The changing global economy, a slowdown in commercial lending by major banks, and demographic shifts are the top three issues facing the real estate market nationwide, according to Jim Lee, chairman of the Counselors of Real Estate, a professional association for real estate advisers.
Speaking in New Orleans earlier today at the National Association of Real Estate Editors’ annual conference, Lee said a projected slowdown in economic growth worldwide could lead to slower and smaller port and infrastructure investment in some markets. Whether that would affect ports in Louisiana is uncertain.
“The good news is that the U.S. is still highly desirable for foreign investment,” he said.
As for the slowdown in commercial lending, Lee said debt markets for commercial real estate nationwide are slowing sharply, and regulators are telling bank lenders to curtail commercial real estate lending. Though the Baton Rouge market has not been affected by that trend yet, Lee predicts markets around the country could see changes in the near future.
“Competition for capital will become an issue in 2016 and 2017,” he said.
Demographic shifts—namely the huge number of baby boomers and millennials, who, together, represent half the U.S. population—are also affecting real estate nationwide. Both boomers and millennials are driving growth in mixed-use and multifamily developments, Lee said. Both groups are increasing demand for communities in which they can live, work and play, as well as for walkable communities with transportation options.
“There is pressure on suburbs to become more ‘urban,’” Lee said.
Other issues affecting real estate:
Changes in retail, namely the increase in online shopping, which is forcing many large department stores and malls to close or downsize. As a result, anchor tenant space is being replaced by restaurants, food courts and entertainment venues, and malls are trying to attract more locally based retailers and entrepreneurs.
The sharing/virtual economy has given rise to enterprises like Airbnb, Uber and shared workspaces. Lee said this development is affecting the local hotel and office markets, as well as the demand for parking lots.
“One of the questions I get all the time is what is the best adaptive reuse for a parking lot?” he said. “The answer is you blow it up. You will see a lot less demand for parking.”
Read more of Lee’s predictions.
—Stephanie Riegel
