10 Issues Facing Commercial Real Estate in 2013

In the world of commercial real estate, it’s easy to get sucked into looking at the job market and corporate investment rates as the main factors impacting the industry, but the Counselors of Real Estate organization urge real estate professionals to take a broader look.

The group compiled a list of 10 issues affecting real estate in 2013, which also intertwine with many other industries.

“The headlines are filled with reports of events and conditions that often seem unrelated,” said Howard Gelbtuch, chairman of The Counselors of Real Estate. “But taking a broader view and looking at the issues from all sides will lead to more informed decisions.”

The 10 issues are:

1. Low interest rates and capitalization rates could rise as the economy improves, making real estate investing more challenging and less profitable.

2. Rising demand for health care from more aging Baby Boomers and new requirements of the Affordable Care Act should create opportunities to fulfill the real estate needs of health care providers, but rising health care costs may affect housing affordability and demand.

3. A resurgence of investment in real estate as underwriting requirements have eased up and money is flowing into new properties and refinancing old properties.

4. Unpredictable global events, such as terrorist attacks or economic crises, impact every industry, but especially real estate as companies often respond to the uncertainty created by such events by holding off on capital projects and expansions.

5. Weather-related catastrophes have a similar stifling effect on the real estate market to global crises.

6. Housing demand is poised to increase with the growing up of “Echo Boomers” — those born between 1982 and 1995 — but the trend is moving towards more urban lifestyles and multifamily housing.

7. Mining natural gas in the U.S. is a growing industry with huge real estate needs, but also environmental risks that could lead to boom-and-bust local economies that devastate local real estate markets.

8. Emerging markets such as China, Brazil and India are drawing the attention of U.S. investors desiring higher returns, while foreign investors are interested in the U.S. because of its stability compared to other parts of the world.

9. Technology innovations are changing, and often reducing, demand for traditional office space.

10. Rapid growth of Internet retailing is revolutionizing traditional brick-and-mortar retail space, focusing on creating an experience, rather than a utilitarian approach to space needs.

Source: Dayton Business Journal