Two Texas Cities Top San Francisco for Property Investors

By Brian Louis  

Houston and Austin are the most attractive U.S. 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 shows.
The Northern California city ranked third, down from No. 1 last year, according to a report released today by PricewaterhouseCoopers LLP and the Urban Land Institute. Denver and Dallas-Fort Worth rounded out the five markets offering the best prospects for investors in 2015, the poll of more than 1,400 people in the real estate business shows. Manhattan slipped out of the top 10 to rank 14th.
Some 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 centers, according to Mitch Roschelle, a partner and U.S. real estate advisory practice leader at PricewaterhouseCoopers in New York.
“Real estate demand is there because jobs are there,” 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.
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.

Manhattan’s Success

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 U.S. “than any identifiable flaw” in the market, according to the report.
Manhattan’s decline in the survey may be because of “its own success,” which put many transactions out of reach for some domestic investors, according to the report.
“Manhattan is expensive, but if you have the capital, survey respondents feel there may be good investment opportunities,” PricewaterhouseCoopers said in the report. “Manhattan is clearly the most attractive destination for global and domestic capital in the United States.”