CRE Investors Target Cities with Millennials, Start-up Culture: Report

"The key word for real estate's future performance is transformation, in technology, in generational choices and in a reconfiguration of preferences related to geography and property types," said ULI Global CEO W. Edward Walter. "The market shift, which will continue to play out over the next several years, is being fueled by consumers and tenants changing the way they shop and live, what they demand of their spaces and by new technologies that will enable real estate to be more flexible and responsive to users' needs."

The report also noted retail space is not dead. "The rumors of retail's demise may have been exaggerated," the report said. "With low [asset] prices, it's a good time to look at retail space to repurpose to accommodate alternative uses such as urgent care medical facilities, health and fitness providers, restaurants, financial services and entertainment venues."

In addition, the millennial generation, which has driven the urbanization trend and 18-hour cities, may finally be ready to start moving to the suburbs, the report said. As the oldest millennials reach their mid-30s, many now seek to live in neighborhoods with urban-style amenities such as walkable neighborhoods close to shopping and entertainment along with green space and good schools.

"The challenge to real estate markets is a prospective slowdown in demand, varying across geography and property types," the report said. "But slower growth does not mean there won't be opportunities. Functional obsolescence in all kinds of space, the need for affordable housing and responses to technologies will all require new investment and development."