The growing appeal of markets outside the nation’s primary coastal cities as lucrative choices for real estate investment and  development is reflected in “Emerging Trends in Real Estate® 2015,” co-published last fall by the Urban Land Institute (ULI) and PwC.

Houston and Austin, Texas, are ranked first and second out of 51 U.S. cities included in the report based on investment prospects for 2015, topping perennial favorite San Francisco, which ranked third. Denver and Dallas/Fort Worth outranked Los Angeles to round out fourth, fifth and sixth place. Charlotte, N.C., in seventh place, scored higher than Seattle, in eighth place, and Boston, in ninth. Raleigh/Durham, in 10th place, and Nashville, Tenn., in 13th place, topped Manhattan, which landed in the 14th spot.

“Investors are looking closely at opportunities in cities beyond the core markets,” says ULI Global Chief Executive Officer Patrick L. Phillips. “These cities are positioning themselves as highly competitive in terms of livability, employment offerings, and recreational and cultural amenities.”

The report, based on interviews with and survey responses from more than 1,000 global real estate experts, notes that many of the most favored alternative markets share several characteristics: a relatively lower cost of living; lower cost of doing business; more affordable housing; promising job prospects in growth industries such energy, technology or financial services; and appeal to millennials, who are drawn to vibrant urban settings that offer a strong sense of community.

Following are six top real estate trends for 2015.

The 18-Hour City Comes of Age
The urbanization of America has given life to cities that historically were nine-to-five towns. It is no longer acceptable for only the great coastal cities to be alive around the clock and on weekends.

Downtown transformations have combined the key ingredients of housing, retail, dining and walk-to-work offices to generate urban cores—spurring investment and development and raising the quality of life for a roster of cities. Investors have more markets to consider now that the 18-hour centers are putting the elements in place to ratchet up their investment capital flows.

The Changing Age Game
Millennials are an even larger cohort than their baby boomer parents. While the tendency of millennials to postpone homeownership and rent longer will affect the apartment sector during the next several years, many real estate experts say investors should consider how the housing preferences of millennials could change in the 2020s.

Looking beyond millennials, the report anticipates further industry changes resulting from the emergence of the smaller Generation Z. Planning for a nation with fewer household formations and new consumers, as well as a meager number of workforce entrants, is the challenge ahead for a real estate industry with its eye on the 2020s.

Additionally, baby boomers, whether they continue to work or retire, will continue to have a significant impact on real estate development and investment for at least two more decades.

Labor Markets Move Toward a Tipping Point
The “jobless recovery” is being supplanted by a shrinking labor force, as the number of baby boomer retirements accelerates while millennial labor force entrants decline. The report predicts that within a few years, labor shortages—rather than labor surpluses—will be prevalent, making the “jobs chasing people” movement a norm of the labor market.

Job growth is at the top of the list of most important issues for the real estate industry, closely followed by the related concerns of wage and income growth.

Real Estate’s Love/Hate Relationship With Technology Intensifies
No form of real estate is exempt from the exponential expansion of technology. It provides new business tools and environments, as well as drives changes in space use, locations and demand levels.

Pessimism regarding technological disruption is easing. For instance, e-commerce and crowdfunding increasingly are viewed as an adaptation challenge, as retailers become “omnichannel distributors” and e-tailers begin to open brick-and-mortar stores.

Housing Steps Off the Roller Coaster

The housing market seems to be putting the excesses of the bubble and the ensuing collapse in the rear-view mirror. The trend in residential real estate looks to be returning to the classic principles of supply and demand. As this major segment of the economy returns to textbook fundamentals, confidence in the residential sector should continue to rise.

Most Promising Property Types
The industrial sector is rated as the most promising property type for investment and development potential this year. Supply has yet to meet demand, which has been rising since 2010.

The apartment sector ranks second, with moderately priced units generating far more interest than high-end units. Hotels are rated third, as prospects for liquidity in the hospitality sector are expected to shape up nicely in 2015.

Office space is ranked fourth for investment and development prospects, although future possibilities for growth exist as more space is converted to provide greater flexibility and variety. Retail is ranked fifth, due to investor wariness over a continued slow jobs recovery.

Despite the generally positive outlook for 2015, “excessive optimism” can trigger risky investment choices. “However, in most cycles, overbuilding and excess leverage likely would have already started building momentum by now,” according to the ULI report. “To the degree that hasn’t happened, the industry looks like it has learned some lessons in self-regulation and self-correction.”  

Trish Riggs is vice president of strategic communications for the Urban Land Institute. For more information, visit