Contributions by: CRE, The Counselors of Real Estate, Chicago
Demographic shifts – the impact of retiring Baby Boomers and the rise of the Millennial generation – will likely have the most significant impact on real estate near- and long-term, according to The Counselors of Real Estate®. Demographic shifts rose to the top of this year’s list because of the sheer numbers of people and transactions involved in the evolving needs of both groups in coming years, and the far-reaching effect these will have on real estate.
Situated in the heart of downtown San Antonio, Alteza Above the Grand Hyatt, is an example of a community experiencing a change in momentum, as activity in the first 6 months of 2015 has already surpassed 2014 totals. The City of San Antonio’s investment in downtown is one catalyst for the transactional volume increase, but the CRE Report provides additional insight into other factors which may be impacting the growing sales success.
“Anticipation of rising interest rates, continued currency devaluation, and excess capital flowing into the United States are all on the minds of our membership,” says Noah D. Shlaes, CRE, 2015 chair of The Counselors of Real Estate Combine this with a growing wage gap and major changes in demographics, and we’ve got a lot to think about this year.”
1. Demographic Shifts: Two key groups – large numbers of retiring “Baby Boomers” (born between 1946 –1964), and the next large population wave, the Millennials (born between 1980 – 2000) — will have the greatest impact on real estate through the lifestyles they choose in coming years.
2. Excess Capital Supply: Funds continue to flow from outside the U.S. to purchase U.S. real estate. The investment rate is approaching record highs, presenting the potential for pressure on investments in the future. Multifamily continues to be very attractive, but investment is not limited to commercial property — residential investment is on the rise, as another form of the secure, transparent asset class that makes U.S. real estate particularly attractive to investors across the globe.
3. Rising Interest Rates: Interest rates have been at near-historic lows – and the general view is that they will stay that way, for a while longer. But savvy investors and homebuyers alike are preparing for rising rates.
4. Global Instability and Currency Devaluation: The U.S. dollar remains strong – but the global economy is being affected by currency devaluation in many other countries. Investment from non-U.S. sources helps fuel the U.S. real estate market.
5. Urbanization: Urban population growth is a global phenomenon. An increasing desire to reside in “live-work-play” and “walkable” communities is not limited to young professionals; older generations are also drawn to such locations, which affects housing choice for all age groups. The past few years have also seen a rise in corporate relocations to cities from the suburbs as a strategy to attract younger, urban professionals.
About the CRE
The list was developed by The Counselors of Real Estate’s External Affairs Committee, considering independent research, qualitative interactive feedback from members via polling at the association’s spring conference and a member wide email survey conducted in spring, 2015. David J. Lynn, Ph.D., CRE, CEO and co-founder, Everest High Income Property, leads The Counselors’ External Affairs initiative.