'Flight to quality' in US

Real estate investors and lenders are expected to target US coastal centres, such as San Francisco and Seattle, as capital continues to flow away from secondary and tertiary markets, according to a report by the Urban Land Institute and PricewaterhouseCoopers.

As the real estate and financial markets continue to take a beating, investors are expected to focus again on top rate cities in the US.

Coastal centres such as Seattle and San Francisco were expected to recover more quickly from market downturns, according to the Emerging Trends in Real Estate 2009 report, released by the Urban Land Institute and PricewaterhouseCoopers.

With an ongoing “flight to quality”, the report said, investors and lenders were expected to “retreat from” secondary and tertiary US markets and target “24-hour cities”, including the coastal cities of Los Angeles, New York, Boston, Washington DC, San Francisco and Seattle.

These markets “pose less risk” in a market downturn, the report added. The Chicago, Dallas and Atlanta markets in the mid-US also benefited from their strategic international airports, it added, while cities “off the global pathways” would be most hard hit.

In the US, investment and development prospects were highest in the residential rental sector, with the industrial and distribution market coming in second. Demographics and the housing market collapse boosted the number of renters and also kept apartment occupanices and rates high. Interest in the industrial sector continued to be strong owing to its steady cash flow.

Investment and development rrospects were lowest for the for-sale residential, retail, and hotels sector, the report said.

The ULI/PwC Emerging Trends in Real Estate 2009 report included more than 700 respondents including investors, developers, property companies, lenders, brokers and consultants.