Captain Real Estate Announces the
Top Ten Issues Affecting Real Estate™ 2018-2019
In Conjunction With The Counselors of Real Estate®
(Honolulu)—January, 15 2019—(W. Nicholas Captain, MAI, CRE®, President, Captain Real Estate) today shared the 2019 Top Ten Issues Affecting Real Estate™ — the issues and trends most likely to impact commercial and residential real estate. Mr. Captain is a member of The Counselors of Real Estate®, the global professional association which annually creates this list. Members of The Counselors organization are recognized property experts who provide specialized, objective real estate advisory services to clients.
Mr. Captain, a credentialed Counselor of Real Estate (CRE®) since 2001, said that for the first time the list is categorized by Current and Longer-Term impacts.
Current Issues Impacting Real Estate
Topping the Current Issues list is the cost of money—Interest Rates and the Economy. As interest rates rise, the commercial and residential real estate markets are experiencing decreasing demand for commercial property, and higher home mortgage rates. Rate increases also limit value appreciation for commercial real estate and make housing less affordable. Captain anticipates that the Honolulu luxury residential sector will reflect a slowdown due to demand, and that will eventually affect lower priced markets. The increasing cost of debt, combined with a shift in expectations from capital gains to increasing yields, will likely negatively impact prices over the next few years, according to Captain.
Politics and Political Uncertainty was a close second on The Counselors’ list. Tax reform and policies enacted to change the balance of trade with other countries impacts jobs, incomes and property of all types, commercial and residential. The island markets are somewhat buffered as national politics can be more of a distraction than a major force. However, on Guam, the tax reform has resulted in local government cash flow problems, and the resulting squeeze and local tax increases could drive economic contraction, increasing downward pressure on real estate prices.
Other current issues include:
- The lack of Housing Affordability across nearly every income bracket with the exception of the wealthiest households. This is particularly relevant in Honolulu where the median price of a house was recently reported at nearly $800,000 and nearly $400,000 for a condominium. However, when combined with interest rates and media household income, economic models show Honolulu has rarely been more affordable. Ha! On Guam, rental housing affordability continues to be impacted by U.S. Government subsidies at the upper (military) and lower (Section 8) sectors.
- Effects of Generational Change and Demographics — For the first time in more than half a century, there are four distinct groups exerting influence on both commercial and residential real estate–aging Baby Boomers, a similar number of Millennials, and the smaller groups on either side of Millennials (Generation X, now mostly middle-aged), and Generation Y, including students and those in their early 20s.
- E-commerce and Logistics — The growing practice of online shopping is affecting the retail sector with pressure on providing convenience, selection and fast delivery times, while impacting warehousing and infrastructure with increased demand. Captain, who lives across from the world’s largest open-air shopping center, Ala Moana, noted that turnover and vacant space growth has been notable since 2018. These factors play a much smaller role in more isolated locations like Guam.
- Asian Economic Forces – The real estate markets in locations such as Guam and Saipan are significantly impacted by the economies in Asia. Almost all major real estate transactions in this region involve investments from Asia. Trade wars and new tariffs, decreases in capital flows, domestic economic issues and foreign exchange all have potential to impact island real estate markets.
Longer-Term Issues Affecting Real Estate
Infrastructure leads the list of longer-term issues—roads, bridges, airports, water and sewer lines, electricity, even public transit, all necessary to sustain and expand cities and communities—are rapidly deteriorating. U.S. infrastructure was given a D+ rating in the American Society of Civil Engineers 2017 Infrastructure Report Card. As much as $4.5 trillion is estimated by that organization to improve critical infrastructure by 2025.
Disruptive Technology — ranked second of the longer-term issues. Examples include advanced robotic manufacturing and warehousing; driverless cars and trucks; the extensive availability and utilization of personal and transactional data (which enhances all kinds of business decisions), “smart” building technology that enables efficiency; global connectivity; automated business processes; and information protection through cybersecurity.
Other longer-term issues include:
- Natural Disasters and Climate Change — projected to result in property and environmental damage from events such as severe storms, wildfires, floods, earthquakes, volcanic activity, and rising sea levels.
- Immigration — if reduced by law, will have a negative impact on new housing starts and home purchases as well as worsen the current skilled labor shortage in the U.S.
- Energy and Water — natural resources important to property and quality of life, yet threatened by not only environmental damage but also by entangling state and local regulations which complicate development; there are no national regulatory standards.
On the Watch List are four additional issues — Construction Costs, Urbanization/Suburbanization, Tax Cuts and Societal Leadership.
The Counselors of Real Estate is known for thought leadership, extraordinary professional reach (more than 50 real estate specialties are represented by its member experts) and objective identification of the issues and trends most likely to impact real estate now and in the future. The issues in the annual Top Ten Issues Affecting Real Estate list are an unbiased assessment of the most critical factors impacting real property
About The Counselors of Real Estate
The Counselors of Real Estate is an international consortium of recognized problem solvers who provide reliable, state of the art advice on real property. Membership is extended by invitation and includes principals of real estate, financial, legal, and accounting firms as well as developers, economists, futurists, and leaders of Wall Street and academia. Counselors of Real Estate endowed the MIT Real Estate Center, brought parking garages to China, developed a master plan for the Philadelphia Public Schools and valued Yale University and The Grand Canyon. Award of the CRE® Credential attests to the exceptional real property experience and decision making skills of the recipient. Counselors reside in 20 countries and U.S. territories.