As the real estate Market continues prospering, the 24 hour, gateway Cities (NYC, Washington D.C., San Francisco, L.A. London, Hong Kong, Tokyo, etc.) have become too expensive for most investors and renters. For investors, the risk to reward value has diminished or become too expensive. More interest is being shown in 18 hour cities. These are cities that have limited resources between the hours of midnight and six in the morning (airports stop, no ground transportation, and few restaurants as examples).
What 18 hour cities offer is above average urban population growth along with a lower cost of living and lower cost of doing business relative to tier 1, gateway cities. Key components making 18 hour cities attractive include growing employment featuring micro offices and shared space that are attractive to businesses with less than 50 employees. Also key are housing options, available parking, car sharing, and infrastructure (water supply and distribution, public education, aviation, vehicle and pedestrian traffic, and rail safety). But the list goes on to include green infrastructure with tax advantages for rain harvesting and support for urban farming.
Cities that have already shown to be at the top of this list are:
- Dallas/Fort Worth
Millennials Are the New Market
Going forward, the strongest market for residential real estate will continue to be Millennials for first time purchases (and eventually buying up to bigger houses) and down sizing or assisted living for baby boomers. Recently, the most active markets for Millennials has been the 24 hour cities where they can find anything they want at any hour of the day. This trend is changing to the 18 hour cities offering expanded entrepreneurial services embracing everything from restaurants to taxis to 24 hour services to accommodate the cash spending trends.
However, the very advanced study by Pwc Emerging Trends in Real Estate© contents the Millennial market is very trendy. While this generation currently has a strong attraction to the urban market, they will eventually marry, have children, and move to the suburbs. The question isn’t “if” but rather “when” they will transition to the suburbs. For now, they are populating the 18 hour cities.
There are 80 million plus Millennials, making this the most active real estate market for the foreseeable future. While there are about 77 million baby boomers, many or most of them are already in their final residences (with many eventually moving to assisted living).
A New Suburbia
You should expect the Millennial generation to redefine suburbia. Something similar to how their grandparents created suburbia in the 1950s and 1960s. The new suburbia of the Millennials will be more like the hub and spoke system of today’s airports. They will want to be able to get to anything they want at a short distance and in a short amount of time.
PwC Emerging Trends in Real Estate© has labeled this new version of suburbia the ‘diet urban’. It will be closer in to the urban areas to offer more access to the same amenities that the Millennial generation is currently showing a preference for. The biggest concern for this generation is transportation. Almost all show a desire to stay within a 20 minute commute to a big city. Today, most prefer being within walking distance of their desired amenities. When these people ponder the thought of relocating to close-in suburbs, they still envision being in transit-oriented neighborhoods.
Until ‘diet urban’ becomes reality, the hot real estate markets will be the 18 hour cities.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for eleven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.
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