It’s time to look ahead to 2014 and what is coming in the real estate market. The Urban Land Institute recently released it’s closely followed annual “Trends in Real Estate 2014 Report”. While most investors are interested in their local market, this report looks at the big picture. Something all investors need to stay aware of. The national real estate industry is expected to continue growing in 2014 but at a slightly slower rate than 2013.
More importantly, major investors will shift out of tier one markets into tier two markets due to the high cost of real estate in the “gateway” cities. Gateway cities are cities offering the most international airplane flights and international business. Cities such as Boston, Chicago, Los Angeles, New York City, San Francisco, and Washington D.C. But there are other important cities now offering a better return on capital. These include Austin, Dallas, Houston, Miami, Orange County, Portland, San Jose, Seattle, and Minneapolis. These are the types of cities that institutional investors will be investing in during 2014.
Probably the biggest change in 2014 will be a shift from residential real estate to commercial real estate. While residential made solid improvements in 2013 (expected to be up an average of 7.5% or higher by year’s end) the market for 2014 will shift to commercial properties. Inside the commercial sector, expect warehousing to see the most growth and retailing to see the least. E-commerce will continue to take market share away from brick and mortar businesses. As a result, more distribution centers (warehousing) will be added and brick and mortar will suffer.
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