Top 10 Mega-Trends Affecting Real Estate and The Economy

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Essential reading: 10 critical issues affecting the real estate industry (and the economy) over the next 10 years from The Counselors of Real Estate.

Response to these trends will separate the winners from the losers not only in real-estate but related industries as well.

1. Aging Population

The aging of the population will broadly and dramatically affect the real estate markets from housing, retail sales, to health care.

Read below for issues #2-10 including student debt burdens, infrastructure funding, and changing retail and office demand.

2. Funding of Public Employee Retirement Systems

Underfunding of state and local retirement systems in the trillions of dollars provides extreme challenges to the provision of basic local and state services critical to real estate properties and markets. Real winners and losers to emerge.

3. Student Debt Burdens

Student college debt averages more than $20,000 per student and its total exceeds consumer debt for the first time. How will such burdens change the patterns of spending, household formation, and growth of this generation of graduates?

4. Infrastructure Funding and US Competitiveness

Creative public-private partnerships with state & local governments are being viewed as potential supplements or replacements for Federal funding of needed infrastructure improvements.

5. Changing Office, Retail and Industrial Demand

Radical reductions in office space use due to technology and acceptance of alternative work systems—and similar changes in retail as Internet buying changes the role of physical retail —will define winners and losers going forward.

6. Real Estate Capital Markets Liquidity

Capital limitations on banks as a result of Dodd Frank and existing over-allocations to real estate, as well as growing capital demands by other sectors of the economy will create continuing uncertainty over access to capital.

7. Global Change and Uncertainty

Political gridlock and budget crisis in the US, the European financial crisis, the slowdown of China’s economy, uncertainty in the Middle East, and continuing expansion of global interconnections makes uncertainty about the future a certainty.

8. Integration of Sustainability

Sustainability has become part of corporate governance, supply chains, and the functioning of many companies—increasing the value of sustainable property investment. How must real estate businesses adapt to keep up?

9. Low Cap Rates

Cap rates for core properties are back to troubling 2007 levels. What happens if interest rates increase and cap rates decompress? Has the industry set itself up for another disastrous value decline?

10. Civil Discord and Political Gridlock

Many of the key issues and challenges require broad consensus to solve. Will there be greater cooperation? Answers to this question will be critical to determining the future of the real estate industry and societies of the world.

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