Urbanization To Flourish Into 2015

December 30, 2014

Urbanization is a widely accepted trend in commercial real estate. In “Emerging Trends in Real Estate”, Urban Land Institute (ULI) cited 70 of their 75 markets polled as showing positive population growth in downtown markets. For the first time in decades, overall city populations have grown more than suburban populations. Even in markets that are notoriously suburban, such as St. Louis or Dallas/Ft. Worth, there is a positive shift in demand for downtown office and retail space.

The Wall Street Journal adds insight, “Since 2010, demand for office space has been rising faster in cities than in the suburbs, at least when measured by rent growth. Office rents sought by landlords in urban areas rose 18.7% in the past four years, based on end-of-2014 estimates, compared with just 3.3% in the suburbs, according to real-estate research firm CoStar Group Inc.”

What’s Driving Urbanization? 

Multiple factors are contributing to the flood of business and people to urban cores.

  1. Millennials Seek Urban Lifestyles: Millennials are still weary of the housing market, and therefore, more inclined to rent multifamily housing in downtown markets. They are also drawn to areas or neighborhoods where they can work, live and enjoy the area around them, simply by walking around.
  2. Employers Are Competing to Recruit Top Talent: Companies seeking recently graduated talent and hoping to retain up and coming employees are moving or expanding in downtown markets to compete.

“They’re going where the talent is, and the talent is in the urban core,” said Jason Hickey, chief executive of Hickey & Associates, a firm that advises corporations on where to open offices.

The Suburbs Won’t Go Out Of Style

The majority of American still live in  the suburbs, and experts predict urbanization may be due to a generation shift. Once Millennials are ready to settle down and seek better school districts, they may return to the suburbs.

Also, ULI noted that urbanization may cause some suburbs to thrive. “Edge city” locations that combine office, retail and residential areas will continue to flourish as people commuting to downtown areas want to live in close vicinity.

Considering a Downtown Location?

Talk to the Intelica Office Services Group about site planning and selection. We can help your business identify commercial properties in core urban markets or in “edge cities” that can improve your location, boost employee/client morale and help recruit top talent.