Everyone knows that New York City and San Francisco are CRE hotspots — but savvy commercial real estate brokers have their eyes on several other emerging U.S. markets.
When it comes to commercial real estate, not all markets are created equal. Some cities are hotly-contested centers of industry with consistently low vacancy rates, while others rely on an up-and-coming atmosphere to attract investors and tenants. So which markets have the most to offer in 2017? We’ve assembled a brief list of the nine best cities for commercial real estate brokers in today’s market.
1. St. Louis, Missouri
St. Louis might not be the first city that comes to mind when you think of burgeoning commercial centers, but there’s a lot to love about this emerging market. In fact, 2016 marked a record-setting year for commercial real estate in St. Louis, bringing with it the absorption of six million square feet of new commercial property. A majority of that property was industrial and warehouse distribution space, the leasing of which contributed to the unprecedentedly low city-wide vacancy rate of 12.9%, down from 18.7% in 2012. With ambitious, tech-centric projects like the Cortex Innovation District attracting major tenants like Microsoft, St. Louis’ future-focused market is poised to continue growing.
2. New York, New York
Second only to San Francisco in terms of cost per square foot and competition between high-profile tenants, New York has long been a reliable hotbed of CRE activity. And while the concrete jungle can hardly be considered an emerging market, abundant opportunities remain for creative commercial investment throughout the five boroughs: price per square foot has grown consistently over the past decade, and leasing activity is also steadily rising. Anticipate continued strength in the multi-family sector, increasing commercial activity in the Bronx, and steady foreign investment.
With a separate New York product, Reonomy can testify to the size and scale of CRE in NYC.
3. Denver, Colorado
CBRE Group Inc. just named Denver one of the top ten hottest CRE markets in the U.S., and for good reason. The Denver metro area just broke its investment sales record for the seventh year running ($12.9 billion in 2016 sales), and CBRE anticipates still more investor activity in the coming years. The city’s River North Arts District (RiNo) is home to several special tax districts and a thriving arts and culinary community helping to spark its revival. Already home to a 25,000+ square foot specialty food market, the area will soon add a 100-room boutique hotel and at least one upscale residential community.
4. Jacksonville, Florida
This mid-sized Floridian metropolis is seeing speculative development for the first time since the 2008 recession, signaling a long overdue upward trend. Though no particular sector has been leading the pack, Jacksonville has been the site of significant retail investment, with the St. Johns Town Center shopping district spurring explosive growth throughout the region. With population growth of 1.5%, employment up 3.6%, steadily increasing home values, and emerging cultural attractions, the Sunshine State’s “River City” might just be the new Miami.
5. San Jose, California
Marcus and Millichap recently ranked San Jose as the number-one office market in America, noting that the region’s vibrant, technology-driven business climate continues to drive office-space demand. With vacancy rates below the national average and continued interest from highly educated millennials, commercial real estate brokers can expect to see an additional 4.4 million square feet of technological development in 2017 from huge names like Apple, Nvidia, and Google.
San Jose mirrors many changes happening in the state of California.
6. Phoenix, Arizona
Experts predict continued commercial growth in Arizona as a result of its slow and steady recovery following the recession. Phoenix’s rent rates are ticking upwards: asking rents in Q4 2016 were $23.50 per square foot, up 5.1% from 2015, and vacancy rates are steadily tightening. ADP, Zen Reach, and Northern Trust have all announced high-profile developments in Greater Phoenix, which bodes well for commercial real estate brokers in the area.
7. Portland, Oregon
Portland is perhaps most famous for its quirky city-wide atmosphere — notable enough to warrant its own comedy series — but Stumptown’s CRE market is nothing to laugh about. Portland’s original Meatpacking District has recently transformed into a hotbed of creative activity with robust demand and exceptional rent growth. Rich in history, the Close In Eastside has a solid inventory of multi-story industrial buildings perfect for startups, creative agencies, and tech companies.
With 3% employment growth, 1.9% population growth, and a 20% increase in home value in 2016, Portland’s well-educated workforce offers tech and professional services leaders a particularly attractive growth opportunity.
8. Austin, Texas
Austin’s burgeoning economy continues to expand, offering tech companies a lower cost of doing business than cities like New York and San Francisco, as well as access to one of the most educated workforces in the nation. Entrepreneurs, startups, and creative companies comprised largely of millennial employees are actively pursuing coworking office spaces over short subleases, meaning subleases will face increased competition and are likely to sit on the market for a longer period in 2017.
9. Oakland, California
If you’re wondering why you should get involved in Oakland instead of San Jose or the San Francisco metro area — Oakland’s nearest and most prominent CRE neighbors — there’s a simple one-word answer: Uber. The ride-share giant recently announced plans to create a second headquarters in downtown Oakland, which helped to propel the metro area from number 13 to number 9 in the Marcus and Millichap report. As vacancies continue to shrink and employment rates continue to grow, Oakland-based commercial real estate brokers only stand to profit as a result.
For more analysis on the Bay Area – read Benjamin Osgood’s analysis here.
Commercial real estate analytics platforms like Reonomy offer investors, brokers, and appraisers real-time access to the data that defines neighborhoods — debt history, zoning, building ownership, and sales history. Step into the future of CRE tech and start a free trial of Reonomy National today.