Forecaster outlines real estate trends; predicts big box boom.

Using the growth of "office-using jobs since the year began" as a benchmark, economics forecaster Susan Hudson-Wilson, CFA, said that "the office-using part of job growth has already turned the corner."

"The six cities which are expected to attract the greatest number of office-using jobs before the end of the decade are: Atlanta, Chicago, Dallas-Fort Worth, Los Angeles, Phoenix, and Washington, DC."

Hudson-Wilson also cited five estate trends impacting both commercial and residential real estate. She made her predictions at the 15th annual meeting of the Association of Foreign Investors in Real Estate (AFIRE) held in Washington, DC in October.

Retail: Your Favorite Big-Box Coming to your Local Mall

"Although retail spending is expected to remain high, we will see the end of the retail mall as we know it today," she said. Hudson predicted that with the advent of the Cartveyor, an escalator designed to carry shopping carts between different levels of the store, traditional department stores will be replaced by value and big-box retailers.

"With the Cartveyor, value and discount stores no longer need the 'big box footprint'," she said, "Now these stores can move into infill locations where the spending power of the population is more concentrated.

This will accelerate the pace of pushing traditional department stores out of the water."

The "Next" Home: Warmth, Water, Mountains, Airport

According to Wilson-Hudson, retiring baby boomers, who have likely moved several times in their business careers, will be undeterred by the prospect of moving to their "next" home. "It's not necessarily a second home or a retirement home," she said. She predicts that without the need to be near schools and large employment centers, retiring baby boomers will head for "some combination of warmth, mountains, the ocean and a regional airport."

At the same time, she projects a weakness in the single-family market as over the next eight years, this large number of baby boomers seeks to sell these assets to a "baby-bust."

Apartments: Falling Rents?

Between now and 2006, we' re heading toward an oversupply of apartments. Since 1991, when there were 11.5 million heads of household between the ages of 25 and 34, the size of this prime renter group has been shrinking. So too, is the second-largest group of renters, those between the ages of 35 and 44. At the same time, apartment construction has been booming. Census figures show that the 25-34 population will not start to grow again until 2006, and it's not expected to reach the 10 million heads-of-household level until 2013, this, against a backdrop of surplus. The one exception: Southern California where, according to Hudson-Wilson, "the housing shortage is profound, and it's difficult to create supply."

Offices: No Workers

Jobs may be few and far between today, but if the economic forecasters are correct, within the next year, unemployment could be back down to 3.9%, where it was before the current recession. It's projected that by 2008 2.5 million new office-using jobs will be created. However, once the recovery is in full swing, the slow growth of the labor force will begin to present problems for absorption in the office market.

"There are two scenarios," Hudson-Wilson said. "The first is that office employment grows at the rate of the working age population (ages 20--64). This would require some 38.3 million s/f of new construction each year between 2006 and 2020. The second scenario," she continued, "assumes a delayed retirement and some retirees re-entering the workforce. In this case, 87.8 million new square feet of space will be required per year. In either case the volume of construction that is required will be considerably below the volume that was required in past years. Thus there will be a risk of overbuilding as construction lenders adjust to the new reality.

Warehouses: Technology Victim?

With inventories "worn down to a nub," demand for warehouse space is expected to be strong for the short term as inventories get rebuilt to normal levels. But, cautions Hudson-Wilson, "Better supply chain management is causing the linkage between real GDP and total-occupied warehouse space to become weaker." On the horizon: Radio Frequency ID (RFID) which eventually will provide retailers with real-time inventory control on an Item-by-item basis. And, it's important to note," she adds, "WalMart is requiring its top 100 suppliers have RFI on their goods by 2005."

Hotels: Following Employment

"Anything that's good for the office market is good for business class hotels," Wilson-Hudson says. "I the short term, the business class hotel market looks strong, particularly if we get 2.8 million people back to work. But when the boomers start to call it quits, the strategic shift will be to resort hotels."

Largely underscoring Hudson-Wilson's predictions are demographic analyses, "If you follow the bodies, you'll know what happens next."