LAS VEGAS – (Realty News Report) – Interest rates and the economy head the list of Top Ten issues affecting real estate this year the Counselors of Real Estate — the invitation-only professional association for leading real estate advisors – announced today.
Joseph G. Nahas, Jr., CRE, 2018 chair of The Counselors of Real Estate noted that this year, the Top Ten list differentiated between current and long-term impacts on real property with the economy the key issue this year.
“As interest rates rise, the commercial and residential real estate markets are already experiencing changes — decreasing demand for commercial property and higher home mortgage rates,” Nahas said. “Rate increases also limit value appreciation for commercial real estate and make housing less affordable.”
Speaking at the 52nd annual real estate journalism conference of the National Association of Realtors, Nahas continued that the lack of wage growth for all but the wealthiest is dampening housing demand and limiting consumer spending. He cited a 2017 Brookings Institution study which showed real wages for most of the middle-class have only increased 3.5 percent since 1979, compared to a 24 percent rise for the top income segment.
Longer-term, the lack of serious effort by the U.S. to address the nation’s infrastructure and much-needed revitalization leads the list of broader and emerging issues affecting real estate. “Roads, bridges, airports, water and sewer lines, electricity, even public transit – all necessary to sustain and expand cities and communities alike—are rapidly deteriorating,” said Nahas, who is senior vice president, investor relations, at Philadelphia’s Equus Capital Partners. Nahas noted that U.S. infrastructure was given a D+ rating in the American Society of Civil Engineers 2017 Infrastructure Report Card. “As much as $4.5 trillion is estimated by that organization to improve critical infrastructure by 2025,” he added.
Among the other current issue concerns:
–Politics and political uncertainty including tax reform and the balance of trade. “Congressional action to relax certain bank lending and asset management regulations was also among developing trends which may improve access to capital,” Nahas added.
–The lack of housing affordability. “Affordability is fueled by not only low wages and rising mortgage rates, but also underproduction of housing for almost two decades,” Nahas said.
–Generational change and demographics. Currently, four distinct groups exerting influence on both commercial and residential real estate – such as office design, student and elder housing, amenities, and locational preference.
–Retail sector volatility, including the affect of e-commerce, and logistics that support warehousing and delivery of goods.
Among the longer-term issues facing the real estate industry noted by The Counselors of Real Estate
–Disruptive Technology including advanced robotic manufacturing and warehousing; driverless cars and trucks; the availability and utilization of personal and transactional data, “smart” building technology that enables efficiency; global connectivity; automated business processes; and information protection through cybersecurity. “Nearly every aspect of real estate is undergoing dramatic change as these types of technology are adopted,” said Nahas.
–Natural disasters and climate change, which result in property and environmental damage from events such as severe storms, wildfires, floods, earthquakes, volcanic activity, and rising sea levels.
–Immigration which — if reduced by law –will have a negative impact on new housing starts and home purchases as well as worsen the current skilled labor shortage in the U.S.
–Natural resources such as energy and water, which are important to property and quality of life, but are threatened by environmental damage and state and local regulations.
Looking to the future, Nahas said increasing construction costs, urbanization/suburbanization, tax cuts and societal leadership are issues to watch.
“Rising construction costs make some development unfeasible, and increases prices on commercial and residential property alike,” said Nahas. “Cities continue to attract population and provide opportunities for millennials, seniors, and other demographic segments as well as property investors, corporations and small businesses.
The Chicago-based Counselors of Real Estate is recognized for thought leadership, extraordinary professional reach (more than 50 real estate specialties are represented by its member experts) and objective identification of the issues and trends most likely to impact real estate now and in the future. The issues in the annual Top Ten Issues Affecting Real Estate list are an unbiased assessment of the most critical factors impacting real property.