Cities and urban areas across the U.S. are experiencing a boom in popularity as millennials and baby boomers alike rediscover the appeal of urban living, prompting ripple effects in local office, retail and multifamily development. A panel of experts led by moderator John Petrovski, senior vice president and managing director, U.S. Commercial Real Estate, BMO Harris Bank, examined why certain areas are thriving and the opportunities that abound during CRE.Converge 2017 session “The Urban Renaissance.”
“In urbanization you have efficiency and energy,” said Ryan Companies Senior Vice President Dan Levitt. People want to live where jobs are readily available and companies are interested in locating where a highly educated workforce resides. “On the energy side, people want to be where the action is – both in the live-work-play environment and in the individual property itself – it makes it more innovative and fun.”
Avison Young Principal Randy Waites, CPA, called urbanization a chicken-or-egg conundrum – it’s up for debate whether the jobs or the people help revitalize a city first. After the crash in 2009, he noted, renting became more widespread among millennials. A recent survey showed that nearly three in four millennials said they moved in the last five years; many said they were moving for the experience of a new city rather than for career reasons.
Cities provide community, opportunities and the free flow of ideas, Waites added. “Since their inception, cities have been the places of innovation and technology. If you’re going to rent, you might as well rent where the action is.”
The suburbs aren’t dead yet, but suburban office space needs to consider the importance of certain elements such as amenities. “Suburban office that’s just office is the dinosaur,” Petrovski said.
“You can have great suburban locations as long as you have a great mix,” said Rod Lawrence, senior advisor at JBG Smith. Lawrence referenced the lessons learned with a JBG Smith development in Northern Virginia’s Reston Town Center in the suburbs of Washington D.C. The building’s lease-up was initially slow, even with Metro expanding their rail line nearby; new restaurants and quick casual eateries had more of an impact in driving demand in the area. There is an art to finding the right mix of live-work-play, Lawrence said, that is both exciting and sustainable long term.
As millennials age, however, price and schools will always matter, Levitt said: “The best schools right now are generally in the suburbs.” However, Lawrence said some urban schools have improved in quality as those who have decided to stay in the city become invested in raising a family in those areas.
“Our big thing is placemaking,” said Lawrence. “You want to create an exciting place where people want to go on the weekends. We’re seeing submarkets pop up, for example Union Market on the east end of Washington, D.C.; it’s an open market with vendors, food trucks …10 years ago you would have said, ‘no way.’ Now, people want to build office there, which is incredible.”