Into the future

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from Geoff Homer
Research Analyst
Jones Lang LaSalle

In anticipation of this month’s Urban Land Institute 2011 Trends in Real Estate Forum at the Westin Copley Place, I just read the Emerging Trends report produced by ULI and PricewaterhouseCoopers.

After reading it I first felt somewhat pessimistic about our city. I took another read through and found a few interesting themes applicable to Boston.

From an investment perspective, there has been robust demand for trophy assets. Two recent sales come to mind: One Brigham Circle and the John Hancock Tower. The listing broker for the Hancock reported that “the bidding was as fierce as anything I’ve ever handled during my 30 years in this business.”

In Boston, demand for core assets across all property types will remain high. However, investors will need to realize the risk of overpaying, and recognize that the strategy of flipping a core asset will not work in the short-term. Expectations of large returns need to be curtailed.

Continuing through the report, a senior executive was quoted as saying “We’re going to see a lot more places end up like Pittsburgh, if they’re lucky.” Pittsburgh was once a major manufacturing city with many corporate headquarters, and is now home to a high presence of education and medical jobs. Forbes magazine ranked it as America’s most livable city in 2010, but property values and rents have been flat with development sporadic.

Boston and Pittsburgh have a lot in common. Corporate headquarters do not have the presence in Boston that they used to, primarily due to merger activity. A lot of jobs, particularly in Cambridge and Longwood, are centered on the education and medical sectors. Development remains difficult due to the lack of space, lack of demand and the arduous planning process.

 Take a look at the report here and let me know what you think.

– Geoff

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