In the first round of development post-recession, the construction cranes shot toward the sky in Uptown to build mid- and high-rise multifamily. It has been the post-recession trend to advocate for the same product that the Urban Land Institute preached in 2007 would fulfill the needs and desires of the next generation. The reigning notion throughout our industry was that creating these in-town, mixed use, walkable ‘neighborhoods’ was the safest investment, due to the natural protection of location and strength of the Echo-Boomer demographic. Despite the overwhelming popularity of the trend however, this in-town, trendy product is only 5 percent of the greater market, albeit a very visible 5 percent, and to say that the Uptown and urban core submarkets have been picked over is a vast understatement.
With that being said, I believe the great shock of 2014 will be the tremendous strength of the suburban market, especially the first suburban ring, and the ‘why’ behind it.
Despite the profuse amount of discussion about and focus on the Echo-Boomer (all of which is valid), in my mind, the most powerful and growing consumer demographic is ‘Gen C.’
Demographers break generations into groupings based upon dislocation in lifestyle or world events. Generation Connected, or Gen C (for those of you who are not), is not a group based upon age, such as the Baby Boomers, but rather an overlay demographic including a collection of all that has come before; the Baby Boomers, Gen X, Gen Y, Millenials, etc. It might most simplistically be described as a group of people who have altered their lifestyle based upon the flexibility offered by mobile and fixed technology and its integration into every aspect of life. For Gen C, technology transcends simple facilitation, and becomes a driver, predictor, and influencer of behavior.
It is this demographic that makes up the largest portion of the growth bell curve. Gen C, simply due to the nature of its size and inherent diversity, is physically spread out. And in a vehicular-based city like Dallas, this means the spread reaches the suburbs. There are more than 6 million people living in North Texas and, let’s hypothesize, around 30,000 living in Uptown and downtown Dallas and Downtown Fort Worth. Stated another way, 0.5 percent of the area’s population resides in an urban core—a very visible, much-discussed percentage, but 0.5 percent nonetheless.
Gen C is growing and has strong and defined tendencies, and the first outer ring of suburbia is its next hub. It’s fascinating that the new, ‘hip’ Gen C still fits in the middle of the bell curve intent on pursuing a suburban lifestyle (whether they admit it or not). Gen C’s desired style of living seeks to blend an urban lifestyle with classical notions of homeownership and a traditional family/neighborhood schooling/car society format.
If you don’t buy this argument, then you can at least acknowledge another; the suburbs are all they can afford. Based upon Gen C’s earnings after debt and other living expenses, for many, an urban address is financially unsustainable, leaving the first suburban ring the natural place to gravitate toward.
This is why the suburbs, in particular the outer rings closest to the core, should see a very strong 2014. These areas are well located, typically have what retailers call ‘strong demographics,’ (in other words, a population with expendable income and unafraid to spend it) infrastructure, some vestige of barriers to entry for new development, and, in many cases, are ripe for gentrification from a product age perspective. In my mind, despite the above, classical real estate perspective, there is an even more powerful reason to support my hypothesis that suburban real estate will be the strongest contender in 2014; next year developers have a chance to provide the product to supply this new demand curve.
Michael Ablon is principal of PegasusAblon, a commercial real estate development, investment and management company. Contact him at MAblon@PegasusAblon.com.