18-hour cities trending upward into 2016

18-hour cities trending upward into 2016

Dec. 2015

Are cities that never sleep being replaced in popularity by cities that know when to take a break? To an extent, according to the 2016 ULI Emerging Trends Report, which indicates some real estate investors are starting to favor 18-hour cities over their 24-hour gateway counterparts.

San Diego is an 18-hour city that is gaining popularity.

San Diego is an 18-hour city that is gaining popularity.

Secondary markets are becoming more attractive as global and domestic investors look for new opportunities. These markets, such as Austin, Denver, San  Diego, and San Antoniooffer the benefits of large urban areas at a lower cost. Plus, they are often considered “cool,” which makes them unique and creates a quality of life that attracts a good work force.

This builds on a trend highlighted by Emerging Trends in 2014 and is supported by three major points:

  • Stronger macroeconomic performance in the U.S. has helped absorption and improved occupancy in most American markets.
  • Real estate investors are becoming bold as they find themselves in a better position to take on additional risk.
  • More data on secondary markets is available than ever before, giving investors peace of mind when considering investment opportunities.

DenverIt’s unclear whether an economic downturn would hurt the investor interest that 18-hour cities have generated. History suggests that these markets are more volatile than gateway cities, but there are positive factors that could make 18-hour cities a viable option for the future:

  • Capital markets have been careful about funding new development
  • Investors have become smarter, focusing on precise areas or neighborhoods in a market.

Look for 18-hour cities to continue gaining momentum in 2016. Check out the full ULI report here.

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