Top 10 Issues
Affecting Real Estate
Daily Real Estate
News | Thursday, July 12, 2012
As
the condition of the global economy continues to cause uncertainty across all
industries, The Counselors of Real Estate, an international professional
association of top executives in real estate, asked its members to identify the
“top ten” broad structural issues that will define the real estate industry
over the next 10-30 years. Many of the issues have strong interrelationships
and are common across industries:
1.
Aging Population: The
aging of the population will broadly and dramatically affect the real estate
markets from housing, retail sales, health care, and myriad factors that define
the success of different geographic areas. Aging will most directly affect the
demand for real estate, but will have scores of less direct effects such as
potential capital impacts as the pensioners by the scores of millions move from
being net contributors to net users of capital.
2.
Funding of Public Employee Retirement Systems:Underfunding of state
and local retirement systems in the trillions of dollars provides extreme
challenges to the provision of basic local and state services critical to real
estate properties and markets. Can existing government assets be tapped for
cash in a way that makes economic sense and does not shortchange future
generations?
3.
Student Debt Burdens:Student
college debt averages around $45,000 per student with a total that exceeds
consumer debt for the first time. How will such burdens change the patterns of
spending, household formation, and financial growth of this generation of
graduates?
4.
Infrastructure Funding and U.S. Competitiveness: Creative
public-private partnerships with state and local governments are being viewed
as potential supplements or replacements for federal funding of the next
generation of needed infrastructure improvements, and could cover the trillions
of dollars of deferred maintenance of existing assets.
5.
Changing Office and Retail Demand:Radical reductions in office space usage
by larger occupants due to increased use of technology, acceptance of
alternative work systems, and changes in retail as Internet purchases change
the role and purpose of physical retail space will define winners and losers
going forward. Additionally, the Panama Canal expansion and East Coast port
expansion are changing the dynamics of warehousing.
6.
Real Estate Capital Markets Liquidity:Capital limitations on banks as a
result of Dodd-Frank and existing overallocations to real estate, concerns about
the scale of return of the commercial mortgage-backed securities (CMBS) market,
hundreds of billions of dollars of real estate loans that must be refinanced in
the next three to seven years, and growing capital demands by other sectors of
the economy will create continuing uncertainty over access to capital. Smaller
properties, properties in secondary or tertiary markets, and properties with
weak borrowers, substantial vacancy, high rollover of tenants in early years,
or other risk factors are already experiencing a severe capital shortage.
7.
Global Change and Uncertainty:The political gridlock and budget
crisis in the U.S., the European financial crisis, the pending (now underway)
slowdown of China's economy, uncertainty and slow growth in the Middle East,
and continuing expansion of global interconnections make uncertainty about the
future of finance a certainty. What does it mean for real estate investment in
the US and abroad?
8.
Integration of Sustainability:Sustainability has moved beyond a
gimmick and become part of corporate governance, management and reporting
systems, and supply chains of many companies ― increasing the value of
sustainable property investment. How must real estate businesses adapt to keep
up?
9.
Low Cap Rates: Cap
rates for core properties are back to troubling 2007 levels. What happens if
interest rates increase and cap rates decompress? Has the industry set itself
up for another disastrous value decline?
10.
Civil Discord and Political Gridlock:Many of the key issues and challenges
require broad consensus to solve. Will there be greater cooperation, or will
political gridlock continue? Answers to this question will be critical to
determining the future of the real estate industry and societies of the world.
The
list was developed by the group’s External Affairs committee. Within The
Counselors of Real Estate organization, more than 50 real estate specialties
are represented; all members provide real estate counseling ― objective
advisory services that solve problems and guide a wide spectrum of real estate
decisions for clients, including corporations, investment funds, financial
institutions, universities, and municipalities.
Source:
The Counselors of Real Estate
