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At last, area attains ‘fair’ ULI market outlook

By Karen Brune Mathis, Managing Editor

Finally, Jacksonville turned yellow.

Jacksonville's yellow dot on the Florida map indicates "fair" overall real estate prospects in 2014, according to the Urban Land Institute.

Whew.

The institute produces the "Emerging Trends in Real Estate" report. The North Florida chapter will present the 2014 trend report at a dinner meeting Jan. 30 at EverBank Field.

"Fair" might not seem to be a big deal, but it's a step up from the "generally poor" red dot on Jacksonville for 2012 and 2013.

And, before that, Jacksonville was "modestly poor" or "poor" for investment and development prospects for 2009-11.

So, "fair" is pretty good, although Orlando, Tampa/St. Petersburg and Miami, the other Florida cities featured, are green-dotted as "generally good."

In fact, Miami broke into the Top 10 of the 51 U.S. markets to watch in 2014 for overall real estate prospects, jumping four spots to No. 8.

San Francisco was No. 1. Detroit was No. 51. Jacksonville stayed at No. 39.

Ranked in three areas, Jacksonville was No. 42 in both investment and development prospects and No. 34 in homebuilding prospects.

That was "yellow" across the board.

On a scale of 1-9 for its attractiveness, Jacksonville scored 4.96 for investment, 4.64 for development and 5.42 for homebuilding.

Slotted between No. 38 Las Vegas and No. 40 Sacramento, Jacksonville's summary was: "For the third consecutive year, Jacksonville remains at number 39. Survey respondents see the outlook for 2014 as being very similar to that for last year.

"The outlook for investment, development and homebuilding improved to the 'fair' range. The improvement in each category was sufficient enough to keep pace with overall market changes."

Annual trend reports are online at uli.org.

Overall trend reports for 2007-14 cover the recession years of December 2007-June 2009 through now.

The Chapter 1 headlines and lead paragraphs tell the real estate market story:

• 2007: Nothing Lasts Forever

"Having crested during 2006 after a decade's worth of superior performance, the U.S. commercial and multifamily real estate investment market will slow down in 2007, comfortably producing average to slightly above-average investment returns."

• 2008: A Dose of Fear

"Wobbly from the credit market knockdown, real estate players hope the U.S. economy can sustain reasonably strong property fundamentals in 2008, and prevent lowered-return realities from turning into portfolio red ink."

• 2009: Forget the Quick Fix

"For 2009, U.S. commercial real estate faces its worst year since the wrenching 1991-1992 industry depression."

• 2010: Timing Play

"More investors recognize massive losses — value declines will eventually total '40 to 50 percent' off market highs, propelled by lagging impacts of the deep recession."

• 2011: Entering the Era of Less

"After a hard crash, the real estate world reluctantly enters a new 'Era of Less' in 2011 — encompassing a shrunken industry, lower return expectations, restrained development prospects, reduced credit availability, and crimped profits."

• 2012: Facing a Long Grind

"Some real estate players take comfort watching ample capital pour into U.S. property markets, escaping from a world of troubles plaguing other asset classes."

• 2013: Recovery Anchored in Uncertainty

"Real estate continues to meander along a slower-than-normal recovery track, behind a recuperating U.S. economy, dogged by ongoing world economic distress."

• 2014: Gaining Momentum

"Commercial real estate is reaching an inflection point where 'valuations will no longer be driven by capital markets.'

" … The difference for 2014 is that the market has progressed further through the economic and real estate cycles and we are now seeing real evidence that the trends have the momentum to finally make an impact on the real estate market."

The 2014 Emerging Trends in Real Estate report is based on the views of more than 1,000 industry professionals, including investors, fund managers, developers, property companies, lenders, brokers, advisers and consultants.

The key drivers for the year are:

• Prospects for profitability continue to improve.

• Increasing interest rates.

• Back to fundamentals.

• Capital goes wide.

• Development goes beyond multifamily.

• Demographic shifts — especially the 72 million Generation Y people in the U.S. born from 1979-95 and their parents, the more than 73 million baby boomers born from 1946-64.

• The changing face of space.

• Housing market recovery.

The Urban Land Institute concludes that the top prospects for real estate investment are industrial/distribution projects and hotels. Apartments, offices and retail follow.

For development, industrial/distribution projects, especially those serving e-commerce, top the list, followed by apartments, hotels, retail and office.

Jacksonville isn't mentioned a lot in the report, but it does merit a reference in a housing summary about all-cash purchases in residential sales.

All-cash purchases represented an average of 45 percent of all residential sales in August, according to the report, citing RealtyTrac.

Miami, at 69 percent, had the highest percentage of all-cash residential sales than any other city with a population of 1 million or more.

Detroit was second, at 68 percent, followed by Las Vegas at 66 percent and Jacksonville at 65 percent. Tampa was next at 64 percent.

Overall for this year, Jacksonville can continue to expect investors and developers.

The institute reports that investors will no longer continue to look only to the "big six" markets of Boston, Chicago, Los Angeles, New York City, San Francisco and Washington, D.C.

"New investments could demonstrate a rising level of confidence in the economics of secondary markets," reports the institute.

That yellow dot on Jacksonville means a fair outlook for prospects, not green for generally good or red for generally poor.

Based on traffic signals, Jacksonville's yellow dot also could mean proceed with caution — or, at least from some in the driver's seat — speed up.

kmathis@baileypub.com

@MathisKb

(904) 356-2466

2014 Jacksonville by the numbers

The Urban Land Institute analyzed 51 markets, citing sources that include Moody's Analytics, the U.S. Census Bureau, the Bureau of Economic Analysis and the Bureau of Labor Statistics. Here are some of statistics for metro Jacksonville.

Population

1.4 million

1.1% growth from 2013

20.7% of total population comprises millennials (ages 20-34)

Business costs

89% of national average of cost of doing business

Employment

2% growth from 2013

98.7% of previous peak

103.5% projected in 2016 of previous peak

Households

549,370 households

Median home prices

$161,710 median price

2.3% increase from 2013

84% of previous peak

Single-family houses

9.1% increase in permits

6% increase in starts

17.6% increase in completions

1.2% increase in sales

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