A widely anticipated industry report, entitled Emerging Trends in Real Estate 2020, was just released by the Urban Land Institute and Pwc. According to the report, while real estate economists’ views on economic growth in the US are moderate, the real estate market should remain steady through 2021. The conclusions of the report are based on a survey conducted in August of 41 economists and analysts at 32 leading real estate organizations, who, despite warning signs of an impending recession and an escalation of the U.S.-China trade war, were generally optimistic about the future of real estate.
That being said, the report stresses the importance of adaptability to change and discipline as necessary factors for the industry to be able to remain strong in the face of a possible economic downturn and potential decreases in real estate demand over the next few years. Although blame for the last major recession was placed in part on the real estate industry for reckless lending practices and fraudulent activity, the report suggests that a future recession wouldn’t be the fault of the real estate industry. Over the past ten years the property sector has become disciplined, the report says, and any warning signs about an economic dip relate to factors that the real estate industry does not control.
According to the report, a dynamic perspective on real estate and a rethinking of growth strategies are necessary for the real estate industry to thrive, and real estate prospects are highest in the cities of Austin, Raleigh, Nashville, and Boston. As housing needs for Millennials and Baby Boomers continue to change, multifamily and single-family housing will be in increased demand, and office spaces, hotels, and retail locations are likely to see a decline.
The report also observes the effects of the housing affordability crisis, which has the most impact in cities where the cost of living is high, including Washington, D.C., Boston, Los Angeles, San Francisco, and San Jose. Affordability is a problem not only for low-income households, but for the middle class as well, a section of the population which is rapidly shrinking as greater numbers of people fall into economic uncertainty. The effects of this crisis mean that multi-family households and co-habitation arrangements are likely to increase in popularity, changing the market somewhat.
Additionally, the report talks about the effects of climate change on real estate, and specifically points to the impact of extreme heat in urban areas. Rises in temperatures mean that cooling apartment buildings will become more expensive, and the threat of wildfires, droughts, and air pollution pose economic problems. Climate change is not the only cause of rises in extreme heat, the report claims, as increased urban development also contributes to the problem. For handling the problem, the report recommends the use of light-colored building materials and smart use of direct cooling from shade.
As a result of difficulties with affordability, co-living is on the rise, not only for younger generations but for older ones as well. Though the trend is caused in large part by worsening economic conditions for most people, the report highlights the social benefits of co-living, which helps to create a sense of community among people, particularly in an age where technology has the power to make people feel more isolated.
The report claims the lifestyle enjoyed by young people in cities is spreading to suburban areas, which increasingly feature nightlife opportunities, and incorporate transit access, walkability, and abundant options for retail, restaurants, and recreations. As Baby Boomers are expected to live longer and stay more active than previous generations have, the implications for housing are positive. And as communities increasingly recognize the threat posed by environmental damage, they are developing a commitment to environmental and social principles including sustainable engineering and design and socially conscious business practices.
As the federal government fails to update the country’s infrastructure, some individual states have announced a commitment to doing so instead, making them a more attractive opportunity for the real estate industry and laying the foundation for economic growth. Finally, the report finds that technology is having a strong impact throughout all types of property, as consumers increasingly demand technological solutions for productivity and efficiency.