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The Top 10 Real Estate Issues for 2017-2018 (Part Two of Two)

July 18, 2017 | John Salustri

In our last blog, we highlighted the first half of the Top 10 issues facing the real estate industry as we begin our approach to 2018. These as seen through the eyes of the Counselors of Real Estate. Chairman Scott Muldavin, CRE, unveiled the list at the recent conference of the National Association of Real Estate Editors in Denver. The top five touched on everything from the dicey political climate to the generational divide and technology’s disruption. Now, let’s take a look at issues six through 10.

  1. CRE calls Housing the Big Mismatch. The mismatch exists between need—especially at the workforce and affordability levels—and supply, what Muldavin termed, “a critical disparity. Although improving home prices, economic growth, mortgage accessibility and rental development have improved housing access and affordability in many areas, a confounding series of supply-demand mismatches continues to severely impact markets worldwide.”

    Much of the problem is caused by a rise in earning power of participants in such fields as tech and finance, and stock rushing to fill that gap. The result is a dearth of affordable housing for workers who can’t claim equal earning power.

    “Developers have only begun to address the potential for starter-home construction (as was done in the 1940s and 50s),” he said. “Land and construction costs (as well as regulatory constraints) have created price points that are simply too high to interest those who might otherwise build or invest in entry-level housing.”

  2. Number 7 on the list is what CRE calls the Lost Decades of the Middle Class, whose incomes still fail to reach pre-recession levels. “Battered by automation and outsourcing, middle-class jobs are still under pressure as the US economy transitions from manufacturing to services,” Muldavin stated.

    As if that were not enough, most of the store closures referenced in Part 1 are occurring at the middle-class level, while “malls with tenants serving high-income buyers are faring relatively better.” And in so doing, creating just one more factor in the higher cost of living for this beleaguered group.

  3. Next off the list is Real Estate’s Emerging Role in Health Care. Here’s a sad fact: “The US spends over $3 trillion each year on health care, or nearly $10,000 per person,” according to Muldavin. “That’s double the average for developed countries worldwide, but US health outcomes and efficiency are poorly ranked in comparison to the rest of the industrialized world.”

    Of course there is a political aspect to this, but there’s also a private-sector, specifically real estate-related solution, along with a growing trend toward clinics and other freestanding facilities for health services. “Most major real estate professional groups have recently ramped up their focus on healthy buildings,” said Muldavin. “Designing buildings to specifically address health behaviors has become the most transformative and rapidly growing sub-trend of the health-and-well-being” macro-trend.

  4. The chairman pointed out that there is a serious overlap in many of these issues, as we saw previously with technology and retail. We witness it as well between the political climate and Issue #9, Immigration.

    “The Trump administration has attempted to enact more restrictive immigration laws, emphasizing concerns about security and terrorism while appealing to a voter base concerned about jobs lost to illegal immigrants,” Muldavin stated. “In the meantime, companies ranging from tech firms to real estate finance companies bemoan the lack of qualified workers.”

    The group also argues that immigrants form a key part of the US real estate engine, through such activities as single- and multifamily housing demand. “Longer term, if the entry of immigrant populations that tend to have larger households is curtailed,” said Muldavin, “there will be a limit on the so-called demographic dividend for economic growth, with less of a labor force to support an aging population.”

  5. And finally we come to one more politically charged issue: Climate Change, with a particular eye to rising sea levels. Muldavin cited a National Oceanic and Atmospheric Administration report that predicted a potential sea-level rise “by 6.6 to 8.6 feet by 2100.” The result would be catastrophic flood damage that would threaten cities such as New York, New Orleans and Boston, locales that buckle under rising tides of only 14 inches.

    “The implications of potential sea-level rise and related flooding on real estate values is positioned to explode due to dramatic increases in the volume and accessibility of information on the consequences of sea rise,” he said. “Employers and commercial real estate investors, thanks to hurricanes Katrina and Sandy, can now access municipal and state reports that detail potential risks of sea rise and efforts to mitigate such risks.”

    He noted that there are serious value implications there, and not just for coastal housing and businesses. “Values of all properties will be affected if airports, transportation infrastructure and other community amenities are negatively impacted,” he warned. “Commercial properties and local economies in coastal regions will suffer if tenants concerned about community resilience or related tax consequences go elsewhere.”

About the Author
John Salustri is editor-in-chief of Salustri Content Solutions, Inc., a consultancy focused on enhancing the web and print content of clients around the nation. He is a regular contributor to JPM Magazine and a frequent blogger for IREM’s website. Prior to launching SCS, John was founding editor of GlobeSt.com, the industry’s premier real estate news website, where he managed the daily output of 25 international reporters, and prior to that, he was editor of Real Estate Forum Magazine. John is a four-time winner of the National Association of Real Estate Editors’ Award for Excellence in Journalism.

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