If you’re looking for the most ideal markets for commercial development opportunities in 2021, CBRE suggests you look southward.
The South claimed seven of the top 10 markets identified in the real estate analysis firm’s inaugural Development Opportunity Index, which evaluated the country’s 50 largest markets for development conditions across multiple criteria. The new index ranked markets based on property performance in each of the four major commercial real estate sectors — office, industrial/logistics, retail and multifamily — as well as forecast performance, construction costs and strength of supply.
Atlanta nabbed the highest index reading across all sectors, with an overall score of 83.81. Several universities in the region have contributed to a highly educated workforce in Georgia’s capital, enhancing the local office-using information and business services segments and boosting disposable income for use in area retail. Atlanta was also the top-ranking city in the industrial sub-index, grading high thanks to strong inventory growth and net absorption.
Joining Atlanta in the top 10 were fellow southern cities Dallas (second with an overall index score of 83.04); Orlando (fourth, 82.06); Raleigh (seventh, 80.88); Houston (eighth, 80.74); Austin (ninth, 80.61); and Charlotte (10th, 79.49).
“Southern states continue to rate well for development and construction conditions, though investors looking for development opportunities can find them in every market in our analysis,” said James Millon, a vice chairman in CBRE’s Debt & Structured Finance practice. “Southern states tend to bring the job growth, in-migration and cost advantages that drive high volumes of construction activity.”
Crashing the top of the list were Western metros Phoenix (third, 82.94); Seattle (fifth, 81.11); and Denver (sixth, 81.88).
Drilling down to the sub-indices, San Jose took home top honors in office development opportunities, thanks to strong supply growth and absorption. In retail, robust consumer spending and sustained absorption of retail space boosted Houston to first place. Orlando, with stout population growth, favorable job gains and relatively low costs, was the highest-graded market in multifamily.