{"id":1004212143,"date":"2015-08-06T00:00:00","date_gmt":"2015-08-06T08:00:00","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/cpe-uncategorized\/steve-coyle-learned-locales-an-educated-investment\/1004212143.html"},"modified":"2022-12-05T15:27:04","modified_gmt":"2022-12-05T23:27:04","slug":"steve-coyle-learned-locales-an-educated-investment","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/steve-coyle-learned-locales-an-educated-investment\/","title":{"rendered":"Steve Coyle: Learned Locales — An Educated Investment"},"content":{"rendered":"

\"Steve<\/a><\/p>\n

As U.S. commercial real estate prices have risen rapidly in gateway markets, where the science, technology, engineering, and new media sectors have driven employment growth, many investors are questioning whether these trends can continue over the long run.\u00a0 We think that they will.\u00a0 While a recession could occur, we believe that technology and knowledge-based markets\u2014what we call Learned Locales– will post above-average growth regardless of economic conditions.<\/p>\n

Employment in the STEM (science, technology, engineering and math) fields is changing the nature of cities and real estate demand.\u00a0 Industries dominated by STEM jobs, including professional and technical services, management and healthcare, accounted for more than 1\u00a0 million of the 3.1 million net jobs added over the past 12 months. Moreover, these categories have expanded employment beyond their pre-recession peaks by 3.4 million jobs, while the rest of the economy still remains 1.5 million jobs below peak employment levels.\u00a0 Along with demographics and other factors, these employment trends are creating \u201chave\u201d and \u201chave-not\u201d cities.\u00a0 Nearly all of the \u201chaves\u201d are Learned Locales.<\/p>\n

Learned Locales and the STEM factor<\/strong><\/p>\n

Attributes of Learned Locales include \u00a0(those born between 1980 and 1999), young immigrants and H1B visa holders.\u00a0 Both immigrants and Millennials are growing as a share of the total workforce, and both groups tend to favor urban markets with high disposable incomes.\u00a0 Of the top 11 metropolitan areas for H1B visa applications in 2014, 10 are also classified by Bentall Kennedy as Learned Locales.\u00a0 Despite having high costs of living, these markets tend to have high income earners who demand services, creating an abundance of lower skilled service jobs as a result of their spending patterns. Thus, most Learned Locales have posted above average growth in wages during the recovery, while most other markets have suffered from weak wage growth.<\/p>\n

Private equity real estate investors have noted these trends, and many have moved aggressively into Learned Locales such as Austin, Boston, Denver, New York, Raleigh\/Durham, San Francisco\/Silicon Valley, and Seattle.\u00a0 Transaction volumes for apartment properties in these markets have more than doubled in the last three years, with average prices up 25 to 40 percent.\u00a0 The office market is a more nuanced story, as the nature of the \u201cbest product\u201d has changed. Demand has shifted away from the traditional tower tenants (law, accounting, and financial firms) to the thriving technology, new media, and medical technology firms.\u00a0 Transaction volumes are up dramatically in most of these markets, especially the Bay Area, but the average price paid per square foot was actually down in Boston, Denver, and Raleigh\/Durham in 2014.\u00a0 This reflects a shift in demand and investor interest to alternative office spaces that STEM workers often find more attractive.<\/p>\n

In Boston, rents have risen dramatically in century-old \u201cbrick & beam\u201d warehouses along the Boston and Cambridge waterfronts and in new purpose-built offices, lab and medical buildings in the same areas, while rent growth in traditional CBD office towers has been more moderate in recent years. Similar patterns have developed in Denver with the Union Station\/LoDo redevelopment and in Raleigh with the conversion of older warehouses into space for its burgeoning networking companies. In response to this trend, traditional office towers are being redesigned to include open-plan layouts. One Sansome in San Francisco is an example of an office tower that catered to finance, law and insurance firms, but has been redesigned to become home to a number of technology tenants.<\/p>\n

Turning to the TERRNs<\/strong><\/p>\n

The latest twist to this story is the move of traditional business services firms such as law and accounting firms away from CBD towers to be near STEM-related office tenants.\u00a0 The Union Station area in Denver, Seaport in Boston, and Transbay area in San Francisco are all examples of this movement.\u00a0 Even for traditional office tenants, the definition of \u201cbest location\u201d is evolving with the changing nature of their workers and their leading clients.<\/p>\n

A focus on Learned Locales with a micro-market emphasis on emerging transportation, employment and retail\/residential nodes, (what we call TERRNs), will lead to outsized demand and, in most cases, outsized returns.\u00a0 While pricing in these markets is quite high today, investors are better off paying up for growth than to buy in markets with weak growth prospects. Markets with positive demographic, employment and educational prospects will grow faster than other markets, and will be among the most liquid markets, an important factor in managing a real estate investment portfolio.<\/p>\n

 <\/p>\n

Steve Coyle is Senior Vice President and Portfolio Manager at Bentall Kennedy,\u00a0one of North America’s largest real estate investment advisory and services firms. Working on behalf of\u00a0550 institutional investors, Bentall Kennedy manages more than 132 million square feet of office, retail, industrial and multi-residential property throughout the United States and Canada.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

As U.S. commercial real estate prices have risen rapidly in gateway markets, where the science, technology, engineering, and new media sectors have driven employment growth, many investors are questioning whether these trends can continue over the long run.\u00a0 We think that they will.\u00a0 While a recession could occur, we believe that technology and knowledge-based markets\u2014what…<\/p>\n","protected":false},"author":443,"featured_media":1004506323,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[39372],"tags":[],"class_list":["post-1004212143","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cpe-blog"],"acf":[],"yoast_head":"\nSteve Coyle: Learned Locales - An Educated Investment - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/steve-coyle-learned-locales-an-educated-investment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Steve Coyle: Learned Locales -- An Educated Investment\" \/>\n<meta property=\"og:description\" content=\"As U.S. commercial real estate prices have risen rapidly in gateway markets, where the science, technology, engineering, and new media sectors have driven employment growth, many investors are questioning whether these trends can continue over the long run.\u00a0 We think that they will.\u00a0 While a recession could occur, we believe that technology and knowledge-based markets\u2014what…\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/steve-coyle-learned-locales-an-educated-investment\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-08-06T08:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-05T23:27:04+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/03\/Steve-Coyle.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"200\" \/>\n\t<meta property=\"og:image:height\" content=\"200\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jessica Fiur\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/\"},\"author\":{\"name\":\"Jessica Fiur\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/0bf67d338f2b97c9e1194fabf816e9c3\"},\"headline\":\"Steve Coyle: Learned Locales — An Educated Investment\",\"datePublished\":\"2015-08-06T08:00:00+00:00\",\"dateModified\":\"2022-12-05T23:27:04+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/\"},\"wordCount\":789,\"image\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/wp-content\\\/uploads\\\/sites\\\/46\\\/2021\\\/03\\\/Steve-Coyle.jpg\",\"articleSection\":[\"Blog\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/steve-coyle-learned-locales-an-educated-investment\\\/\",\"name\":\"Steve Coyle: Learned Locales - 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