Shopping, living trends
disrupt Atlanta real estate Business, By J. Scott Trubey - The Atlanta Journal-Constitution 6/20/16
NEW ORLEANS —
The top trends affecting real estate in the year ahead all seem to center on
disruption. Factors such as “experiential” retail, the sharing economy,
political instability, shifting demographics and the densification and
urbanization of cities are key in both the commercial and residential markets,
according to the Counselors of Real Estate’s 2016-2017 Top 10 List of Issues
Affecting Real Estate.
The top issue,
according to CRE: the changing global economy, instability and slowing growth
around the globe. Jim Lee,
chairman of CRE and a co-founder of investment firm Kensington Realty Advisors
in Chicago, presented at the National Association of Real Estate Editors
conference here. CRE is an invitation-only group of top real estate advisers
and includes 1,100 members worldwide.
10: The Rise of Experiential Retail
Retailers are
adapting to online shopping by trying to turn their centers into live-work-play
communities, rethinking the tenant mix to provide unique shopping and
entertaining experiences. The ideas is to create “destination” centers where
people want to spend time as well as buy stuff.
In metro
Atlanta, examples are Avalon in Alpharetta, Ponce City Market, the reinvention
of Phipps Plaza and Lenox Square, Buckhead Atlanta and the Battery Atlanta
entertainment district under development outside the new Braves stadium in Cobb
County.
Visitors enjoy the lawn and fountain in the mixed-use development of
Avalon, in Alpharetta. Stores are
becoming more like showrooms and return centers for online shopping, while
restaurants and tenants such as luxury bowling alleys can be anchors for
developments, Lee said.
Malls also are
rethinking the use of their real estate, adding apartments and hotels to bring
new energy to their surroundings as more consumers seek out neighborhoods where
they can walk to parks, dining and entertainment. Phipps Plaza has plans for
both, while Perimeter Mall’s owner is working a deal to sell an out-parcel to a
developer for an office tower.
9: The Sharing/Virtual Economy
The American
flag flies over the renovated Ponce City Market, in in-town Atlanta. The
development is an example of experiential retail. Ride-sharing services such as Lyft and Uber
mean retail centers and apartments might need fewer parking spaces. AirBnB is a
serious threat to hotel owners. Crowdfunding, or ways to raise investment
dollars from regular people, is changing real estate investing, he said.
8: Energy
Spiking energy
costs were a big problem for some tenants and a boon to landlords in
energy-driven local economies such as Houston. Now that has flipped with the
oil glut. Investors, Lee said, are reassessing their investments in energy boom
towns, and the office market in Houston is struggling amid layoffs and
corporate restructurings.
7: The Disappearing Middle Class
It’s more than
just a problem for real estate, but stagnant wages and the expanding gap
between rich and poor affects purchasing power for consumer goods, cars and
homes. Meanwhile, the CRE report said, costs for health care and college have
risen. In response, many middle market retail chains have struggled. The shift
from home ownership to renting is one reflection of that, which does open
opportunity for investors in apartment communities. Millennial households also
do not have the same relative purchasing power of their predecessors. “The
wealth and income gap continues to grow,” Lee said.
6: Housing Affordability and Credit Restraints
Both rentals
and home ownership are strained by issues of affordability. Home prices have
risen beyond the reach of many buyers, which forces more to rent and pushes up
prices for apartments. Lee said “micro apartments” could be one answer, but not
everyone will want to live in a tiny unit. Will builders shift from luxury homes
to starter homes?
Lee said the
high housing cost issue will present both challenges and potential
opportunities to be creative with affordable housing.
5: The Political Environment
Instability in
politics puts doubt in the minds of investors, Lee said. “The political
environment has become acrimonious on all levels, whether that’s global,
federal, state or local,” he said. Continued population growth and the
challenges of an aging population will pressure the nation’s infrastructure.
In Georgia, the
state has won kudos for the partnership between Gov. Nathan Deal and Atlanta
Mayor Kasim Reed. State lawmakers also voted to raise fuel taxes to fund roads
and bridges and gave Atlanta residents the opportunity to vote to expand MARTA
4: Densification/Urbanization
Many suburbs
are trying to be more urban, pursing walkable developments and live-work-play
communities. That’s expected to continue both in cities and the burbs.
Urban areas are
winning at the expense of suburbs, Lee said, with vibrant urban centers showing
themselves to be more economically viable. In metro Atlanta, Alpharetta,
Dunwoody, Sandy Springs and others are getting denser, particularly around mass
transit. Like the issue of experiential retail, there’s both a threat and
opportunity for traditional retail and office centers.
3: Demographic Shifts
The nation is
getting older, millennials are waiting later to get married and have kids and
all generations are demanding more in terms of services and amenities. Baby
boomers are headed to retirement and millennials have now surpassed boomers in
the workforce. Another aspect of both changes in demographics and urbanization:
Baby boomers and millennials competing for the same housing. As boomers age, it
will put greater strain on governments and real estate professionals to provide
infrastructure and services to allow them to age-in-place, the report said.
This also opens opportunity in the senior living and elder care industries, and
likely in more densely-populated areas.
2: Debt Capital Market Retrenchment
Lending is
slowing, Lee said. Regulators are instructing banks to pump the brakes on
commercial real estate lending and commercial mortgage-backed securities also
are slowing, he said. The competition for debt will intensify.
1: The Changing Global Economy
The top issue,
Lee said, is the changing economy and cooling global growth. The U.S. remains a
magnet for foreign investment, but trade activity abroad is weakening and Lee
said his group is seeing foreign investment softening.
Comments
When the
music stops, cities and counties need to make sure they have a chair to land on
if they are on the hook for Development Bonds.
Otherwise, taxpayers will pay for developers’ optimism and greed. We need to return to the time when commercial
real estate was totally planned and funded by the private sector investors, to
make sure that the development has been planned and timed properly. If they fail, they should be “on their own”. Government
needs to get out of the business of giving subsidies and tax holidays to
developers.
The only
population increases planned for currently by government include about 1
million refugees on welfare and no jobs.
Norb
Leahy, Dunwoody GA Tea Party Leader
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