Fundamentals of Urban Investing
Why Invest in Urban Communities?
Canyon Johnson is bullish on Urban America for several reasons:
- There is a significant mismatch between supply and demand of housing and quality retail options.
- The population of urban areas is growing significantly faster than suburban markets.
- Government leaders in urban areas tend to be more supportive of growth and attracting investment.
- There is still a lack of capital in urban markets.
Significant Mismatch in Supply & Demand
- Due to population density, collective spending power in urban communities is up to twelve times greater per square mile than that of suburban communities.
- Residents of urban communities have 75% fewer retail options than their suburban counterparts.
- In many urban communities, upwards of 40% of retail demand is going unmet.
- The top 50 cities are short 2.5 million housing units.
Growing Ethnic Population
- Ethnic-minority populations now represent over 30% of the US population and are heavily concentrated in America’s urban communities.
- America’s ethnic population is growing at seven times the rate of the general population.
- A Fannie Mae study predicts that the population of the 25 largest cities will grow by 75% within 10 years.
Pro-Growth Environment
- Unlike suburbia, cities must rebuild their tax bases.
- States have huge incentives to create employment opportunities because they risk losing federal aid if unemployment rates remain high.
- The federal government creates Empowerment Zones and other incentives in order to attract investment.
Lack of Capital
- It is estimated that only 2% of US domestic private equity capital is currently targeted toward real estate development and businesses in core urban areas.
