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2018 Top Markets for Retail and Restaurant Real Estate
From The Buxton Co
Every year, real estate professionals attempt to predict the next hot markets in the U.S. There are a variety of approaches to answering this question, whether from surveys, migration data, or store opening data. Here’s what we’ve found.
Secondary Markets Regain Momentum
“To the extent that retail grows its physical presence at all, I would expect up-and-coming second cities, as well as desirable retirement markets, to benefit most,” writes Buxton Senior Vice President Paul Schlesinger. “So, while major markets will still have the greatest actual count of retail sq. ft. and related employment, I would expect the growth rate to be highest in cities such as Pittsburgh, PA; Cleveland, OH; Bend, OR; and St George, UT.”
This sentiment was echoed in PwC and the Urban Land Institute’s annual survey-based market rankings, which placed Seattle in the top spot. In fact, the list of top 20 markets were dominated by secondary markets. This leads the to the question, why? As the report explains:
“First, more investors have taken time to educate themselves about the nuances of secondary markets. Next, secondary markets have not suffered from the level of overbuilding seen in previous cycles. Third, the amount of investable foreign capital looking for a home in the U.S. real estate market has grown significantly, focused mainly on primary markets. On the whole, asset pricing in secondary markets has remained relatively favorable, potentially providing more upside in the current market. Finally, these markets have a lot to offer to businesses and residents, suggesting that the current level of demand will be sustainable going forward.”
The rise in secondary markets is also aided by migration. In a recent analysis of LinkedIn members, the company found that the top three U.S. cities gaining workers are Seattle, Denver, and Austin – all secondary markets. In fact, for every 10,000 LinkedIn members located in Seattle, 67.3 arrived within the last 12 months. Secondary markets dominated the top 10, with markets like Portland, OR, and Tampa-St. Petersburg, FL, rounding out the list.
Part of the demand for secondary markets is being driven by the millennial generation. While some initially moved to primary market urban centers for jobs, many are now returning to the suburbs or secondary markets for better quality of life and lower costs. Only time will tell if Generation Z – the next wave of young adults – will follow the same pattern.
Buxton’s Top Market Rankings
To do this, Buxton examined the locations of sites that our retail and restaurant clients have “scored” using our geospatial analytics application SCOUT. The data was rolled up to the Core Based Statistical Area (CBSA) level, which includes both an urban center and the cities that are economically tied to that center. Doing so provides a snapshot of the markets attracting interest based on a sample set of retailers and restaurants.
The data shows that while primary markets still attract the highest volumes of interest, secondary markets have a prominent place on the list. Florida markets in particular show strength, with three markets rocketing into the top 10. Trendy markets like Austin and Nashville fell in the rankings, while markets like Oklahoma City broke into the top 25.
Markets Most Evaluated in 2017 by Buxton Clients
If you have an opinion on the retailing or retail real estate industries, take this opportunity to share your thoughts. Articles should run between 400 and 800 words. Topics can, be general in nature, consumer observation or specific to retail concepts or practices.
Articles will be posted for at least one week and will then be placed in the Editorial Archives. All articles submitted will be read and considered but we cannot guarantee publication. Each published article will carry the submitters byline (if desired) and is a free service to our community.
Article ideas and suggestions are also always welcomed. Contact PVS@PlainVanillaShell.com
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