It isn’t often that a national perspective on the real estate market is offered. For the most part, those in the profession tend to focus on commercial, construction, residential or some other specialized market.
Such a perspective was recently offered, though, by an international group of professionals. The analysis had the goal of identifying the top 10 issues that will affect the real estate market in the next 10 to 30 years. According to the professionals, the way businesses respond to these issues will impact their success in the real estate business.
Changing demand for office space and changing demand for retail space are two issues included in the list. With more employees working remotely, there is a decreasing need for overall office space. The trend is bound to continue as the use of technology increases. Estimates are that major tenants will be reducing space by 30 to 40 percent. In addition, online retail sales-which have been increasing for years-will force companies to reorganize their brick-and-mortar stores and adapt to increased internet shopping.
Liquidity in the real-estate capital markets is another upcoming issue. With fewer lenders are providing the capital for refinancing commercial real-estate loans, businesses are feeling the strain. The liquidity problem is made worse by increasing capital demands by state governments and stricter requirements by lenders who do have the capital.
Overvaluation of commercial properties is another problem. The smaller markets particularly struggle with this problem. There are a number of reasons for it, but businesses will have to grapple with this problem in the coming years as well.
The aging population, student debt loads, global change and uncertainty, sustainability, and political disagreement about how to spend money are other issues listed that will have an impact across all sectors of the market in the coming years.
There is no quick solution or strategy to any of these problems, and any intelligent response will have to move forward with careful planning, expert advice, and with a willingness to deal with some uncertainty.
Source: Marketwatch, “The top 10 threats facing real estate,” Amy Hoak, July 17, 2012