The condition of infrastructure topped the list of 10 issues affecting the real estate issue in an annual report by The Counselors of Real Estate.
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Real estate decisions and behaviors face some chronic, some emerging and often integrated health issues, according to Counselors of Real Estate’s latest report, released as part of the keynote address at the National Association of Real Estate Editors’ annual conference, held this week in Austin.
Topping the Top 10 list of concerns CRE’s 1,100 membership cited as factors affecting all property sectors is inadequate infrastructure, meaning the condition of roads, bridges, tunnels, railways, airports, power grids and water systems.
“Inadequate infrastructure creates a hard ceiling to economic development, and real estate values are tied to sustainable growth,” said Julie Melander, CRE’s 2019 Chair. The U.S. is lagging other countries in infrastructure investment, she said.
The housing gap, which has widened between the supply of increasingly expensive homes and buyers able to pay. The report noted the affordability issue extends beyond lower income buyers and reaches into neighborhoods, where rents also have soared beyond budgets. Affordability concern is “threatening the stability of the middle class, which will hit other parts of the economy as well,” Melander said. In addition, new limits on deductions at the state and local tax levels are affecting homeowners both urban and suburban.
Weather and climate change risks round out the top three issues and affect the physical as well as operational aspects of property. Investors are now requiring climate risk assessment to factor into their return projections.
“Weather and climate-related risk has emerged as a new – and likely permanent – aspect of fiduciary duty and what it means to assess, disclose ad manage these risks for real estate investments,” Melander noted. The report warns insurance costs will likely rise in response and reduce risks covered. Climate change is also driving new building laws and ordinances.
Technology’s effect, meanwhile, is driving capital markets, use of space, leasing, brokerage, valuation and building operations. “If this makes your head spin, it’s just getting started,” the report said. “The industry is moving into overdrive with increased intensity on occupant experience…all requiring integration and automation.” Think environmental conditions, amenities and responsive services, and billing.”
End-of-cycle economics ranked fifth with CRE members, who pointed to complacency with the robust and near-record expansion as a concern. The expansion is nearing a record and must end, but when?
“As we look forward, we can’t expect to see the same rate of growth as in the past,” Melander said in the Q&As following the keynote presentation.
Politics, more specifically partisan division, ranked sixth and affects real estate directly and indirectly, through economic impacts. The gridlock and lack of solutions also affect other Top 10 issues such as climate change, infrastructure, housing and migration. CRE is not an advocacy group.
Capital market risk, population migration and distribution, market volatility and debt on the public and personal levels were the remaining and recurring issues the CRE report identified.
CRE is an international organization of commercial property professionals and experts in academia and government. The annual report formalizes issues members have identified, debated and voted on.