How Urbanization Has Changed the Landscape

ATLANTA—How has urbanization changed the landscape? What tangible impact has commercial real estate development in metros made on the development and capital markets strategies? According to Hugh Finnegan, partner and co-director of real estate at Sullivan & Worcester LLP in Boston, there is no single answer. In other words, the landscape has changed in many ways.

The thought of commuting is very unappealing to a lot of people in the new workforce. People simply do not want to commute and they want their amenities centrally located near where they live and work,” Finnegan says. “Although lending parameters may not be changing, there seems to be a greater comfort with multifamily construction loans because lenders know the demand is there. I'm also familiar with a retail REIT that is getting rid of its suburban portfolio and is now focused solely on urban retail.”

According to a ULI survey, 61% of Americans would choose smaller housing in favor of a shorter commute to work, and 53% prefer neighborhoods close to shops, restaurants and offices.

Hotel brands are discovering a similar preference among extended-stay guests. Hilton's most recent survey of business travelers revealed 55% of respondents prefer walking over other forms of transportation for traveling in and around their destination. That finding is significant, considering the same survey found 66% of travelers are booking hotels based on locality versus price.

“Understanding this trend, Homewood Suites and Home2Suites has made a dedicated effort to open new hotels in urban locations such as New York, Chicago, Denver, Dallas and Atlanta,” says Bill Duncan, global head of Homewood Suites by Hilton and Home2Suites by Hilton. “Although extended stay hotels typically have been developed in the suburbs, in the past year Homewood Suites and Home2 Suites have increased their urban footprint significantly.”

Combined, Hilton's extended stay brands have 23 properties in metropolitan centers, with 15 more urban properties slated to open before the end of 2016. In fact, 20% of Homewood Suites' pipeline is in urban developments. Of course, Duncan says that has shifted the brand's development strategy to consider more adaptive reuse developments that convert defunct condo buildings or abandoned office space into hotels, or dual-branded hotels where two hotel brands are developed on the same site and share operating expenses.

Want to know how urbanization has changed the commercial real estate landscape? Read this.