By: Ross Moore | Chief Economist, Colliers USA
This is the last in a series of 2011 projections examining some of the key trends that are likely to drive commercial real estate markets next year. This final installment examines the cities that are expected to lead the real estate recovery in the coming 12 months.
Washington, DE Ranks as Number One, But Baltimore, Boston, New York, Miami, Portland and Raleigh Are All Expected to be Strong Markets in 2011
Based on a fairly simple algorithm* involving economic growth, employment, vacancy and gains in occupancy, Washington is set to continue its winning ways in 2011. Demand for all types of real estate in the nation’s capital is anticipated to remain high, with a growing economy and healthy job gains. Washington begins 2011 with some of the lowest vacancy rates in the country across all property types. Despite a move by lawmakers to curb Federal government spending, Washington is expected to be the best performing commercial real estate market in the country. Baltimore, Boston, New York, Miami, Portland and Raleigh are also expected to be top performers in 2011. Most are characterized by recent data showing year-over-year gains in employment and 2010/2011 economic growth rates that are above the national average. Furthermore, many of these markets boast vacancy rates that are amongst the ten lowest in the country and have seen healthy gains in occupancy in the first three quarters of 2010.
Other Cities Are Expected to be Market Leaders
Beyond the cities mentioned above, a few more metropolitan areas are worthy of special mention either through above average employment gains or economic growth that place them in the top ten category. Beyond Washington and Baltimore, one other city is included in both top ten lists. Despite its much publicized housing market troubles, Phoenix ranks number nine in terms of average economic growth for the 2010/2011 period and number three for job growth for the year ending in October. Measured by economic growth alone, Seattle and Houston rank as number two and three behind Baltimore. Looking at job growth, Austin and Charleston get special mention posting the first and second highest job gains in the country.
What Other Cities Are Poised to Accelerate in 2011?
For a variety of reasons, a number of cities don’t appear in the above and below top ten lists but are nonetheless expected to lead the recovery in 2011. All of the “global gateway” cities are expected to register above average growth in 2011. These are mostly coastal cities that should benefit from robust growth in the global economy (global economic growth is expected to be 4.2% in 2011 after expanding 4.8% in 2010 – IMF October 2010). Energy related markets are expected to be 2011 growth leaders. Technology related markets are also anticipated to be fairly strong, and metropolitan areas tied to raw materials and commodities should be some of the strongest performers in 2011.
The U.S. commercial real estate market has come through a very challenging period. With the economy on the mend and signs of further improvement in 2011, almost all cities, from coast to coast, will enjoy a better year, led by the markets listed above.
Ross Moore is the Colliers International’s Chief Economist with a focus on providing bottom-up and top-down analysis of commercial real estate markets across the United States. In addition to his North America wide reports, Ross also authors all global research produced by Colliers.