3 US Cities to Watch in 2018

By Scott Baltic

Melissa Reagen, managing director & head of research for the Americas

As 2018 appears to be heading into positive performance for commercial real estate, the three U.S. cities to watch, according to a new report from TH Real Estate for the first quarter of this year, are Los Angeles, Chicago and New York. The reasons why, perhaps unsurprisingly, are largely similar for all three cities, forming an implicit blueprint for a world-class metro in the early 21st century. The report, “THINK US Cities: Trends and Tactics,” was written by Melissa Reagen, TH Real Estate’s managing director & head of research for the Americas.

Each city is, of course, very large both demographically and geographically, and each benefits from a workforce that’s rich in college graduates and Millennials. The three have in common vibrant tech sectors, major universities, substantial tourism, prominent cultural attractions and strong transportation connections to the rest of the country.

It comes as no surprise that Los Angeles led the nation in CRE transactions last year, at more than $28 billion, followed by New York and Chicago, with $23 and $17 billion, respectively. 

Nationwide take-home points

Nationally, CRE conditions are “tempering somewhat,” the report says, but they remain solid, despite recent stock market volatility. That upheaval happened in part because of a divergence between a Fed that has been hiking rates to head off inflation, even as Congress passed a stimulus measure in the form of the tax bill.

Among trends to watch are co-working spaces and the rise of the contingent workforce, which is predicted to increase by another nearly 25 million workers and to comprise a majority of the U.S. workforce by 2027.

As to the sharing economy, the report points to surging companies such as Uber, which owns no cars; Airbnb, which owns no houses—and in particular WeWork, which doesn’t own its own real estate. Office building owners are thus forced to invest more capital in their properties, pulling down returns.

In January, TH Real Estate released a report that identifies eight possible real estate trends which may guide investors this year.

Image courtesy of TH Real Estate