Chicago, IL—The Counselors of Real Estate has identified the current and emerging issues expected to have the most significant impact on real estate, with U.S. infrastructure being the leading concern of the 1,100-member organization.
The Counselors released its Top Ten Issues Affecting Real Estate during the keynote address of the National Association of Real Estate Editors’ annual conference in Austin, Texas.
“Inadequate infrastructure creates a hard ceiling to economic development, and real estate values are tied to sustainable growth,” said Julie Melander, CRE, 2019 chair of The Counselors of Real Estate. “The U.S. must invest in infrastructure to compete globally, but right now it is lagging other nations on infrastructure investment.” The report cites that roads, bridges, tunnels, railways, airports, the power grid, water systems, and levees are giving way with greater frequency. While the White House and Congressional leadership have discussed funding of up to $2 trillion, it remains unclear what action government leaders will take.
Housing in America ranked second on The Counselors’ list, with the gap widening between increasingly expensive supply and the decreasing level of ability to pay. The underlying causes can be found both on the supply side and the demand side of the housing equation.
“Housing affordability is threatening the stability of the middle class, which will hit other parts of the economy as well,” said Melander. “Additionally, the new limits on the deductibility of state and local taxes are affecting both urban and suburban homeowners, while the liquidity of the housing market has been compromised by the difficulty of the Baby Boomer generation in finding buyers for the homes that represent a major portion of their net worth.”
Weather and climate-related risks rounded out the top three issues of concern for The Counselors, as real estate investors are requiring that climate risk be assessed and factored into return projections and day-to-day decisions.
“Weather and climate-related risk has emerged as a new—and likely permanent—aspect of fiduciary duty and what it means to assess, disclose, and manage these risks for real estate investments,” said Melander. “Real estate investors can no longer rely on historic performance to predict future returns.” With the frequency and intensity of events increasing, the report states that weather and climate-related events present physical and operational risks for real property.
The remaining issues identified by The Counselors of Real Estate are The Technology Effect, End-of-Cycle Economics, Political Division, Capital Market Risk, Population Migration, Volatility and Confidence, and Public and Private Indebtedness, respectively.
“Many of these issues are interrelated and thus influence one another,” said Melander. “Clients of Counselors seek unbiased, objective advice on the critical factors that will impact all property sectors today, as well as those issues that may affect their decisions over the next ten years. This thought leadership initiative is an invaluable service to those clients and to the real estate industry in general.”