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CRE Finance World Summer 2015
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Other markets such as Seattle, San Diego, Atlanta, Dallas-Ft.
Worth, Portland, Minneapolis, and Indianapolis exhibit long term
growth attributes in certain categories that suggest consideration
after factoring qualitative factors and overall market position.
Seattle has the fourth highest technology location quotient in the
US, a very high education attainment level, and is considered more
affordable than rival California tech cities. San Diego has an above
average education attainment level and has experienced a high
growth rate in the number of college graduates aged 25 to 34.
Portland is well known for being attractive to young people and
has attracted YCEs and STEM jobs.
Although Atlanta and Dallas-Ft. Worth have had low growth in the
number of college graduates aged 25 to 34, they are affordable
housing markets that have attracted young families in great numbers.
In addition, they have experienced growth in office-using jobs over
the past five years and are expected to do the same over the next
five years. Minneapolis and Indianapolis are the only Midwestern
cities on our list. Minneapolis is notable for its high educational
attainment level and high-tech employment growth. Indianapolis
has had a high level of office-using job growth over the past five
years and is forecast to have above average growth over the next
five years. It is an affordable housing market and has attracted
young families over the past decade.
In addition, Greater Miami, which lagged in many of the considerations,
was included due to its strong projected growth in office-using jobs
and it being a global city with potential for category changing growth.
Many of these metros are being transformed into fundamentally
stronger cities and office markets. Seattle and Miami may catapult
to tier one status over the next 15 to 20 years. Although most of
the smaller markets may remain secondary destinations, they can
nevertheless achieve long term growth and be a source of solid
office building investment returns.
Selecting the appropriate metro is important, but equally as vital is
discerning which CBD or suburban submarket are the most suitable.
Similarly, strategically choosing the right office building within the
preferred submarket is essential.
The metro area considerations detailed above go beyond cyclical
rhythms and do not focus on entry points. We include markets that
we consider to have sustainable growth over the long run. This is not
a total return play and is not reflective of short term profitability23.
As is true with all markets, they are subject to cyclicality, overbuilding
and supply/demand imbalance.
The Information presented herein does not involve the rendering of
personalized investment advice, but is limited to the dissemination of
general information on Market conditions. This is an abridged version
of a larger paper that can be found on
realestateinvestors/. See same link for important disclosures pertaining
to this article. Real Estate Investors is an investment group within NYL
Investors LLC. NYL Investors is a wholly owned subsidiary of New York
Life Insurance Company.
1 The source for the presented Moody’s CPPI data is Tad Philipp, Kevin
Fagan, and Keith Leung, “Moody’s/RCA CPPI: Industrial Leads Price
Gains Over the Last Three and 12 Months l”, March 6, 2015. Data is as
of January 2015.
2 For the purposes of this report young college educated persons are
those between the ages of 25 and 34 as used by City Observatory
3 Joel Kotkin, “Baby Boomtowns: The U.S. Cities Attracting The Most
Families”, Forbes, September 12 2014.
4 This does not imply that good investments cannot be made in energy
centric markets with the right entry and exit points.
5 Alan Berube as quoted by Sabrina Tavernise, “A Gap in College Gradu-
ates Leaves Some Cities Behind”, New York Times, May 30, 2012.
6 Alan Berube, “Where the Grads Are: Degree Attainment in Metro Areas”,
, May 31, 2012.
7 Edward Glaeser, Triumph of the City, Penguin Press, New York, 2013.
8 Alan Berube, “Where the Grads Are: Degree Attainment in Metro Areas
of the City”, , May 31, 2012.
9 Edward Glaeser is an economist at Harvard and the author of “Triumph
of the City”. As quoted by Sabrina Tavernise, “A Gap in College Gradu-
ates Leaves Some Cities Behind”, New York Times, May 30, 2012.
10
metro-areas.html. Based on the Brookings Institute’s analysis of US
Census American Community Survey data.
11 All the data concerning YCEs is from Joe Cortright, “The Young and
Restless and the Nation’s Cities”, CityReport, October 2014.
12 The reason for this screening mechanism is to highlight metro areas
that have increases over a substantial base.
13 Source: U.S. Census; CoStar Portfolio Strategy.
14 Source: U.S. Census; CoStar Portfolio Strategy. Residents 25+ as of
2010.
Beyond The Big Six: Identifying Alternative Us Office Markets Based On Long Term Demand Generators