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High Scrutiny Pushes Lenders to Change Their Market Perspective

Commercial Construction Loan


Dubai and China will soon have some of the tallest skyscrapers in the world.


The US isn’t behind either.


Standing at 1,428-foot, New York’s111 West 57th Street will be among the tallest buildings in the US. Similarly, Seattle and Chicago will boast mega-skyscrapers 4/C and Wolf Point South Tower, respectively.


These facts suggest that the building boom will only get stronger with time. Or is it so?


Revised regulations


Recently, increased scrutiny and revised regulations related to loans are transforming how construction deals are done.


The newly introduced rules need the lenders to rethink their ways of dealing with high volatility commercial real estate or HVCRE. These new rules have altered not only financial benchmarks but also a lender’s modus operandi regarding:


  • How the money will be lent for future acquisitions?
  • How commercial buildings will be developed?


For example, as part of the new rules, the lenders will have to meet the risk weight requirement of a whopping150 percent and the equity requirement of15 percent.


Besides, a federal analysis discovered that financial institutions have a growing tendency toward making underwriting policy exceptions and toward reviewing inconsistently. Resultantly, US’s leading banking regulators are advising lenders to expect an additional degree of scrutiny.


Owning to the revised regulations, the regulators will particularly give their attention to those banks engaged in expanding commercial realty lending activities. Besides, other financial institutions operating big-ticket construction projects can expect to draw attention from regulators.


Why these regulations


These new, stringent regulations come in the wake of the shift taking place in today’s geopolitical landscape. For example, the US–China trade war, the volatile nature of oil prices, and the like are changing the geopolitical climate of the world at large.


To top it all off, banks have become more conservative with their lending model. Why? According to real estate experts, it is because of the perceived late point happening in the existing real estate cycle. Owing to this factor, most lenders are forced to change their focus or reduce their activity centered on HVCRE loans.


The aftermath


The excessive scrutiny and regulations have forced lenders to focus more on term loans instead of construction lending.


The existing market conditions have even allowed some of the lenders to fill the yawning gap by populating their balance sheet by writing high-value commercial construction loans.


That way, these alternative financial institutions are receiving premium pricing on every closed deal. These alternative set of lenders generally deal in private equity, debt funds, and hedge funds.


The silver lining


Although rigid, these regulations are broad enough to be subject to different interpretations by different lending institutions.


That means developers have to find how different financial institutions are working with regulators to disburse funds on completing construction projects.


The newly introduced structure triggers HVCRE in different ways. One solid negative impact of the revised regulations can be on pricing. However, if a developer is in complete control of its leverage, things will not be too difficult to manage.


How this regulatory shift will affect the big-building business in the long run remains to be seen, though.


In a way, these regulations have brought with them a new level of caution for lenders. Just last year these lenders were giving away money for building big real estate projects. But, now, they have become conservative and cautious. Today, a lender is more concerned about allocating funds keeping in mind the risk-return basis; now, a lender views resources as a scarce quantity.


Real estate pundits, too, believe that the developers who are optimistic about the slow but steady growth of US employment will even believe that the interest will stay low. That particular mindset will even want the developers to believe that the real estate will continue to drive growth in the coming time.


For deriving more information about different varieties of real estate financing options available to developers at such trying times, browse through Park West Capital’s offerings. In case you do not know where to start, contact one of our representatives who will happy to help.

Soft Costs in Construction and Their Importance in Completing Projects

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Soft costs in construction are those costs in the early stages of development of construction projects that are normally not easily noticeable. However, these costs are not negligible as they comprise a significant part of the construction cost. The other important thing to note is that without soft costs, no construction project would be possible. They are an integral part of the total cost of a construction project which includes the hard cost and land cost in addition to the soft cost. Soft costs make up around one-third of the total cost of a construction project. Here’s a look at the different soft costs that get added to a construction project.


Cost of land


This includes the cost of real estate research, survey of plots, assessment of lots, as well as transaction costs for easement and ROWs. It also includes cost of land acquisition legal processes, appraisal, assessment and improvement of land among others in addition to the cost of land for temporary staging areas.


Cost of credit


The cost of interest on loan taken from banks including bank transaction costs as well as construction loan commitment fee, mortgage broker fee and permanent commitment fee all come under soft costs. Commercial bridge loans from Park West Capital are available at competitive rates that allow construction companies to control the cost of credit.


Construction equipment costs


Construction equipment is usually hired or leased in most projects and the cost of rentals in this case is a soft cost. Items like construction office equipment, office trailers, cellphone, radio communication systems, staging area equipment are also included in soft costs.


Cost of architecture and design


These costs normally cover feasibility studies, master planning and design costs among others are a vital part of soft costs. These costs are lesser when the projects are large in size.


Cost incurred by payment of local and state taxes


In any construction project, taxes become applicable for various transactions e.g. material and labor costs as well as fees paid to local and state agencies.


Cost of fees paid for inspections


Without permissions and authorizations from different government agencies, no construction project can even start. The fees charged by these different government agencies are substantial when added up and they are another major soft cost.


There are many other miscellaneous costs that are incurred in construction projects that also get added to the soft cost.


This update has been brought to you by Park West Capital specializing in the debt and equity markets for land acquisitions, horizontal construction, vertical construction, and permanent financing in the commercial real estate sector. Please feel free to contact us to further discuss your development financing needs at and/or you may visit us for more information at Our services are provided globally for projects exceeding $5MM+.

EB-5 Financing is a Viable Option but Commercial Bridge Loans from Established Mortgage Lenders are Better

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About three decades ago in 1990, the United States Congress launched the EB-5 Program which allows foreigners to invest their capital in the US and help in stimulating the economy of the country by creating jobs and wealth. A couple of years later in 1992, Congress consolidated the initiative by creating the Immigrant Investor Program (IIP), which is also known as the Regional Center Program (RCP). Under this program, the government issues EB-5 visas to investors who commit their money in commercial enterprises based on proposals for promoting economic growth. Such commercial enterprises should be associated with regional centers approved by United States Citizenship and Immigration Services (USCIS).


The EB-5 Program requires the foreign investor to commit a minimum of $500,000 in a commercial enterprise associated with regional centers approved by USCIS and this investment should create at least 10 jobs. The benefit of investing via a USCIS approved regional center is that it enables computation of indirect and induced jobs toward the job creation requirement mandated by the EB-5 Program. Today, EB-5 financing has grown as a viable funding option along with the well-known options mortgage lenders offered by Park West Capital.


Developers across several industries in the US have made very good use of EB financing which has strict compliance norms especially with regard to the number of jobs that a particular investment creates. That’s not the case with other more conventional sources of credit like commercial bridge loans from Park West Capital. It is true that there is a huge rush of migrants from different parts of the world to put their investment capital in projects approved USCIS but it normally takes up to nine months for a deal to close. Commercial bridge loans from reputable Park West Capital are way ahead in terms of speed and efficiency in closing deals.

Is The Student Housing Sector Impacting The Commercial Mortgage Lenders Bottom Line?

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Needs for amenity packages get real including the best that technology has to offer


Over the last five years the student housing sector has witnessed an overflow of amenities in properties and this trend has continued to this day. One is likely to see amenities like rock-climbing walls, lazy river pools and spas among others. There’s actually no real demand for such amenities although many developers seem to believe that students find these fancy things, cool. That’s not the case though. One can expect good sense to prevail and developers will realize before long that such amenities only end up escalating the construction cost which finally means that only affluent students are able to afford such housing which is not how it is supposed to be.


Technology Based Facilities are in Demand


Owners of student housing units need to take up the matter with property developers and offer them some insights into student preferences in a house. The students don’t come looking for the ultimate in luxury and high end amenities and certainly not if it inflates the cost of their lodging. As young people, they are more interested in working hard to get good grades in whatever line of education they are pursuing. What they really want in their rooms is the best Internet and information technology facilities as they usually have three to five devices connected to the Internet at any given time.


Owners of student homes need to understand that these students get annoyed when Internet service is inconsistent and they want every unit to be well-equipped for wireless Internet connections. Property owners must avoid buying cheap Internet services and stop considering these as expenses more than investments. Internet services are a vital necessity today especially for students who rely on such services to augment their knowledge base. Therefore, student home owners should make efforts to understand Internet technology better and learn more about the service providers. They need to make sure that they are providing their tenants with top-quality Internet services rather than fancy luxury amenities.


Investors Getting Wiser on Student Housing


Today, commercial mortgage lenders look at the student housing sector more favorably as they’re now better educated on how properties located close to large, tier-one universities usually show strong net operating income growth over time. This realization has helped to create premium pricing for such properties and yet, up to some years back, the average property buyer was unwilling to offer commercial bridge loans for student housing properties. They didn’t show any interest even in strong locations in markets that serve tier-one universities, let alone markets close to tier-two universities.


How far the perception of commercial mortgage lenders about the student housing market has changed can be understood from the large number of student housing firms that now take a more serious approach to owning and managing their properties than they did a few years ago. In fact, these investors now look around for meaningful information on the performance of existing student housing properties as well as the new developments that are in the pipeline. There is realization among lenders offering commercial bridge loans that student housing is an attractive asset class that performs well even in tough economic times. During the Great Recession of a decade back, it was the student housing sector that was least affected compared to the overall real estate market in the US.


Park West Capital is among the commercial mortgage lenders that look favorably at the student housing sector and offers its commercial bridge loans to investors interested in the sector.

Commercial Real Estate Owners Need to Know the IRS Depreciation Schedule Better

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Did you know that the Internal Revenue Service (IRS) considers commercial real estate an asset and not an expense? That’s exactly why you don’t get to write off the cost of your property in the year you buy it. In order to make good the gradual loss of your property’s value while it deteriorates, you will have to decrease its value by a small amount every year, which is what depreciation, is all about, as per the IRS. Although commercial buildings generally have a lifespan of around 39 years, you have the option of speeding up the process of depreciation in less time in order to claim the compensation.


Depreciation Applies Only to Commercial Buildings


According to the IRS land doesn’t deteriorate over time and hence commercial land cannot be depreciated. However, people buy land and building together which makes it necessary for owners of commercial property to allocate the value of the property proportionately between the land and the building because commercial buildings older than 39 years fall under the depreciation rule. This is where things begin to get complicated and the need for expert advice is felt. You can speak to the experts at Park West Capital to know how to allocate the value of your property in a way that not just maximizes your depreciation but also ensures that it complies with IRS requirements. In case you just buy land on which you later construct a building it will be depreciable over 15 years.


Depreciation on Leasehold Property


The 15 year depreciation rule also applies when you build space to lease out to a tenant since the property will require periodic changes with a change of tenants since the changes don’t last as long as the building. You need to make sure though, that the changes are done only to the portion that has been leased out and no structural changes are made to the building. You can contact Park West Capital for a bridge loan to carry out the changes to your leasehold property at competitive terms. Aside from the option to speed up depreciation in 15 years, the IRS allows you the option of writing off the remaining leasehold changes with a one-time payment if your tenant decides to move out before completing 15 years.


Divide your Cost to Enable Faster Depreciation


Not all parts of your building have a lifespan of 30 years which allows you to divide it into different parts. For instance, there would be fixtures and electrical and electronic equipment installed in the building on which the depreciation can be speeded up. Therefore, it is advisable that you divide the cost of the different segments of your building. This is easier said than done and you will need expert advice to help you know how and where such depreciation is applicable. When you speak to us at Parkwest Capital for a bridge loan to fund the changes in your property you also get valuable insights on how to utilize your credit and asset value in the most optimum way. You can avoid claiming more depreciation going forward when you take more depreciation in the initial stages.

E-commerce Growth Impacting the Industrial Real Estate Market?

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The industrial real estate industry market is rapidly evolving with the demand of consumers for faster delivery of products and with advanced technology in the logistics and retail industries. Due to the changing habits of today’s consumers and the rapid growth of e-commerce, there has been a big spike in the development of massive distribution centers in the US.


There has been an increase in demand for well-located “last-mile” fulfillment centers that are located near population centers by major e-commerce players and retailers for the purpose of meeting the precise needs of consumers for quicker product delivery at their doorstep. Before the product arrives on the doorstep of the consumer, the last mile is essentially the last leg of the product’ trip.


It is essential to understand that the new “retail model” requires industrial distribution centers that should be located near population centers. In addition, these centers should have high ceilings and be compatible with online purchases. It is essential to understand that the development of the modern distribution centers has increased rapidly in the last few years due to the rising demands of these centers by Amazon, Walmart and various other e-commerce leading companies.


The industrial real estate sector is the big winner


Due to the rising demands of the distribution centers by the leading e-commerce players, the landlords are enjoying record high rents and increasing property values. It is important to understand that the industrial vacancy is at an all-time low in the US. It has rapidly declined by 70 basis points from a year ago to an aggregate nationwide vacancy of about 5.3% in the fourth quarter of 2016.


There is no doubt that e-commerce is driving the demand of distribution centers in the US due to increased demand for inventory by the e-commerce players such as Amazon. For example, Amazon, which is one of the leading e-commerce players in the US, continues to broaden its product and service offering. It is estimated that it will require three times or more distribution centers.


Finding the right distribution center is challenging


In the last few decades, the biggest challenge faced by the e-commerce site is to locate distribution centers near the population pools. In order to deliver products quickly with lower logistics costs, it is beneficial for the e-commerce players to have distribution centers near highly populated cities. Major developers in the US are involved in the construction of distribution centers that are not more than six to nine miles away from the major metro cities, as per the recent report published in a leading real estate journal.


Finding such centers has significantly increased the same-day delivery services by major e-commerce players such as Amazon, Walmart, Instacart, Google Express, and others. Most of the major players require easily accessible warehouses in order to deliver products within the promised time frame.


Are logistic facilities, changing to meet these standards?


It is essential to understand that the logistics facilities are not a new concept in the US real estate market, but what is new is the state-of-the-art technology that is used for meeting the needs of the consumers. There were a large number of catalog houses where consumers would make an order and their order would be ordered in old buildings as they have their own trucks. This has been going on as part of the business. But consumers in the US are no longer using catalogs for making orders. They visit the online website and make an order while sitting in the comfort of their home or office with just a simple click.


It’s all about accuracy, speed, and customization


The e-commerce site has the unique ability to track what their online order is. Consumers are able to track their orders online and know where the orders are actually located in most cases immediately. Due to their wide distribution network and strong logistics support, big players like Amazon can deliver it to you in some cases within hours. It has captured a way to do it faster, cheaper and more customized solutions based on the needs and preferences of the customers. How’s that possible? It’s technology. As much as they’re a logistics company, they’re a technology company.”


E-commerce is big business


It is essential to understand that consumers alone in 2016 bought about $400 billion in goods from different online portals. Moreover, the sales of major e-commerce have been increasing rapidly by about 15% per year. In addition, many experts believe that the e-commerce business in the US will only continue to grow and the business is just in its infancy stage. The e-commerce business has driven the business of the industrial real estate sector in a big way.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

What Makes Senior Housing The Most Recession-Proof Asset Class?



As per a recent report published in one of the leading real estate journals, it was reported that the demands for senior housing in the united states will grow from 1.4 million units in the year 2015 to 3.2 million units by the year 2040. According to the 2016 market brief of the American Senior Housing Association, it was estimated that nearly 100,000 senior housing units per year will be needed to be built by builders from 2025 to 2040 for the purpose of keeping up with demand.


It was historically difficult for an average investor to access the senior living as an asset class. Specialized operators and institutional investors were some of the primary beneficiaries of this sector as they concentrate on an asset class who demand has been driven by different demographic trends. Through the new private money real estate lenders available in the market, now the mid and small sized investors can also systematically capitalize on these trends (senior housing sector as the asset class).
Regardless of the condition of the overall economy in the U.S, senior living has continuously proven to be a strong asset class because of the rapidly aging population and short supply of newly constructed senior housing units.


Some reasons why the senior housing properties are considered to be one of the most recession-proof asset class in the united states are briefly discussed in this post. In addition, it will also briefly discuss why the rate of growth of senior housing is increasing at an exponential rate.


Reason number 1: high demand


Seniors are retiring at a truly staggering rate in America. It is estimated that about 47.8 million American who were 65 or older have retired in the year 2015. Due to the emergence of baby boomers into the age of retirement, the number of Americans 65 and older will increase to 79. 2 million by 2035.The increase in a number of people retiring will only create a greater demand for senior living facilities by the year 2035.


Reason number 2: low supply


The new construction of senior housing is not keeping pace with the increasing population of elderly people (retired) in America. The construction of senior housing had a significant decline in the year 2008 and it continued to fall through the year 2011. Units under construction have only modest growth through 2014. The need for a more newer units in senior housing is left unaddressed, which is a growing market for better communities and facilities that are tailored made to emerging retires.


– About 10,000 baby boomers are turning 65 each day
– Based on this information, it is estimated that nearly 60,000 new senior housing units will be required each year
– A 173 % increase per year in senior housing units is necessary for meeting the demand


Senior housing vs. other real estate sectors


In the united states of America, the senior housing sector has outperformed all the other sectors including apartments, hotels, industrial sectors, etc.


The Bottom Line


The resiliency of this sector in the commercial market is one of the major benefits of real estate investors in the senior housing space. An essential element of the senior housing market’s success is its lack of reliance on a particular economic or real estate environment. For the last ten years, the senior housing sector has been one of the leading performing commercial real estate sectors in the United States. This includes the period encompassing the 2007 capital market collapse, in-which returns among other commercial sectors fell as much as 20%.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

Reasons for the Significant Rise of Urgent Care Centers in the US

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Increasing demands for convenient healthcare of consumers is driving a significant shift in the real estate strategies. These urgent care clinics are a low-cost alternative to hospital emergency rooms in the US. One of the reasons for its growing popularity is that these clinics have expanded hours. These clinics are well-equipped for diagnosis and treatment of a broad range of limb and non-life threatening illnesses and injuries.


Urgent Care centers are all about convenience of the patient


One of the fastest growing segments of the American healthcare system is the urgent care center industry, which has become a significantly viable alternative for patients due to rising wait times of both emergency and primary care providers in the US.


According to American’2016 benchmarking report, there are 7357 urgent care centers in the U.S, which is a rise of 650 from the 2015 count. In the year 2015, 92% of the urgent care centers in the US have achieved wait times of 30 minutes or less. In addition, there were about 3% of patients only in these clinics who were diverted to an emergency department.


About 22% of the patients have chosen urgent care centers over other medical facilities because they thought wait times would be shorter. As per the same study, about 21 % people preferred these centers due to convenient locations of these clinics.


Urgent Care Clinics in Retail Real Estate


The Ambulatory strategy plan is increasingly implemented by large healthcare real estate service providers in the US. For increasing their profits significantly, the retail real estate providers were leasing vacant retail spaces and urgent care clinics in areas where potential patients live.


Retail landlords are embracing healthcare tenants due to their ability to drive a significant amount of traffic. One of the major benefits of adding more health care providers to their retail mixes to a landlord is that the doctors often have higher credit ratings than any real estate retailers. Real estate providers view doctors or any healthcare employees as people who are free from the effects of the recession. The signs of healthcare tenants increases significantly as most of the retailers in the US are struggling with a rash of store closures and high vacancy rates.


When making real estate decisions, healthcare providers are beginning to think like retailers in order to tap into the retail sectors and consumer behavior.


How is site selection for urgent care centers done?


The top healthcare real estate service providers in the US have now had access to better decision support tools for guiding their site selection and successfully leasing decisions. These advanced tools use data-informed scenarios to determine a forward-looking market footprint.


The tools pinpoint regions with a favorable payer mixer and substantial health needs, which can support a sustainable growth strategy for any real estate service providers. Today the most advanced healthcare real estate providers are working with their potential clients as partners who effectively combines the patient’s data and the health providers’ critical demographic data into advanced site selection tools.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

Financing An Industrial Property? Here Are 8 Different Types Of Properties To Consider

Multifamily Hard Money


Are you in the market to finance/purchase an industrial property but aren’t sure the differences between the types of properties? Here we describe the eight major industrial property types:


1. Warehouse/Distribution Buildings


These buildings range from 50,000 to hundreds of thousands of square feet in one single-story structure used mainly for warehousing and distributing business inventory. They also have up to 60-foot ceilings, as well as numerous loading docks, truck doors, and large parking lots to accommodate semi-trailers. They may have a small amount of office space and may be served by rail cars.


2. Manufacturing Buildings (aka heavy industrial buildings)


These facilities are intended to house specialized equipment used to produce goods or materials. They typically have three-phase high capacity, electric power, these properties might also include heavy ductwork, pressurized air or water lines, buss ducts, high capacity ventilation and exhaust systems, floor drains, storage tanks and cranes.


3. Refrigeration/Cold Storage Buildings


These specialized industrial properties are equipped to hold a large capacity of cold storage and/or freezer space, and are typically used a distribution center for food products.


4. Telecom/Data Hosting Centers (aka Switching Centers, Cyber Centers, Web Hosting Facilities, Telecom Centers)


These highly specialized industrial buildings are located close to major communications trunk lines to allow for access to an extremely large and redundant power supply capable of powering extensive computer servers and telecom switching equipment. They typically have reinforced floor slabs to support the weight of the equipment, as well as backup generators and specialized HVAC.


5. Flex Buildings


This building type is capable of housing wide range of uses, typically more than one in a single facility, including office space, research and development, showroom retail sales, light manufacturing research and development, and even small warehouse and distribution uses. They typically feature lower ceilings (under 18 feet) and a higher amount of office space than other industrial property types.


6. Light Manufacturing Buildings


Light manufacturing that doesn’t require extensive physical plant and space requirements typically provided by heave industrial buildings can take place in flex buildings.


7. R&D Buildings


High technology industries, such as computers, electronics, and biotechnology, prefer flex buildings because they offer a wide range of uses in one location, including office, manufacturing, and warehouse space. Nowadays, many of these spaces are converted to campus-like business parks with landscaping, shared architecture design, and lots of surface parking and open space.


8. Showroom Buildings


Showroom buildings combine retail display space with extensive onsite storage and distribution. These buildings typically include up to 50% of space dedicated to sales.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.

How Will Millennials Moving, Influence Your Real Estate Market?



Consumers under the age of thirty years with at least bachelors’ degree are often referred as the millennials. They are considered to be the most educated generation. They are better informed about their housing options and are already influencing the real estate markets and trends in the US. Real estate analysts and experts have identified the metro areas with the lowest rates and fastest rates of growth. The analysts used the data from the U.S Census Bureau. In the year 2015, the regions that have seen the strongest economic growth and real estate appreciation were the metros with the fastest rates of educated millennials’ growth and economic growth. Appreciation in the real estate of these regions highlights the real power of then millennials.


Metros with the highest growth rate of the educated millennials


The highest rates of population growth were reported in metro cities of the West, Southwest, and Southeastern regions. With a 7.6% population increase in 2015 from the year prior, Nashville ranked first in the college-educated millennials’ growth. Austin, Orlando, Seattle, and Denver followed closely behind Nashville in terms of educated population’s growth.


Reasons for enhanced growth of the millennials


There are many reasons for increase in the number of educated millennials in various metros of the US. These include well-performing job markets and entrepreneurial opportunities. In addition to this, thriving arts and cultural scenes, and high rank in various quality of life measures are some of the reasons behind the increase in the number of educated millennials over the years.


New York City, San Francisco, and Los Angeles have higher rents than the places which saw an increase in the number of educated millennials. In addition to this, these metros have created a virtuous cycle of job growth for attracting further young talent, by orienting their economies towards technology and professional service-oriented fields. Rise in the number of educated youths in these regions has helped in boosting the sales and rents of various real estate properties such as an apartment, single-family, office, and retail markets.


2015 One-Year Population Change


Cities with declining manufacturing and less prosperous trade hubs, which are located in the rust belt and the Midwest, are considered to be the lowest performing metros in terms of real estate appreciation. As these metros don’t provide the same economic opportunities or quality of life as compared to other metros, these cities have the lowest economic growth and as well as those of the educated youth. The least performing metros don’t offer reasonable incentives for the educated youth to move to these areas as these areas are marked by harsher climate conditions and industrial diversifications.


In 2015 annual growth and five-year growth plans, some of the metros like Kansas city, Cleveland and Chicago were ranked in the bottom ten. Low economic growth suggests that the long-term challenges for these areas are still not addressed.


Atlanta, Phoenix Sacramento, and Las Vegas are ranked in the bottom ten over the past five year period. Due to the improvement in their ability to attract young and college-educated workers, the economic growth of these cities has improved considerably in the year 2015.


Raleigh-Durham: A curious and unexpected outlier


This metro has several top-tier universities, which make it one of the best metros for education in the US. In addition to this, it has a growing biotech sector of the local economy. But, it ranks among the bottom ten on both the lists. It is important for such metros to simply retain their college graduates to enhance the economic growth, rather than pulling the educated millennials from elsewhere and displaying strong growth.


2010-2015 Annual Average Population Change


The report of best and worst performing metros in terms of economic growth and educated millennials may serve as a predictor of economic winners and losers in the decades to come.


It is important to understand that a growing millennial population in these metros will stimulate demand for office and retail space. In addition to this, the demand of single- and multifamily homes will also increase due to increase in the number of educated youths. Increase in the demand of commercial as well as industrial properties serves as an underpinning for the appreciation of the value of real estate.