Real estate recovery will pick up in St. Louis, experts predict

A photo of a tortoise flashed on a large screen and drew knowing chuckles from the full-house crowd of developers, bankers, consultants and government officials. The slow-moving reptile and the pace of economic recovery was an easy comparison for more than 200 people gathered Thursday to hear experts give next year’s outlook for real estate.

“The recovery has been much more like the tortoise than the hare,” said Stephen Blank, a senior resident fellow of the Washington-based Urban Land Institute. “We’ve become used to slow relief. But we have finally turned the corner, and I think we’ll be headed in the right direction in 2013.”

Real estate markets in busy coastal cities — New York, San Francisco, Los Angeles and Boston, for example — emerged first from recession and will pick up their pace of recovery in 2013, said Blank, a principal researcher for Emerging Trends, an annual report by ULI and PricewaterhouseCoopers. He was the main speaker at the annual outlook presented by ULI’s St. Louis chapter.

Big investors scared away by the high prices in coastal cities will look more closely at properties in secondary markets, including St. Louis, experts predict.

Key to investor success in those smaller cities will be partnerships with local players who know their markets, Blank said.

“They need a local sharpshooter who understands the market,” he said.

Pitfalls remain. Developers must cater to companies’ desire for more-compact offices and retailers’ growing embrace of e-commerce over physical stores. Rapid construction of multifamily housing, strong over the last two years, could produce an overbuilt market by 2015.

In most of the 51 cities Emerging Trends evaluated, recent job creation should push down office and factory vacancy rates, said the report, which is based on interviews or survey responses of more than 900 real estate experts. Lowering vacancies further is the absence of construction during the recession.

As it has in previous reports, St. Louis sits near the bottom of the markets examined. In real estate prospects for 2013, St. Louis ranks 43rd for investment, development and home building. Detroit is last in all three categories.

St. Louis and other secondary markets, many of them in the Midwest, barely rate mentions in the 2013 outlook. It says, “St. Louis shows strong industry diversification but still struggles with job growth.”

But the report includes hope for such secondary markets. In addition to forecasting more attention from big institutional funds, the report predicts more activity by local investors “willing to bet on their communities for the long term rather than focus on some unachievable short-term investment return for investors who may never set foot in town.”

Another speaker, economist Jack Strauss, noted that St. Louis continues to experience slow growth in jobs and population. But a strong point is the area’s per capita income, which is higher than the national average, and its below-average cost of living, said Strauss, director of the Simon Center for Regional Economics at St. Louis University.

Blank pointed out that St. Louis has a relatively high percentage of Generation Y residents, young adults entering their high-earning years. Persuading them to stay is key to the region’s success, he said.

“That’s a decision all of you have to figure out how to make,” Blank told the crowd.

Emerging Trends said that to various degrees, the economic rebound will continue to spread across the country. The report found that only six of the 51 markets evaluated show declines in investment prospects.

Blank pointed out that St. Louis’ low standing in the 2013 outlook is the result of opinions expressed by fund managers, developers, property companies, lenders, brokers and consultants nationwide.

“This is a perception study,” he said. “It may have no basis in reality.”

The job is to correct the perception of St. Louis by showing areas of strength, Blank said.

For the original post visit: http://www.stltoday.com/business/local/real-estate-recovery-will-pick-up-in-st-louis-experts/article_653f4939-7f7c-5d63-a9b4-f5eb090f770f.html