Why the Suburbs Are Suddenly a Hot Spot for CRE Projects
In the evolution of how we live, work, and play, big cities have often borne the brunt of our changing consumer preferences. When people made the decision to leave cities in favor of rural and suburban areas during the pandemic, data from the U.S. Census Bureau revealed that many of them stayed.
Then came the rise of hybrid and remote work, which also served to transform the larger real estate outlook. Major metropolises such as New York, Chicago, and San Francisco are still struggling to bring workers back to the office — and to the surrounding businesses that count on the 9-to-5 crowd for their revenue.
This historic shift has placed a renewed focus on revitalizing the suburbs. Commercial real estate developers have recognized this as an opportunity to bring the energy and vitality of big cities to where people live and where they’re now spending more of their time. Call it the urbanization of suburbia.
If You Build It…
Looking back, this suburban flight actually began before the pandemic, with many young professionals moving to the ‘burbs to begin families (much like their parents and grandparents did generations before). This migration to the suburbs has changed many formerly sleepy towns into “hipsturbia,” a phrase coined by the Urban Land Institute and PwC way back in 2019.
The centerpiece of these newly trendy — and more affordable — metro areas is the presence of a walkable downtown filled with multi-use developments and condos, offices, hotels, restaurants, shops, schools, and other businesses that these young professionals frequent.
These developments are providing suburban dwellers with the same desirable amenities as city slickers, and at a fraction of the cost, showing that the suburbs have staying power.
Meet Them Where They Are
As workers in Europe and Asia have largely returned to the workplace, U.S. office occupancy still stands at 40-60% of pre-pandemic levels. Larger homes, longer commute times, and a tighter labor market that benefit workers have all contributed to this lag.
America’s raging return-to-office debate doesn’t seem to be abating any time soon, as employers struggle to find middle ground with employees who have grown accustomed to their work-from-home lifestyles. In fact, Slack’s Future Forum research revealed that as many as 76% of workers never want to return to the office full time.
These dramatically shifting priorities are driving the demand for multi-functional communities where today’s consumers can live, work, shop, and socialize within a few block radius. It’s the rise of the famed 20-minute neighborhood — an ambitious urban planning project adopted by several American, European, and Australian cities — that all aspects of daily life (home, work, school, shopping, entertainment) could be conducted by walking, biking, or public transport in just 20 minutes.
Retailers are also flocking to towns outside of big city limits, with name brands such as Target, Warby Parker, Wayfair, and Madewell zeroing in on suburbs outside of Philadelphia, Chicago, and Los Angeles for opening their latest brick-and-mortar locations.
Another sure sign that the suburbs are becoming a magnet for remote and hybrid workers: the proliferation of coworking centers that are cropping up outside of city limits. Nearly half of all of these flexible workplaces — where workers can drop in to use a variety of office amenities as they please — are located in metro areas such as Irvine, CA; Arlington, VA: and Plano, TX.
Finding Opportunity in a Changing Marketplace
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