CHICAGO – June 24, 2016 – Every year, the Counselors of Real Estate, a group of real estate professionals who hold the CRE designation and seek to offer unbiased guidance on real estate topics, offers a list of major issues that they feel could affect the industry.
Learn what the implications of these potential shifts could be for your business.
Shifts in the world economy
In response to economic and political uncertainties, the International Monetary Fund amended GDP growth to spiral downward for much of the globe in 2016 and 2017.
Implications for real estate: The CRE sees China as the primary competition in this sector, having capped a five-year real estate investment total to more than $110 billion. They caution that economic deceleration could lead to lower investment in infrastructure worldwide.
CRE is predicting lending for commercial projects will decrease as many insurance companies, bank lenders, and debt markets reach allocation limits. Further, the group sees no legislative action on the horizon to change retention rules set to go into effect this summer.
Implications for real estate: With more restrictions on risky commercial real estate lending, CRE predicts it'll be tough to finance projects. But the group also sees this as an opportunity for "other, less regulated lenders to enter the market," including crowdfunding.
The millennial population is growing as approximately 10,000 baby boomers as retire each day, according to The CRE. The group finds an increasing number of buyers from every generation want homes in the same places.
Implications for real estate: CRE predicts continued strength in multifamily, and growth in boomer-focused housing offering medical, assisted living and memory care services. In retail, expect more "experiential" shopping/dining/entertainment destinations, but nothing too luxurious as wages continue to stagnate.
To cater to the demands of urbanization, a thriving live-work-play rental market will see higher migrations of residents and businesses seeking densely populated areas, according to CRE research.
Implications for real estate: Suburbs will see increased pressure to urbanize, and "high density mixed-use centers" that offer transit, luxury living spaces, retail, work space and entertainment will continue to be popular. Watch out for specialized spaces centered around "innovation" and "education" hubs.
The CRE says affordable homes and flexible credit have grown more unattainable, which challenges both the rental and homeownership markets. The lack of housing inventory is another contributing factor.
Implications for real estate: As buyers flock to purchase starter homes, micro homes may provide affordable alternatives for millennials.
Energy affecting development
The instability in the oil industry has not only been a threat to global economic security, it also has led to the restriction of commercial real estate debt in some areas.
Implications for real estate: According to the CRE, oil instability – currently at its highest level in 50 years – stunts economic growth and job opportunities in areas where production is prevalent. Demand from China could turn this around, but it remains a volatile market that could affect development.
The sharing economy
Airbnb and Uber, companies that operate outside traditional regulations and offer alternatives for employment are two examples that show how the sharing economy is becoming more firmly established.
Implications for real estate: Just as Uber caused taxi revenue to decrease, shared and virtual office spaces could negatively impact commercial real estate values.
According to the CRE, traditional retail is beginning to thrive in an e-friendly cyberspace, expanding its reach and adhering to downsizing trends.
Implications for real estate: With product purchases shifting to online, a shift from large chains to neighborhood shops is key to attracting consumers while building profit, according to the CRE. Many customers today visit retail locations for the experience alone.
Source: "The CRE 2016-2017 Top Ten Issues Affecting Real Estate," The Counselors of Real Estate (June 8, 2016).
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