Demographic shifts including the impact of retiring baby boomers and the rise of the millennial generation will likely have the most significant impact on real estate near- and long-term, according to a new survey of real estate professionals.
The list from the Counselors of Real Estate (CRE) was developed with feedback and polling of CRE members in spring 2015.
"This list reflects a higher degree of economic uncertainty than in years past," said CRE chair Noah D. Shlaes. "Anticipation of rising interest rates, continued currency devaluation, and excess capital flowing into the United States are all on the minds of our membership. Combine this with a growing wage gap and major changes in demographics, and we've got a lot to think about this year."
Many of the issues on this year's list have strong interrelationships and affect multiple property sectors. Excess capital supply-- funds largely flowing into U.S. real estate purchases from foreign institutional and private investors, and rising interest rates--which greatly impact activity in both the commercial and residential financing sectors, were ranked second and third on the list.
Scroll through the list below to see what is on the minds of the country’s top real estate professionals:
1. Demographic Shifts: Two key groups--large numbers of retiring baby boomers and the next large population wave, the millennials--will have the greatest impact on real estate through the lifestyles they choose in coming years. This casts a spotlight on housing in all its forms: for seniors, the homes in which they choose to age-in-place, downsized homes, senior communities or assisted living; for Millennials, the decision to buy or postpone buying, and location most often being driven by amenities, such as urban walkable communities. The real estate and service sectors targeting each group are adapting, too - medical facilities, retail, office and entertainment venues, to name a few; as well as infrastructure and distribution. Overall, demographic shifts will drive decisions across virtually all real estate sectors this year and for the foreseeable future.
2. Excess Capital Supply: Funds continue to flow from outside the U.S.
to purchase U.S. real estate. The supply
is driven by economies that have high savings rates, a shortage of mature
financial markets and few safe assets. The investment rate is approaching
record highs, presenting the potential for pressure on investments in the
future. While investment in major cities
continues, some non-gateway and edge cities are also experiencing higher levels
of investment. Multifamily continues to
be very attractive, but investment is not limited to commercial
property--residential investment is on the rise, as another form of the secure,
transparent asset class that makes U.S. real estate particularly attractive to
investors across the globe.