The best housing markets, according to the report, will provide better commercial real estate options because a housing sector recovery generates more jobs, and demand for vacant commercial real estate. At the same time, banks will free up funding and a multiplier effect ensues. Even though the housing market is starting to improve, demand and interest in apartments in “American infill” locations remain attractive, leading to a boom in apartment development. Leading this cycle move is the Echo Boomer generation, which is delaying plans of home ownership.

Markets to Watch


Here is a snapshot of the top five markets ranked by survey respondents and their outlook for each of the markets:

1. San Francisco. In 2013, San Francisco steals the Triple Crown from Washington, D.C., receiving top billing in the Emerging Trends investment, development and housing categories. The market is driven by growth and a strong jobs outlook, led by technology and a structural change away from suburban and toward downtown. Continued infill interest is supported by providing one of the best transit systems in the country and a city center with walkability that is number two only to New York City.

2. New York City. New York City makes a small move this year, stepping up two spots to second-best investment prospect. However, investors still seem concerned about the run-up in prices. Demographics for the city prevail, with 20% of the city’s jobs being in the growing education and health care sectors and an important Echo Boomer population. Service-type jobs continue to develop, but a lag in goods-producing jobs is a concern.

3. San Jose. The San Jose technology corridor continues to be a market to watch. In 2013, San Jose and the broader Silicon Valley are largely expected to generate jobs in a variety of fields, but most will revolve around high-tech firms. Industrial diversity is limited in San Jose and could be a concern for investors; however, the more than 6,600 technology companies based there that employ more than 225,000 people make it an area of interest.

4. Austin. In 2013, Austin looks set to extend its trend of attracting individual and institutional investors alike. Expansion of commercial real estate in Austin looks likely with a population increase of 2.3 percent anticipated next year, pushed by the Echo Boomer demographic.

5. Houston. Energy-related employment is one of the driving forces behind the Houston market and the investment prospect rank jumped from eighth to fifth. Survey participants believe the main buying opportunities are in the industrial sector—50% believe that space in Houston is worth taking a chance on.

Rounding out the top ten markets to watch:

6. Boston has an increase in high-tech and biomedical research and development employment that continues to take the lead, increasing investor interest.

7. Seattle is the global center for the software industry and continues to be the focus of many domestic and global investors.

8. Washington, D.C. commercial real estate prices have risen since the recession, with investors regarding D.C. investments as “recession-proof”; however, concerns about overbuilding and costs continue to lead discussions about interest in D.C.

9. Dallas/Fort Worth ranks behind only Houston as a job provider, and the Dallas/Fort Worth job base is one of the most diversified of the 51 markets covered.

10. Orange County, Calif., shows increases in rating value and ranking as an investment prospect.

Property Types


Among property sectors for 2013, the survey finds that commercial and multifamily regain generally solid Emerging Trends investment ratings. Categories hold their relative rankings from 2012 in the survey, with the persistent-leader, apartments, still on top, though noticeably leveling off and retail continuing to lag but recovering.

Industrial/warehouse and hotels show the biggest survey improvements, trailed closely by downtown office. Power centers and suburban offices remain investors’ least-favored subcategories. Except for apartments and industrial space, development prospects remain challenging. Interviewees show mixed concerns about apartment construction on a market-by-market basis, but generally concur that overdevelopment will happen, just not in 2013. They also anticipate more big-box industrial development.