The Counselors of Real Estate published a report on the top ten current and emerging issues affecting real estate in 2019 and 2020. The full report can be found here, but you can get my Cliff Notes version of the top five below.
- Infrastructure: Roads, railways, airports, water systems, and the power grid are having greater frequencies of deterioration. These breakdowns lead to hurdles for economic development. The report notes the U.S. is behind compared to other nations. Being behind damages major cities’ ability to attract economic growth. Better infrastructure is directly tied to housing growth and real estate values. The lack data management capacities and telecommunications is also a major element of concern.
- Housing availability: There is not enough housing available for all the various demographics. From low-income to high-income housing, the supply and demand are not in sync. This is connected to the mortgage crisis of a decade ago, the Baby Boomers looking to downsize, and the massive volume of younger households having significant debt tied up in student loans. While the economy has been strong, the growth in earnings has not been for 80% of the population, therefore widening the gap in what is actually affordable and what is available.
- Weather/Climate: Climate volatility has become a major factor in real estate and is included in risk assessment when investing. Both physical and operational risks are in existence due to hurricanes, wildfires, droughts, and sea levels rising. How real estate is purchased and constructed is affected. Strategies and plans are being installed with greater strength, and the physical construction is including greater emergency activity elements, i.e. generators and sea walls. Additionally, insurance is being utilized with greater frequency possibly impacting it affordability in the future. Local ordinances and laws are adapting to climate change as well. An example of this would include laws directly addressing building code associated with energy efficiency and carbon emissions.
- Technology: Every element of operation and management is connected to technology. This has led to a gap in many buildings as there has been division with the back-office technology and the technology that actually runs the building. Such systems as HVAC, which is dependent on computer servers to operate are being installed and managed by those who do not possess modern tech skills, creating significant risk to operations. Automation and integration is rapidly consuming all areas of the industry, therefore altering how it operates at large.
- End-of-Cycle Economics: Despite a continued records of economic growth and unemployment rates, as well as other healthy economic metrics, the cycle is going to end. When and where is not as easily determined as simply saying, it is cyclical. And this end could be abrupt. Real estate is driven by the economy on a macro level.
And for a bonus:
- Political Division: The current climate of politics that is very adversarial disallows for many of the aforementioned concerns to be addressed as government officials cannot find a means to work together. This also weakens real estate’s position internationally. The ongoing issues of tariffs and trade, combined with an executive branch operating with a broader interpretation of power presents challenges for the industry. The concern centers on the partisan political norm.
Obviously, there are many factors across culture and society that are influencing real estate. These issues are affecting the immediate and the future, both long term and short term. It is important to stay abreast of these issues in some capacity to ensure your real estate needs are being addressed appropriately.