DENVER – Global uncertainty and rising political polarization are expected to have a major impact on the real estate sector this year and next, according to The Counselors of Real Estate (CRE), the invitation-only professional association for the industry’s senior advisors.
“Real estate is affected when uncertainty about trade, travel and immigration policies threatens cross-border investment, hospitality assets, retail, manufacturing supply chains and other areas,” said Scott Muldavin, CRE chair, on Wednesday. “Middle-class home ownership will also be pressured as interest rates rise.”
Delivering the opening keynote at the National Association of Real Estate Editors (NAREE) annual conference in Denver, Muldavin — president of the San Rafael, California-based advisory firm Muldavin Company — identified a range of interconnected issues shaping the sector: technology, generational shifts, retail transformation, infrastructure investment, a severe housing mismatch, decades-long pressures on the middle class, real estate’s growing role in healthcare, immigration and climate change.
“In real estate we understand risk — we can price and mitigate it,” he told NAREE attendees. “What we don’t like is uncertainty. The fundamental problem is delay and the inability to act.”
Muldavin stressed that many of these forces are linked and reflect both global instability and relentless economic disruption, affecting multiple property types and markets.
“Even locally, political polarization is intensifying, making compromise and collective decision-making nearly impossible,” he said. “If compromise is treated as weakness and people with differing views cannot share the same forum, how will we address failing infrastructure, build affordable housing, or ensure the built environment grows in a way that protects the planet?”
Among the key concerns raised by industry leaders were the following:
Technology. A steady wave of innovation in commercial real estate technology is changing how properties are purchased, leased and managed. Muldavin noted that machine learning and advanced automation are accelerating workplace transformation. “When autonomous vehicles become affordable, they will reshape parking demand, garages and streetscapes,” he said.
Generational disruption. Differing preferences between Baby Boomers and Millennials for where they live, work and socialize are reshaping markets. Many current real estate choices are made by people under 40. Although studies suggest Millennials may eventually mirror Boomers’ behaviors, that shift could occur a decade later, producing transitional market dynamics.
Retail disruption. The industry’s shift toward experience-driven retail is offsetting some losses in traditional brick-and-mortar stores, but not all retailers can make the transition profitably. Those that cannot have closed stores, moved primarily online, or exited entirely. “Retail isn’t dying — it’s changing,” Muldavin noted.
Infrastructure investment. While both major parties often express support for significant infrastructure spending, timing and political consensus remain uncertain. “Investment in ports, airports, warehouses, roads, highways and rail is critical,” Muldavin said. “The movement of goods is straining an aging and vulnerable interior framework that urgently needs modernization.”
Housing: the big mismatch. Low inventory has driven up home prices and reduced affordability, especially for lower-income households. A serious problem is the lack of housing located where job growth is strongest. “Boomers are seeking larger apartments than those commonly being built for Millennials,” Muldavin said. “There is a major mismatch in workforce housing in fast-growing job markets. Solving this will create substantial opportunities for those who address it.”
Lost decades for the middle class. Middle-class incomes have not recovered to pre-recession highs—$57,403 in 2007—and remain below inflation-adjusted levels from nearly two decades ago. Automation and outsourcing continue to pressure middle-income jobs as the U.S. transitions from a manufacturing to a service economy.
Real estate’s emerging role in healthcare. Political polarization complicates efforts to improve healthcare access and quality, yet real estate is playing a growing role in delivering cost-effective medical services. Care is increasingly provided in clinics, urgent care centers and ambulatory surgery centers, reducing expensive hospital stays.
Immigration. Labor shortages affect sectors from technology to real estate finance; construction and development in high-growth metropolitan areas like Denver can stall without enough workers. Demographers point to immigrants as a key source of household formation and positive population trends that benefit the U.S. “Without a comprehensive immigration strategy we are marginalizing millions and undermining industries that depend on immigrant talent,” Muldavin said. He noted immigration’s strong contribution to residential demand in markets such as Texas and other fast-growing regions.
Climate change. The impacts of climate change reach beyond properties directly at risk of flooding. Damage to access roads, utilities and regional infrastructure can reduce the value of nearby assets. Airports, transportation networks and community amenities affected by climate events can lower property values and drive tenants and businesses to relocate. “Predictions are hard, especially about the future,” he added, acknowledging uncertainty in long-term forecasting.
The CRE’s biennial top issues list for 2017–18 is compiled each year by members of the organization’s External Affairs group, led by research executive and author Peter C. Burley, CRE, and Victor Calanog, Ph.D., CRE, chief economist and senior vice president at Reis. CRE’s roughly 1,100 members around the globe engage in extensive collaborative dialogue on current trends and challenges to identify the final list of priorities affecting the real estate industry.