The Trend Report: Emerging 2017 Insights

While just a mere month into 2017, there are already a few emerging trends that savvy commercial real estate investors are taking notice of according to the 2017 Emerging Trends in Real Estate report recently released by the Urban Land Institute and PWC. After reading the report for ourselves, here are our top six emerging trends to watch out for in 2017!

Demographic Shifts

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We’ve gone into great length previously on the impact that the rising number of Millennials and Baby Boomers entering and exiting the work force is forecasted to have on the commercial real estate market, and the crossover point where more Baby Boomers are retiring than Millennials entering the labor force is now upon us. Boomers are retiring at a rate of approximately 10,000 per day and America’s population of persons over the age of 90 has almost tripled since 1980. This, combined with the fact that many younger (millennial) households are falling behind, has left older and younger households competing for housing in many of the same places, indicating that Multi-Family developments with evolving amenities will continue to stay a strong investment.

Urbanization / Densification

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This trend, which has been steadily growing over the least several years, seems to have no indication of slowing down any time soon as walkability, extensive live/work/play opportunities and alternative transportation options continue to draw people of all ages into the urban core. Developers are also continuing to follow this trend, preferring to invest in creating high-density mixed-used centers that provide a mixture of luxury living spaces, retail, work, parks, gathering and entertainment spaces. Even the suburbs are feeling the pressure to become more “urban”.

The Suburbs Aren’t Dead

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While urbanization is still a hot trend moving into 2017, it’s important to note that most suburban communities are still flourishing despite the fanfare of the urban movement. In fact, in America’s 50 largest (and most urbanized) metropolitan areas, suburbs account for 79 percent of the population and (despite popular and media perception) 75 percent of the 25-35 year old population. So while many are feeling the pressure of the urbanization trend, it’s important to note that our nation’s suburbs are still poised to maintain their relevance and predominance.

The Rise Of The “Surban” Neighborhoods

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As we just stated, the suburbs are far from dead. However, the market is beginning to see a trend toward the urbanization of existing suburban neighborhoods and new developments that are shifting their focus to provide greater density, diversity, walkability and transit accessibility. This trend is due in large to the Millennial preferences for these qualities, which studies have found they find equally attractive in the suburbs as they do in the densest urban core. This has seen more and more retail stores transforming their spaces into locations that sell experiences, rather than goods and more developments combining housing and retail to satisfy consumer demand for places that offer convenient, car-free shopping.

Forward Looking Strategies

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One trend that has become glaringly apparent as we move into 2017 is a push toward investors and property owners utilization of forward-looking strategies. Whether it be opting for the build-out of dynamically configurable office spaces that can easily be transformed to suit a variety of tenants or the conversion of class B and C shopping centers into last mile distribution centers to help e-retailers tackle the holy grail of same day delivery, investors are looking forward to the future and taking drastic steps to breathe new life into outdated spaces that are rapidly trending towards functional obsolescence. It seems that while often viewed as a “disrupter” for real estate, e-commerce is gradually emerging with a symbiotic relationship beyond the first clicks-and-bricks rapprochement.

Labor Shortages

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As labor shortages in the construction industry continue to rise across the US, demographic projections are indicating that the issue will only intensify over the coming years. As of April 2016, there were over 200,000 unfilled job openings in the building and construction industry. More young people than ever are seeking higher education and therefore remaining out of the workforce longer at the same time that the Baby Boomer generation is slowly leaving the labor force creating a significant shortage of skilled laborers. These shortages are poised to not only reduce the number of projects undertaken by developers (some are already hypothesizing that this may have been a key factor in preventing over building in 2016) and delay the timing of these projects, but may also drive up the cost of new development. This, in turn, may see a push towards developers opting for projects that target the luxury end of the market in order to help cover costs.

screen-shot-2017-02-07-at-10-09-10-am“One thing is coming through loud and clear from the Emerging Trends interviews: you can find opportunities in any of the markets in this year’s survey, whether the market is number-one Austin or number-78 Buffalo. It all comes down to your strategy, risk tolerance, return requirements, and access to deals. If the markets are the squares on the chessboard and the property sectors the pieces, then there is an almost infinite combination of moves that can be made.”

To read the rest of the Urban Land Institutes report on Emerging Trends in Real Estate for yourself, click HERE.

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KADIE PANGBURN
MARKETING COORDINATOR
CRUNKLETON Commercial Real EState Group
KADIE@CRUNKLETONASSOCIATES.COM
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Trend Report: Brick-and-Mortar Retail Is Not Dead

Over the past couple decades e-commerce has been taking over retail…. or has it?

One of the largest online retailers in the world, Amazon, shocked the world when they opened a bookstore in Seattle’s University Village last November. This single act has brought national attention to a sway back toward brick-and-mortar stores, as well as an “omni-channel” approach to retail (the seamless integration of online stores to physical stores).

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Many other companies like Warby Parker and ThinkGeek have also decided to make the move to adding concrete locations, allowing customers to closely interact with the brand and their products.

But what is causing this trend?

I did a little research and have compiled this list of the top 5 reasons that brick-and-mortar retail is not only alive and well, but superior to e-commerce:

People Prefer to Shop in Person

The simple fact is that the majority of customers still prefer to shop in-store. They want the “experience” of shopping and the ability to touch or try on products.

Customers Spend More Time In-Store

Research shows that customers spend almost one and a half times longer in a physical location browsing products than they do when perusing an online website.

Increased Sales

Browsing in a brick-and-mortar location results in one in five customers actually making a purchase. Whereas according to “Instore vs. Online” by icsc.org, online shopping is closer to 1 in 20 customers making a purchase after browsing a website’s products! Not only does shopping in an actual store result in more completed purchases, on average people also tended to spend a lot more in person than they do online.

More Cost Effective for Brand Awareness

It’s true that e-commerce has grown exponentially, but with it, its competition has grown exponentially as well. That’s because every company is trying to reach customers through the same Google search results. This has caused online advertising and keyword purchase prices to skyrocket. According to the Guardian, “Macy’s and Nordstrom’s spent an estimated $6.4 million and $4 million respectively, in paid search listings for the top 1,000 apparel-related keywords in the first quarter of 2015.” This has led many online-based companies to start using brick-and-mortar locations to expand their customer base and awareness. These companies have shown that physical stores can increase sales, brand awareness, and online traffic all at a fraction of the cost of Google keyword purchases.

In-Store Growth Rates Equal $144 Billion

In this handy infographic published by icsc.org,  they explain some of the confusion around e-commerce’s seemingly huge growth. E-commerce’s current growth rate of 17%  is calculated from only a tiny portion of total retail purchases, about 6%. And this 17% comes to about $38 billion in growth for e-commerce. In contrast, in-store retail only has a 3.5% growth rate, however they account for 94% of total retail purchases yielding about $144 billion in growth! This explains why people may think e-commerce is growing more quickly than in-store retail, but in fact, brick-and-mortar retail is still the king.

© ICSC In-Store Vs. Online

© ICSC In-Store Vs. Online

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LINDSEY POPPE
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INFO@CRUNKLETONASSOCIATES.COM

 

The Trend Report: Emerging 2016 Insights

The Urban Land Institue recently released their annual report on the emerging trends in Real Estate for the year! Here are just a few highlights from their findings on the trends we can expect to see emerge nationally over the course of 2016!

Second Tier Cities Take Center Stage

Second tier cites such as Austin are booming, and according to the report, these cities are only getting started. In addition to their reputations for hipness, cities such as Nashville, San Antonio, Portland, Austin and Raleigh-Durham are also attracting attention for their lower costs of living, and their increasing ease of staying connected far from main hubs, more upside from affordable and available investment opportunities, and increasing sophistication from realtors and investors.

Will Millennial Parents Move to the ‘Burbs?

A generation traditionally known for their obsession with urban living, a growing number of Millenials are becoming parents and looking to find homes and good schools for their children. While this generation has put off having kids longer than previous generations, recent studies suggest that a larger number will soon become parents, and could quickly fuel a suburban boom. However, these won’t be the suburbs of yesteryear. Studies show that young millennial parents will be drawn to more mixed-use, walkable developments, offering a mix of urban and suburban benefits with quick easy access to the city’s core.

Investment in the Changing Office Landscape

The continued recovery of the US economy has led not only to job growth, but also a strengthening of the commercial sector. Open office plans still dominate the market and the average SF per worker, which was 253 in 2000, is predicted to shrink to 138 by the year 2020. Showing no signs of slowing down, investors can expect to see continued development and redevelopment of existing spaces, as well as a continued rise in coworking.

Pulling Up Parking Lots?

As many young Americans opt out of car ownership, and tech trends such as ride-sharing and autonomous cars begin to change transportation patterns, many urban planners, government officials, and real estate owners are questioning if parking lots are the best use of downtown real estate. Trends suggest that “existing parking represents a suboptimal use of land,” and as cities change zoning regulations to reflect these shifts, developers are asking how they can take advantage. Are surface lots and parking structures potential development opportunities?

Increasing Investment in Infrastructure

America’s crumbling infrastructure has been in the news for years, yet the need for new mass transit, better roads and highways, and improved aviation and rail facilities hasn’t been met: the American Society for Civil Engineers estimates that $3.6 trillion would be needed by 2020 to meet the backlog of much-needed repairs. This suggests there’s a great upside in new models for infrastructure funding, including public-private partnerships and real estate investment trusts (REITs).

Urban Agriculture Is On The Rise

While conceding that we’re not likely to see silos dot the skyline anytime soon, the ULI report suggests that an increasing number of viable urban farms and rooftop gardens, including Brooklyn Grange in New York, large urban farm operations in Detroit, and a forthcoming vertical farm in Newark, New Jersey.

CLICK HERE to read the full report and discover the rest of the exciting emerging trends for this year!

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KADIE PANGBURN
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CRUNKLETON & ASSOCIATES
KADIE@CRUNKLETONASSOCIATES.COM

Could Adaptive Reuse Be The Key To Unlocking Huntsville’s Full Potential?

For those unfamiliar with the term “adaptive reuse,”  basically it’s a fancy way of saying you’re going to find a new use for an old building, or if we want to get more technical about it, “a process by which structurally sound older buildings are developed for economically viable new uses.”

The concept itself isn’t new, but really came into mainstream architectural parlance during the 1960s and 1970s due to the growing concern for the environment.  This, combined with high material costs, difficulties in securing building permits, and the growing preservation movement which was gaining ground due the national attention the grassroots efforts to save SoHo and Penn Statation were receiving in New York City at the time,  “resulted in adaptive reuse becoming a viable alternative to new construction,” stated  Sophie Cantell in an essay on The Adaptive Reuse of Historic Industrial Buildings.

But why? What are the benefits of adaptive reuse over simply building new?

Of course there is the fact that historic buildings help to “define the character of our communities by providing a tangible link with the past,” Cantell stated.  But there are also social and economic benefits to the community as well says Cantell.   “A successful adaptive reuse project can bring redevelopment, heritage tourism, and new life into a community.”

the-huntsville-timesbob-gathany-50da7f22e5f0db2bProof of this is already starting to trickle through our city as successful local adaptive reuse projects such as Lowe Mill are having an increasing impact on our community and new projects such as Campus No. 805 (the old Stone Middle School site) and Huntsville West (the former West Huntsville Elementary School) are popping up.

Here are just a few more creative projects from around the US that are igniting our imaginations right now for how adaptive reuse could have a big impact on Huntsville!

The Pratt Power Plant
Built in 1900, the plant served as the main source of power for the United Railways and Electric Company and later served as a central steam plant for the Consolidated Gas, Electric Light and Power Company and finally shut down in 1973.  Since then the plant has gone under an adaptive reuse to become a mixed-use, office, retail and entertainment facility.
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The High Line
The High Line (also known as High Line Park) was once a portion of the West Side rail line running to the Lower West Side of Manhattan that had been abandoned since the 1980s.   When plans to demolish the disused line caused a community outcry, the High Line went under a creative adaptive reuse to create a 1.45 mile long linear park.
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Olio 
Built in 1937 as an Oil Station, the building went under an adaptive reuse to become a restaurant, complete with original subway tiles and salvaged brick.
Olio Restaurant Exterior; Saint Louis, Mo., owned by Chef Ben Poremba

Rhode Island Mill
Built in 1901 as a textile mill and closing it’s doors in 2001, this old mill went under an adaptive reuse to convert the 102,000 SF building into 63 dwelling units for low income families, complete with a Head Start daycare and business center.
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770 North Point
A parking garage built just after the turn of the century in San Francisco went under adaptive reuse to become a Patagonia clothing store.
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Could projects like this help revitalize more of the Huntsville area and breathe life into the older industrial sectors of our city?   We’d love to know what you think!  Leave a comment below and let us know what Huntsville buildings you’d love to see go through an adaptive reuse!

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KADIE PANGBURN
MARKETING COORDINATOR
CRUNKLETON & ASSOCIATES
KADIE@CRUNKLETONASSOCIATES.COM