If you sent a survey to 1,000 opinion leaders in the real estate industry and asked them what the key issues impacting their work are, what would they say?
The Counselors of Real Estate recently conducted a survey through polling, discussion and debate among 1,000 of its members, identifying the top 10 current and emerging issues expected to have the most significant impact on all sectors of real estate. The top issue — surprise surprise — is inflation and rising interest rates.
“The reason why we have 10 issues is that there are so many things going on,” said Marilee Utter, global chair of The Counselors of Real Estate. “Ultimately, they get reflected through this inflation and interest rate hike that we’re experiencing right now. ”
When it comes to the undoubtedly top issue, it feels like “a war” for many people involved, said Utter. “In fact, you could say that, historically, the model that probably closest approaches what we’re experiencing right now would be a wartime model. You’ve got a labor shortage, a supply chain interruption and yet a lot of demand — and so that creates inflation.”
“There is always the ‘next recession,’ but absent an unforecastable stock, a recession is improbable in the near term,” Timothy Savage, professor of practice at the NYU Schack Institute of Real Estate, wrote in the report. “Proximate economic threats remain the sustained pandemic supply chain problems and policy errors.”
The pain of inflation and interest rate hikes impacts some markets in the industry far more than others. “I certainly think the office is going to be impacted. Part of it is just the longer-term assets are the ones that are going to be troubled the most,” said Utter, “The smaller, more vulnerable markets are going to be hit the hardest in terms of property type. Affordable housing is going to really get hit hard, workforce housing is hard enough to build as it is.” She reckons that interest rate increases are really going to hurt smaller developers that don’t have institutional money or staying power.
If you look down the list, you’ll see a series of well-discussed topics including supply chain disruption, labor shortage strain and hybrid work. “A big theme we’re seeing across all these topics is that there’s huge pressure for the higher quality Class A space,” according to Utter. “Better spaces, however you define it for your industry and your location, are going to really be the ones who succeed, and the rest of them are going to struggle more. So it’s worth the investment to get ahead of it.”
Great issues come with great opportunities, she said. “The opportunity that goes with the dynamics is enormous, the innovation that’s coming out of our industry across all property types is pretty exciting,” Utter added. For example, hybrid work and decentralization will have a major impact on smaller communities. “If you think about suburbs, they really weren’t designed for a lot of the amenities that people want. They weren’t designed for the volume of people moving there. And it could be a great opportunity,” she said.
Emily Fu can be reached at email@example.com.