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Aging Population Biggest Threat to Real Estate Investment

By Amy Hoak for MarketWatch

Original headline: The Top 10 Threats Facing Real Estate

Big-picture perspectives of the real-estate market are rare, as professionals tend to focus on their corner of the real-estate world—be it residential or commercial, funding or construction.

But that’s exactly what the Counselors of Real Estate, an international professional group, assembled recently, identifying the top 10 issues facing all real estate in the next three decades. The group of high-profile thinkers came up with a list that focuses on themes from demographic trends to global uncertainty and their effects on real-estate markets.

Essentially, the response to these trends will separate the winners from the losers in the real-estate market, said Scott Muldavin, a member of the group and president of The Muldavin Company, a consulting firm serving the real-estate industry.

1.             An aging population. Changes in commercial real estate, from retail to health-care centers, to meet the needs of this large demographic.

2.             Student debt burdens. When college students are graduating with $25,000 in debt, their spending is greatly restricted—and they’re less likely to form households of their own.

3.             Public funding. Areas where funding problems aren’t as severe will be able to make the infrastructure and quality-of-life investments that encourage real-estate investment

4.             Changing demand for office space. More employees are working remotely, stopping in at the office only periodically, and that is reducing the overall need for office space.

5.             Changing demand for retail space. Online retailers have changed the market for brick-and-mortar shopping centers.

6.             Liquidity in the real-estate capital markets. There are hundreds of billions of dollars of commercial real-estate loans that need to be refinanced in the next three to seven years, but there are fewer lenders who will be able to provide that capital

7.             Global change and uncertainty. The European financial crisis and slowdown of China’s economy is having an effect on global companies.

8.             More sustainability. Expect (sustainability) to become an even more essential component for commercial properties to stay competitive in years to come.

9.             Overvalued commercial properties. Investors have flocked to these properties over those in smaller markets and less desirable buildings.

10.          Political gridlock. To solve some of the key issues in real estate today, broad consensus is needed.

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