Albuquerque edges up in its ‘coolness’ factor

The latest buzz in commercial real estate from an investment and development perspective is the rise of the bizO-Metcalf_Richard_BizOso-called “18-hour city” – places such as Austin, Denver and Portland, Ore. – which raises the question of how many hours might apply to Albuquerque.

A “12-hour city” isn’t a term in use just yet, said Todd Clarke, spokesman for the New Mexico chapter of the Urban Land Institute, but it could be coming.

The Washington, D.C.-based Urban Land Institute explores the emergence of 18-hour cities in its latest Emerging Trends in Real Estate report, which takes a look at the kind of characteristics that contribute to making a city cool, hip and trendy.

After years of subpar ratings, the latest report also gave Albuquerque its first positive review – the celebrated green dot – as a place to invest in commercial real estate. Maureen McAvey, a senior resident fellow at the Urban Land Institute, recently fielded questions about the positive rating.

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“Maureen, are we cool?” asked Clarke at an October luncheon at the Albuquerque Marriott hosted by NAIOP, the commercial real estate development association, and the ULI chapter.

“You’re getting there,” she replied.

Albuquerque’s green dot actually means it’s average from a national perspective. In the report’s West Region, which is easily the most robust part of the country in terms of commercial real estate, Albuquerque ranked 18 out of 20 cities.

Albuquerque’s current culture of conservatism could be a barrier to achieving the same status as such icons of hipster urbanism and entrepreneurship as Austin and Portland, Clarke told the Journal with some hesitation after the luncheon.

“If you look at the kind of things those cities have in common, Austin is probably the most liberal city in Texas. The same can be true for Portland in the context of Oregon,” he said. “I won’t go so far as to say liberals define hip.”

The up-and-coming millennial generation, born between 1982 and roughly 2000, have a big voice in defining what’s hip. And millennials are known to be a comparatively liberal generation, particularly on social issues.

Revitalized downtowns are definite contributors to a cool 18-hour city, but the Emerging Trends report says “close-in suburbs” can be more important for their short commutes to Downtown jobs, and their walkability, bikeability and access to public transit.

The 18-hour city concept is derivative of 24-hour cities, which is used to describe the country’s “sexy six” gateway cities of Boston, Los Angeles, New York City, San Francisco, Seattle and Washington, D.C. If the coastal bias is set aside, Chicago often makes lists of gateway cities.

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Most people have heard New York described as “the city that never sleeps,” which would presumably apply to the other five or six as well.

These 24-hour cities have a lot going on and are where a lot of people want to be. When the Great Recession hit, most of the gateway cities incurred some real estate damage, but were the first to bounce back. From a real estate perspective, they largely remained good places to invest.

As the economic recovery spreads and 24-hour cities get picked over for profitable real estate deals, investors are gravitating to second-tier cities, sometimes called secondary markets, especially those that have been rather fancifully rebranded as 18-hour cities.

“Such markets are ‘hip, urban, walkable, and attractive to the millennials’ while providing better future opportunities for rising net income and appreciation than the 24-hour city markets that led the post-financial crisis real estate recovery,” says ULI’s Emerging Trends report.

Looked at another way, Clarke described 24-hour cities as international or global cities, while 18-hour cities are more like national cities. Third-tier cities like Albuquerque are, by extension, regional cities.

“Investors are moving from global cities to national cities,” he said. “We’re replicating a cycle we saw in the early ’90s and early 2000s of investors chasing greater returns by moving from first-tier cities to second-tier cities, with a rippling effect to third-tier cities.”

The Trends report says, “2016 is the year of the secondary and tertiary markets. They continue to be more attractive on a relative opportunity basis than some of the gateway cities.”

The report uses “villes” to describe the next batch of small-to-mid-sized cities that could emerge as the new darlings of investors. “Villes” is short for smaller second-tier cities, such as Nashville, Tenn., and Jacksonville, Fla., as well as third-tier cities, such as Knoxville, Tenn., and Gainesville, Fla., that are attracting attention.

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The term doesn’t apply only to cities ending in “-ville,” but to cities that share similar characteristics.

“The ‘villes’ are seen as offering opportunities to take advantage of faster growing demographics, economies, concentrations in desirable industries and, in many cases, aggressive development plans to establish growth centers within the community,” Emerging Trends says.

“A number of these markets appear to offer benefits similar to key 18-hour cities: growing urban centers, good in-migration (specifically among desired workers), attractive quality of life, and a lower cost of doing business,” it says.

This is the batch of cities, off the beaten path for major-league investors, where Clarke said Albuquerque wants to be. “Albuquerqueville” suddenly has a nice ring to it.

There’s a level of hype associated with hip 18-hour cities like Austin and Portland being job meccas for millennials, McAvey said.

“They’re great cities, but the underpinnings of what they have are not as strong as what Albuquerque has,” Clarke said. “We have more authenticity and a stronger sense of place than those cities have.”

A lot of people, including millennials, are looking for the kind of lifestyle that Burqueños enjoy but take for granted, he said. They just don’t know we have it, thus the challenge is to get the hype machine working in Albuquerque’s favor.

As background, classifying cities into tiers is as much art as it is science. The classifications vary depending on who is doing the classifying. For example, a first-tier city is sometimes defined as one that has a major professional sports team. Regardless, Albuquerque is consistently a third-tier city.

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