Each year, the Counselors of Real Estate offers its insights on the factors, trends and issues that are shaping the residential and commercial real estate industries. CRE’s analysis offers insights into opportunities and challenges facing real estate professionals, as well as how the economic environment is changing the industry landscape.
2017 CRE Chair Peter Burley, a real estate economist and market/investment research executive, said real estate professionals have 10 “elephants in the room” to consider. Topping the list: political polarization.
Burley cited tax reform, immigration, global conflicts and other concerns, adding that real estate professionals should be concerned about the uncertainty that the current political environment creates when it’s unable to effectively address major issues.
“The thing is, real estate investors really like risk. They can price it. But they don’t like uncertainty,” Burley said. “When uncertainty prevails, we start to question what it is that we’re doing.”
Coming in at number three, Burley pointed to “generational disruptions” facing the industry.
“This is going to be on our list for quite awhile,” Burley said, as he noted for the audience that there are more millennials than baby boomers in America.
But Burley offered a unique perspective that challenged conventional wisdom about the behaviors of millennials and boomers.
“It’s not just that baby boomers and millennials are looking for different things,” Burley said. “It’s that they’re competing for the same spaces and expecting different things.”
Burley cited an example of a millennial family and a “downsizing boomer” looking at the same apartment. While the boomer asks “where’s the dining room,” according to Burley, a millennial asks “how close are we to the nearest bar and grill?”
Burley turned the conversation from there over to Joseph Nahas, Jr., 2018 CRE chair and senior vice president at Equus Capital Partners.
Nahas tackled the issue of “retail disruption,” pointing out that while many retailers are shrinking their brick-and-mortar footprint, many others are moving to expand.
That expansion, however, is clearly changing.
“We’re even seeing that some retailers are measuring logistics in cubic feet as opposed to square feet,” Nahas said. “They’re looking at ceiling heights that approach 30-plus feet… and looking to go vertical, not just horizontal. “
Nahas pointed to commercial changes in the residential market as well. Demand for retail space in walking distance from housing is up, as are locating experiences convenient to housing. But according to Nahas, one of the biggest changes for developers has yet to unfold.
“Developers of retail really have to think forward and start to ask, ‘how will the design of centers be affected by driverless cars?’” Nahas said. “I think you’ll see, in the medium term, a different plan before planning commissions on new constructions [to] reflect that.”
Nahas also described what he called a “housing mismatch” in the economy, asking “what ever happened to the starter home?”
Affordable housing is too hard to find, Nahas said, while the luxury market has “a demand problem.”
“Boomers and millennials… we have to serve both,” Nahas said. “It’s not an either/or.”
Additional issues making the CRE list include immigration, climate change, and the “lost decade” for the middle class. The two experts also laid out a “watch list” of issues on the horizon that included tax reform, monetary policy, and cannabis.
Nahas and Burley offered their insights at a panel titled “The Top 10 Real Estate Game Changers 2017-18.” The event took place as part of the Realtors® Conference and Expo in Chicago.
CRE Top 10 Real Estate Game Changers, 2017-18
- Political Environment
- The Technology Boom
- Generational Disruptions
- Retail disruption
- Infrastructure investment
- The Housing Mismatch
- Lost Decades of the Middle Class
- Real Estate’s Emerging Role in Healthcare
- Climate Change