Emerging Trends in Real Estate 2025

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I’m proud to have served again as head writer for the 46th annual edition of Emerging Trends in Real Estate, released this week by the Urban Land Institute and PwC. Thanks to all the industry leaders and experts who generously shared their time and insights for the report. Their perspectives on what we can expect in the coming years provide unique context for the report’s extensive survey data.

The key theme for this year: “The time has come.” Most obviously, time for the Fed to pivot from its restrictive battle against inflation, as Chair Powell stated in August, and start bringing down interest rates. And time for CRE investors to re-enter the markets and test the waters. It’s also high time for our industry to do more to expand housing availability and improve housing affordability. These are some of the themes we highlight this year.

A report overview on ULI’s website here.

And the full report is available for free download on ULI’s website here.

Countercyclical Investment Opportunities For REIT Investors

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Commercial property owners face some daunting challenges, as I discussed in a recent article, which makes me bearish on REITs overall right now. A credit crunch is spiking just as property market conditions are softening – a deadly combination for many owners. Broad expectations of an economic downtown, if not a recession, portend even tougher times ahead, particularly in the office and multifamily sectors.

The economy will, indeed, eventually lapse into a recession – eventually – though even the bears keep pushing out their recession forecasts, calling into question the usefulness of these outlooks in making investment decisions. But here’s the key insight: Though REITs certainly perform better when the economy is growing than when contracting, It may not matter much for how REIT investors position their portfolios whether the economy actually turns down or just slows without falling into a recession, as REITs usually perform similarly in both situations.

My analysis and views on Seeking Alpha.

The End Of Rate Hikes Does Not Improve REIT Prospects

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The Fed may be done with rate hikes in this cycle, meaning interest rates could soon begin to retreat. Should REIT investors rejoice? Not so fast.

  • Investors should not expect the end of Fed rate hikes to boost REITs.
  • Though falling interest rates can bolster REIT returns, the broader economic environment is much more important, and the outlook is not favorable.
  • The full impact of the coming downturn on operating performance is not yet fully baked into REIT prices.
  • Time to start looking for countercyclical REIT plays.

My analysis and views on Seeking Alpha.

The Office Market Reckoning is Nigh

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Remote working is still upending the office property sector. In an article I wrote for Real Estate Issues in 2021, I considered the early evidence that working from home and hybrid work arrangements were likely to be lasting legacies of the pandemic.1 Two years later, the “will they or won’t they return to the office“ debate is largely settled: workers won’t be sitting at their company desks nearly as often as before the pandemic – and firms won’t be occupying nearly as much space.

After reviewing the emerging new dynamics of office leasing, I focus in this article on the impact that reduced office tenant demand on property capital markets. Already property values have fallen more in the office sector than in any other property sector, while investment returns have been the lowest. And that pain will only intensify as market conditions weaken further.

But as with the shakeout in the retail sector, outcomes for individual owners and buildings will be highly differentiated. The premier buildings – those with the best locations, designs, amenities, and services, and especially health and safety features – will prosper with high occupancies and record rents. Much of the commodity “B” space will continue to muddle along.

But many other buildings in the middle will see a dramatic reversal of fortune, including some formerly Class “A” offices that until recently commanded premium rents. This is where we can expect to see the greatest concentration of distress and value destruction.

Read my deep dive article in Real Estate Issues published by the Counselors of Real Estate

Thriving Retail Today: What are the Key Ingredients?

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What drives successful brick-and-mortar retail today? What lessons can be learned from outperformers that can help owners improve their retail centers or plan better ones? How do shopping centers thrive alongside the convenience of e-commerce? And how can cities and towns help support successful retail development in their downtowns and in neighborhoods?

I was pleased to moderate a webinar for the Urban Land Institute on March 15, 2023 with a panel of outstanding retail center owners: Jodie McLean, Chief Executive Officer of EDENS, Cathy Jones, President and CEO of Sloss Real Estate Company; and Gavin Thomas, Vice President of Development for Hendricks Commercial Properties. ULI members can view the webinar here.

The webinar was based on a report I co-authored for ULI that can be downloaded here.

Retaining and Attracting Tenants in Today’s Tough Office Market

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Office markets are increasingly challenging. Vacancies are rising, and tenants are extra choosy about where and what they will lease. Firms are looking for newer buildings that offer accessible locations, first-class amenities and services, appealing designs, and functional layouts. And probably most important, with our memories still scarred from pandemic fears, tenants demand buildings perceived to provide superior health and safety features.

How should office building owners and managers respond, particularly for older buildings? Check out my new blog for Grace Hill here.

Office image courtesy of Grace Hill.

“Emerging Trends in Real Estate 2023” Released

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I’m pleased to have returned again this year as the lead writer for Emerging Trends in Real Estate, released last week by PwC and the Urban Land Institute. Despite the challenges of cyclical headwinds and shifting industry dynamics, industry participants remain largely optimistic and “take the long view.” One of our key themes for 2023.

In keeping with its long tradition, the report lays out ten top trends of relevance to the property sector. Among the key issues this year: “normalizing” as market conditions return to more familiar pre-Covid levels, while others find their “new normal.” Climate change and housing affordability return as continuing issues impacting our universe, while Sun Belt metros return as most-favored markets but lose some of their luster.

A report overview on ULI’s website here.

And the full report is available for free download on ULI’s website here.

San Francisco is Really Weird. But Not Only the Way You Think

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San Francisco is different from other places. The city developed its lawless and wild reputation from its very founding when thousands of prospectors arrived at this former mission outpost during the Gold Rush of 1849 — along with prostitution, gambling, and crime. From that notorious beginning, San Francisco has long been celebrated for its diversity and for attracting outcasts from everywhere else: beatniks in the 1950s, hippies in the 1960s, and people of all sexual orientations and identities pretty much always.

Perhaps less well known is that San Francisco has also always attracted money. Alas, the people who made money in the Gold Rush and then the Silver Rush generally were not the common prospectors but the bankers who financed them and the entrepreneurs who sold them provisions. Some became fabulously wealthy, while most prospectors went home broke.

In fact, San Francisco has long reigned as the financial capital of the west coast, home to leading banks like Wells Fargo and Bank of America, but also Crocker Bank and Bank of California, as well as the Pacific Stock Exchange. But even with this history, it is still surprising — even shocking — to learn just how many billionaires reside within its 49 square miles.

Read my article in Illumination on Medium here.

Remote Work Is Here to Stay.

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Cities and Property Markets Will Never Be the Same.

Looks like we’ll be working from home for a while longer. A lot longer. We’ve learned a lot in the last two years about working remotely and adapted our homes to be functional workplaces. Plus, our employers have upgraded their infrastructure to facilitate remote working, often shedding space in the process.

And perhaps most importantly, we also now better understand both the advantages and difficulties of working from home (WFH). For many more of us than before the pandemic, the benefits are just too compelling to want to go back to the old ways.

I wrote about this WFH trend last year in Emerging Trends in Real Estate, published annually by the Urban Land Institute (ULI) and PwC. There was much debate then about the permanence of WFH arrangements. But now we know more, and the odds are even higher that remote work isn’t going away, at least not to the way it was. The hit to office buildings will be enormous.

But the impacts are much broader than just the damage to commercial real estate markets and local businesses and their workers. Here are three other significant trends I see for urban places that may be less obvious and don’t get nearly enough attention: the devastation of public transit, a game-changing break in the traditional link between work and workplace, and hope for more affordable housing in expensive gateway cities.

Read my analysis in Discourse and Dialogue on Medium here.

The Upside of the Big Quit

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Of the many changes in America’s labor markets since the pandemic began, perhaps the most surprising has been a decisive shift in the balance of power from employers to workers. Facing historic labor shortages and much choosier workers, employers are boosting wages, improving workplace conditions, and providing more flexible work arrangements to attract the personnel they need.

In the first part of a two-part article, I explained what’s causing the labor shortage and why it’s unlikely to ease anytime soon. In this article, I show how workers are leveraging the labor shortage and other trends to be much more selective about where and when to work and under what conditions. It all adds up to newfound clout for labor and greater hiring costs and challenges for employers.

Read my article in Dialogue & Discourse on Medium here