Suburbs Are a Hot Commercial Real Estate Investment
As the largest generation to ever live, Millennials are credited with starting two of the biggest real estate trends: urbanization and renting over owning. However, recent Harvard University and Zillow studies show that most Millennials do want to buy a home, yet base their decisions on affordability. Largely priced out of the urban cores, Millennials are heading to the ‘burbs — which are no longer the sleepy suburbs where they grew up.
Contrary to popular belief, in the top 50 U.S. metropolitan areas, 75 percent of all 25-to-35-year-olds live in the suburbs, according to the Urban Land Institute’s 2017 Emerging Trends in Real Estate report. This generation is remaking the suburbs to suit their wants and needs of bustling, walkable downtowns with intriguing restaurants, retail destinations, entertainment venues, transit hubs and creatively-designed offices. This trend makes suburban multi-family and office properties prime options for commercial real estate investment.
At Origin, we were early to the proverbial party: in the past few years we identified this trend and made a number of private equity real estate investments in “smart” suburbs (those well-positioned with plentiful jobs, numerous recreation options and quality schools), as referenced in a recent Bloomberg News feature “Suburban Offices Are Cool Again.”
As we noted in Bloomberg, we don’t necessarily believe that we are in an overarching super-cycle of urbanization. Millennials will continue to work in cities and jobs will continue to be created there, but they will also live and work in the suburbs. And in some cases, the rate of growth in the suburbs may outpace that of the cities. Urban or suburban, the best places to invest in real estate have daytime flexibility and streets that don’t roll up at night.
Origin has found strategic locations to invest in by embracing millennial standards in our acquisition strategy, as shown by some of our most noteworthy suburban office building and multifamily investments.
Denver’s Tech Center (DTC)
Denver Tech Center’s restaurants, apartments and running trails are amenities that attract the city’s young, highly educated workforce. Even better, a new light-rail line brings Denver’s southern outskirts close to Lower Downtown and other entertainment hubs.
Origin’s private equity real estate investment in DTC allowed the rebranded Office @ dtc to add abundant bicycle storage, an expansive fitness center with showers, a bistro and gourmet coffee center and collaborative spaces that lured new tenants. These smart capital investments helped Origin to attract and retain tenants, just as these amenities also help the tenants themselves attract and retain employees.
Charlotte’s Red Zone
At the Cambridge Corporate Center in University City, on the edge of Charlotte, North Carolina, we appealed to Millennials’ adventurous eating habits by adding space in front of a new parking deck to accommodate visiting food trucks. The payoff: marketing analytics firm Red Ventures, which this year bought finance website Bankrate.com, chose Origin’s Cambridge Corporate Center for a 100,000-square-foot expansion.
The competition was stiff for Red Ventures, with Maine and South Carolina vying for the firm. But as it doubles its Charlotte workforce, the new tenant is counting on the northeast location among forested greenways near the University of North Carolina’s Charlotte campus—and a new light rail system from downtown Charlotte opening next year — to attract software engineers and data scientists.
Atlanta’s Perimeter Edge
A rail shuttle gives Origin’s Centrum at Glenridge office building a direct line from Atlanta’s Central Perimeter to trendy Buckhead and other Red Line city stops. This year, Haverty Furniture Cos. signed a seven-year lease extension for its headquarters at Glenridge, where tenants include Atlanta-based broadcaster Cumulus Media and accounting firm Moore Stephens Tiller.
Chicago’s “Second City”
While Origin’s Atlanta, Charlotte and Denver properties hug the city limits, the Iroquois Club complex is located in Naperville, Illinois, a far western suburb of Chicago. But Naperville also happens to be Chicago’s largest suburb; the state’s fifth-largest city in its own right; and one of the wealthiest and safest cities in the U.S, according to World Population Review. Like other Origin multifamily real estate projects, such as Stella Apartments in Houston, Iroquois Club matches a thriving employment hub to a property with unique scenery and recreational options such as pool, clubhouse, trails and fitness center.
Origin looks for urban opportunities beyond urban centers. Iroquois Club is a five-minute bus ride from commuter trains in Naperville’s walkable downtown, yet it has attractive amenities for growing families. Naperville schools are rated among the nation’s best.
The Smart Suburb Strategy Pays Off
ULI predicts that millennial families will be attracted to school and open-space options that are not available in the central city. In its 2017 trend report, the real estate think tank forecasts a return of suburban office demand. As investors, we believe it’s critical to mine the opportunities in smart suburbs, especially as near-downtown property valuations rise and as affordability becomes an increasingly larger issue. Our acquisition team’s “boots on the ground” are in search of urban amenities that will attract and retain suburban Millennials.