Top 10 Issues Impacting Commercial Real Estate
The Counselors of Real Estate compiled a list of the top 10 issues affecting commercial real estate for this year, in both the short- and long-term. The Counselors consider independent research, qualitative feedback from members via polling and a member survey.
- 1. Top 10 Issues Impacting Commercial Real Estate in 2014 transwestern.com | @Transwestern
- 2. Agriculture
- 3. transwestern.com | @Transwestern 10. Agriculture 920 million acres of the U.S. devoted to farming – 45% of the land $39 billion in trade surplus – 5% of U.S. GDP U.S. produces more food than it consumes – only 6.8% of consumer income, much lower than other countries Increasing specialized demand, such as organic foods Investment opportunity: As the world population grows, the demand for food increases
- 4. Manufacturing
- 5. transwestern.com | @Transwestern 9. Manufacturing Even technology runs on manufactured “stuff” – laptops, microphones, phones, etc. all have to be made first Manufacturing doesn’t translate directly into jobs Today’s facilities employ 20% of the labor force a decade ago Robotics and automation replacing people 3D printing has the potential to revolutionize the industry Manufacturing superpowers used to be Eastern, now Western
- 6. Housing
- 7. transwestern.com | @Transwestern 8. Housing Moved from a headwind to a tailwind, but ownership still lags Obstructed the entire national economy People couldn’t move to where the jobs were Greater liquidity in housing is creating jobs, albeit incrementally Finance, landscaping, architecture, retail (indirectly) Multifamily may feel downward pressure as people transition from renting to owning
- 8. Capital Markets
- 9. transwestern.com | @Transwestern 7. Capital Markets Availability of capital is vital to the CRE industry CRE is still better than any investment alternative New round of refinancing this year with $360 billion in permanent securitized loans requiring refinancing by 2017 While investors await extraction of quantitative easing, the real question is whether or not we’re headed for a “bubble”
- 10. Water
- 11. transwestern.com | @Transwestern 6. Water Global demand expected to exceed supply by 40% by 2030 Areas where we think global growth is headed – China, India, etc. – are severely lacking water China has 20% of the world’s population, but only 7% of the world’s water U.S. will likely face shortages, too, impacting agriculture, development, land value and investment
- 12. Globalization
- 13. transwestern.com | @Transwestern 5. Globablization Global supply chain drastically impacted by U.S. manufacturing, eCommerce and widening of the Panama Canal U.S. manufacturing could cause labor issues in Europe and Asia What happens if the U.S. doesn’t need oil from the Middle East? Devil’s bargain: we traded our jobs for lower costs Money we are sending aborad is coming back to the U.S. in the form of CRE investment
- 14. Healthcare
- 15. transwestern.com | @Transwestern 4. Healthcare $40 billion worth of healthcare facility construction next year By 2018, that’s expected to grow up to $50 billion Providers constructing specialized consultative facilities in non-urban areas, providing wide range of services for lower cost Consolidation creating excess unused properties and higher demand for updated facilities Class B malls well-positioned to serve as healthcare facilities
- 16. Millennials
- 17. transwestern.com | @Transwestern 3. Millennials Second greatest demographic wave in U.S. history 9.1% unemployment rate: hard to find jobs, therefore hard to find housing in the short-run Median income for younger millennials is only $25,000; older millennials is $40,000 Trade size for proximity to food, shopping and, if possible, work Causing pain in the suburbs as baby boomers downsize
- 18. Jobs
- 19. transwestern.com | @Transwestern 2. Jobs Very close to being the #1 issue U.S. has finally replaced all the jobs lost in the Great Recession Strong job creation should positively impact residential and MF Office demand may increase, but employers considering changing technology and preferences of younger workforce Real estate has to adapt to these changes Densification, replacing POS with self-checkout in retail, etc.
- 20. Energy
- 21. transwestern.com | @Transwestern 1. Energy U.S. is now producing more crude oil than it’s importing Domestic energy production impacting jobs and income growth Huge variation state to state – resources, regulations, etc. Most communities involved are experiencing a job boom We will need more and more and more energy if we are to grow Can we create enough energy to make changes that matter for the economy?
- 22. transwestern.com | @Transwestern Final Takeaways Don’t forget the cyclicality of real estate “Too much” may not be an issue right now, but it will be. It’s all a cycle. The most important thing to remember is that these 10 issues are all connected.
- 23. Data provided by the Counselors of Real Estate and Dr. Hugh Kelly, principal at Hugh Kelly Real Estate Economics and former clinical professor of real estate at New York University. Read the full alert from the Counselors of Real Estate here. GET INVOLVED