If you sent a survey to 1,000 opinion leaders in the real estate industry and asked them what the key issues are that affect their work, what would they say?
Real Estate Advisors recently conducted research by surveying, debating and debating 1,000 of its members, identifying the top 10 current and emerging issues expected to have the greatest impact across all real estate sectors. The main problem – surprise surprise – is inflation and rising interest rates.
“The reason we have 10 questions is because there’s so much going on,” said Marilee Utter, global president of The Counselors of Real Estate. “Ultimately, they’re reflected in this inflation and interest rate hikes that we’re experiencing right now. “
When it comes to what is undoubtedly a major issue, it seems like a “war” for many involved, Utter said. “In fact, you could say that historically, the model that probably comes closest to what we’re experiencing now would be the war model. You have labor shortages, supply chain disruptions and still a lot of demand – and that creates inflation.”
“There’s always the ‘next recession,’ but without unpredictable inventories, a recession is unlikely any time soon,” Timothy Savage, a professor of practice at the NYU Schack Institute of Real Estate, wrote in the report. “The closer economic threats remain lingering problems in the pandemic’s supply chain and policy failures.”
The pain of inflation and rising interest rates affects some industry markets much more than others. “I definitely think it will affect the office. Part of it is that the longer-dated assets will be the ones that will struggle the most,” Utter said, “the smaller, more vulnerable markets by property type will be the hardest hit. Affordable housing is really going to be hit hard, workforce housing is hard enough to build as it is.” He reckons the rate hike will really hurt smaller developers who don’t have institutional money or staying power.
If you look down the list, you’ll see a range of topics well covered, including supply chain disruption, labor shortages and hybrid work. “The big theme we’re seeing across all of these topics is that there’s a big push for higher quality Class A space,” says Utter. “The better spaces, however you define them for your industry and location, will really be the ones that succeed and the rest will struggle more. So it’s worth the investment to get ahead of him.”
Great problems come with great opportunities, she said. “The opportunities that come with the dynamics are huge, the innovation coming out of our industry across all types of real estate is pretty exciting,” Utter added. For example, hybrid working and decentralization will have a big impact on smaller communities. “If you think about the suburbs, they really weren’t designed for a lot of the amenities that people want. They were not designed for the multitude of people moving there. And this could be a great opportunity,” she said.
Emily Fu can be reached at efu@commercialobserver.com.
