Houston now offers the most attractive real estate investment and development opportunities of any major U.S. market, according to a survey from PwC and the Urban Land Institute (ULI).
Another Texas city, Austin, took second place in the 2015 survey of more than 1,000 real estate experts. San Francisco, which was ranked first in 2013 and 2014, slipped to the third position. Meanwhile, New York fell out of the top 10 to 14 in the 2015 survey. The Big Apple trailed up-and-coming cities such as Charlotte, N.C., and Nashville, Tenn.
Growing markets such as Austin and Nashville “are positioning themselves as highly competitive, in terms of livability, employment offerings, and recreational and cultural amenities,” ULI Global CEO Patrick Phillips said.
Investors believe that the energy industry will continue to drive economic growth in Houston, which will support the real estate market in 2015, according to the PwC/ULI report. Austin, meanwhile, has gained favor for its industrial base, its appeal to the millennial generation and a lower cost of doing business.
“Houston and the middle of the country have been overlooked for a long time,” said Ric Campo, chairman and CEO of Houston-based multifamily REIT Camden Property Trust (NYSE: CPT).
“The whole idea that coastal markets are going to dominate forever is a thing of the past,” he added.
Campo attributes the emergence of these non-coastal markets not only to the thriving energy industry, but also to the run-up of real estate prices and low capitalization rates for properties in major coastal cities. The returns that investors get in key markets on the east and west coasts “are really, really paltry from a cash-on-cash basis,” Campo said.
Cities such as Houston and Charlotte are “being awakened,” Campo said, by the influx of millennials. These cities now have retail, dining and entertainment options that cater to younger inhabitants beyond normal business hours, he noted.
The 2015 results continued Houston’s ascent in the eyes of real estate investors. In the PwC/ULI survey for 2014, Houston ranked second after being rated the fifth most attractive market the year before.