The Counselors of Real Estate (CRE) recently published a top ten list of issues they see affecting real estate through 2017-2018. You can read up on the article yourself here. But for those who want the shorter version and a little bit of commentary read on and update yourselves on the changing landscape of real estate because most, if not all of the issues noted here will affect you in one way or another.
1. Political Polarization and Global Uncertainty. A resurgence of global nationalism, increased trade and diplomacy struggles, and worldwide conflict or potential conflict affect the real estate market by placing strain and uncertainty on trade, immigration, and travel. This in turn weakens the potential for cross-border investments in areas such as hospitatlity, retail, and manufacturing. Further down the line it trickles into the job market and economy where less money flowing through countries becomes less money flowing through the pockets of the working class.
2. The Technology Boom. Information and sharing will be the biggest tech changers of real estate and its future. With many real estate startup companies trying to change how real estate is bought, sold, and managed, there are other aspects to tech and how information is shared and utilized for the convenience and use of those involved in the business. In addition, because the United States is overly saturated with retail per capita in comparison to other developed countries in the world, the big shift we see in online retail and land use will change things such as building codes where we won't need as much parking or retail space. We'll see homes with secure package depositories (if you shop on Amazon or another online retailer) and things that make our lives more convenient to our changing lifestyles. Anyone in the mood for Pizza?
3. Generational Disruption. Outgoing Baby Boomers versus up-and-coming Millenials. Then there's everyone in between. The lifestyles and preferences of differing generations are real. So when property owners or developers are gearing up for leasing or selling their properties they must pay very close attention to the audience they are trying to cater to. They will need to understand the locational preferences, desired amenities, and balance design and functionality for each respective group now and into the future.
4. Retail Disruption. Retail in the United States is oversaturated. There is nearly 3-5 times more retail space per capita than other leading developed countries. And the changing face of retail, retail centers, and the shopping preferences of today's consumers are different from what they were even ten years ago. We've noted before how the retail experience needs to evolve into something more experience-oriented as this is the future. Despite the changes, retail won't suffer extinction by any means, however, retailers need to refocus and resposition themselves to offer up fresh, new ways of delivering their products through a holistic experience.
5. Infrastructure Investment. This goes without saying that if there's no way to get to where you're going, you won't be going there anytime soon. Real estate value is so dependent on accessibility, exposure, and location. This holds true for retail, distribution, and transportation. As recent as today (August 15, 2017) President Trump is expected to sign an executive order aiming to streamline the permitting process for infrastructure and has pushed for a $1 trillion initiative to revive airports, roads and bridges, with public spending boosted by private funding.
6. Housing: The Big Mismatch. 2017 so far has been a big issue of housing supply and demand. With the shortage of supply and the heavy competition for the same homes by multiple buyers, it has not only pushed up real estate housing prices but has also created a larger gap between homeowners and those stuck renting at elevated prices. This issue trickles down into the job market as well, where otherwise qualified talent may look elsewhere for work because of the lack of affordable housing options.
7. Lost Decades of the Middle Class. The turn to automation and outsourcing has caused middle class jobs to disappear as the U.S. economy transitions from manufacturing to a more service based job market. The lack and/or reduction in the middle class income becomes a burden on retail properties that cater to or service them and is seen in the influx of retail store closings (which is also related to other issues herein).
8. Real Estate’s Emerging Role in Health Care. The U.S. spends over $3 trillion on healthcare but the general health of its people and efficiency of the system is poorly ranked in relation to other industrialized nations. The Mayo Clinic research concluded that only 20% of health comes from health care, with environmental and behavioral factors accounting for 40%. What does this mean for real estate? We spend nearly 90% of our days indoors and so the demand for "healthy" buildings are ever increasing. Healthy buildings are those that are designed with new standards in design that incorporate things such as open spaces, natural light, clean air management, etc. to promote live and work spaces that allow us to be more productive and healthy while doing so.
9. Immigration. With the new U.S. administration focusing on immigration reforms it potentially seeks to reduce the diversification of the workforce. New jobs, new wages, new skilled workers, all need new housing and services. Limiting immigration will work to constrain labor mobility and homeownership.
10. Climate Change. Warmer worldwide temperatures from greenhouse gases cause the ice shelf to melt causing increased sea levels. This is of course over time, however, in January 2017 the National Oceanic and Atmospheric Administration (NOAA) released a report stating that the sea levels at around 2100 would be approximately 6 to 8 feet higher than they are today. This change alone will affect coastal properties (most metropolitan areas are based around water) and also potentially increase the costs of insuring properties due to additional side affects of global warming which can include excessive, damaging storms and floods.
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