
Here’s are some reasons why urbanization will occur:
WHAT IT MEANS FOR CRE
Pent up institutional and foreign capital, more familiar and comfortable with the stability of major markets, will continue to flow to cities pricing out most entrepreneurial capital investors. Following a corrective period, infill land will trade at astronomical prices and bite sizes exceeding friends-and-family equity buckets. Given overall demographic growth and limited supply resulting from moderate development last cycle, most suburbs will remain healthy from a real estate standpoint with some softening in occupancy and rate growth during a corrective period. If the economy hits a road-bump, suburban office vacancies may spike, as small independent businesses rising with the tide sometimes go back to working from home-offices when their business softens. Cities will eventually sprawl and begin to bleed into nearby suburbs offering buy opportunities for those who can predict and shape the path of movement. Suburban yields may increase as a result of less competition and tough underwriting translating to higher costs of capital, offering premiums for financeable entrepreneurial investors willing to stomach some volatility and actively manage assets.
Next week we’ll discuss which cities stand to gain the most, and which may suffer.
Comments and feedback are always welcome. Email Eli
Eli Randel is Director of Business Development based in CREXi’s Miami office. Eli spearheads CREXi’s growth and sales throughout the east coast as well as overseeing the national sales team. Prior to joining CREXi, Eli was director of dispositions for Blackstone’s Invitation Homes. Eli has also held management positions and production roles with Cohen Financial, Auction.com, LNR and CBRE where he began his career spending three years in Investment Sales before leaving to obtain his Master in Business Administration from the University of Florida.