Top 10 Issues that will continue to affect the U.S Real Estate Industry 2017-2018admin
A survey was taken among over 1,100 real estate agents and analysts by the Counselors of Real Estate (CRE), they have narrowed down the top 10 issues that will affect the U.S real estate industry for the remainder of 2017 through 2018. Below is the CRE 2017-2018 Top Ten issues Affecting Real Estate:
- Political Polarization and Global Uncertainty
- Technology Boom
- Generational Disruption
- Retail Disruption
- Infrastructure Investment
- Housing: The Big Mismatch
- Lost Decades of the Middle Class
- Real Estate’s Emerging Role in Health Care
- Climate Change
Political Polarization and Global Uncertainty is number one on the list because it impacts the decision making process at every level of government and private sector. With recent new elections in the U.S, U.K., France, Austria, and other countries, existing relationships have been destroyed, but also built. The new changes in trade, travel, and immigration policies threaten cross-border investing, hospitality properties, retail, and manufacturing supply chains. A long term affect is that polarization prevents long-term fixes to issues that the U.S economy has been facing over the last decade.
A boom in technology revolutionizes the real estate industry by innovating the way real estate is bought, sold, and managed. Advancements in technology such as robotic learning, big data, and online shopping, according to a study done by McKinsey & Co., is expected to replace today’s jobs by 47%. With big data, autonomous vehicles and ride sharing competing favorably with car ownership raise the question of what to do with our garages, parking lots, and the streetscape. In online retail, the increase in shopping online increases the warehouse demand. However, each foot of new warehouse space leased by online retailers translates into eight feet of vacant retail. Get ready to change uses; you won’t need as much parking, retail, and anything that is shareable. Properties with features that take advantage of the new trends will draw more attention in the marketplace.
The disruption among generations, divergent views of where they live, work, and play increasingly impact the market. The Millennial generation (born 1980-1997) has now surpassed the number of the Baby Boomer generation (born 1946-1964). In the workplace, Millennials are moving into management type positions looking to start a family and own a home. At the same time, Boomers are looking to downsize or age in place. Studies project that Millennials are behaving similarly to Boomers but do so 10 years later. Characterized by:
- Leading “experience-oriented” lifestyle in their 20s
- Marrying, having children, and buying homes in their 30s opposing to their 20s
- Living in the city before moving to the suburbs, searching for large and affordable home with better schools.
Boomers, however, are exhibiting behaviors like Millennials:
- Transitioning into “experienced-oriented” lifestyle in their 20s
- Selling their homes and renting (in the same buildings as younger generations)
- Abandoning the suburbs for city living/ urban like lifestyle.
In the workplace, Boomers still favor traditional office designs, onsite work environments, and structured schedules. But Millennials entering the work force prefer “collaborative” styles and flexibility, where they work. Developers, investors, owners, and landlords will need to understand not only is location the preference, but designs and amenity features, when appealing to the audience they serve.
The trend in retail is shifting into “experiences” while “bricks and mortar” are shrinking. Experiential retail drives customer traffic to a more divers and highly participator environment targeting all age groups and interests. As mentioned earlier in technology and innovation. Many traditional retailers are adopting an “Amazon- like” approach creating new warehouses, distribution, and fulfillment methods. Retailers unable to profitably transition into the multi-faceted new format are phasing out of physical space, and transitioning into virtual, or overall discontinuing operation entirely. However, restaurants have boomed in recent years, and service oriented outlets take up ever more space. As long as retailers who cater in a fresh, appealing, refined, and innovative way they will survive and prosper.
The need for infrastructure investment is critical. Both major U.S. political parties support substantial investment in infrastructure. But it has been unclear when the U.S. Government will make any major moves. The initial conceptual plans released by the Trump administration have indicated a relatively limited Federal Government investment. Instead, placing a heavy reliance on local and state governments, and public-private enterprises, this presents opportunity for the private sector to direct significant funds to infrastructure projects. Relying on public-private investment means projects must have strong revenue generating capacity to funded, something most rural projects, and utilities companies cannot achieve. Public transit has also become one of the most critical investment criteria, but cannot meet requirements of private-public funds. Federal budgets have zeroed out on public transit investment, which is a dramatic issue for many communities and real estate investments. The volume of the need has also become a concern, since state and local financial resources are severely limited…