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Houston, Austin top US markets for property investors

CHICAGO — Houston and Austin are the most attractive United States markets for buying and developing real estate, topping San Francisco, as growth potential in the Texas cities draws investors from popular coastal areas, a survey showed.

CHICAGO — Houston and Austin are the most attractive United States markets for buying and developing real estate, topping San Francisco, as growth potential in the Texas cities draws investors from popular coastal areas, a survey showed.

The Northern California city ranked third, down from No 1 last year, showed a report released by PricewaterhouseCoopers and the Urban Land Institute.

Denver and Dallas-Fort Worth rounded out the five markets offering the best prospects for investors next year, the poll of more than 1,400 people in the real estate business shows. Manhattan slipped out of the top 10 to rank 14th.

Several non-coastal markets are drawing more property investors partly because they offer higher yields than places such as San Francisco and Manhattan, which led the recovery from the financial crisis.

The smaller cities also are benefiting from employment growth and increasing numbers of people moving into urban centres, said Mr Mitch Roschelle, a partner and US real estate advisory practice leader at PricewaterhouseCoopers in New York.

“Real estate demand is there because jobs are there,” Mr Roschelle said in a telephone interview. “When jobs chase people, there’s a knock-on real estate benefit.”

Houston, where an expanding energy industry is driving the economy, climbed to the top spot from No 2 last year in the survey.

Austin, the state capital and the home of the University of Texas, ranked seventh last year.

One big advantage in Austin is that employers are able to recruit people to move into the area as well as find workers locally, said Mr Tim Hendricks, a senior vice-president at Cousins Properties, a real estate investment trust.

“You’ve got a low cost of living, you don’t have personal income tax,” said Mr Hendricks, who oversees the Austin market for Cousins. “It’s a Sun Belt city.”

The US-based REIT is developing the 35,000sqm Colorado Tower, slated for completion by the end of the year. The office property is 95 per cent leased, said Mr Hendricks. The firm last week said it plans to begin work on a 16,233sqm building in the city.

“We feel like there’s enough internal and external growth to justify starting (construction),” Mr Hendricks added.

Survey respondents liked Denver’s popularity with millennials as well as its strong energy and technology employment, while lower living and business costs in Dallas-Fort Worth are bolstering the property market in that area, the survey showed.

San Francisco and Manhattan are still important to investors, with the California city slipping from No 1 more because of growth opportunities elsewhere in the US than any identifiable flaw in the market, said the report.

Manhattan’s decline in the survey may be due to its own success, which put many transactions out of reach for some domestic investors, showed the report.

PricewaterhouseCoopers said in the report: “Manhattan is expensive, but if you have the capital, survey respondents feel there may be good investment opportunities. Manhattan is clearly the most attractive destination for global and domestic capital in the US.” BLOOMBERG

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