Too few sellers, high home prices, 8%-ish mortgage rates and strong buyer demand made the list, but so did AI and the “staggering costs to repair … aging infrastructure.”

CHICAGO (October 2, 2023) – The Counselors of Real Estate’s (CRE) annual Top Ten Issues Affecting Real Estate report for 2024 includes global events, along with well-known challenges, such as continually rising interest rates and too-few homes for many, many buyers.

“This past year has been challenging for some and opportunistic for others as the economy, office market and artificial intelligence (AI) continue to evolve and impact the market,” says William McCarthy, CRE global chair. “This next year will be crucial to real estate with the upcoming election at the local, regional and national level. All eyes are on the future as we navigate these disruptions with a purpose for developing solutions and a better understanding of how the issues may impact and change the many professional disciplines in commercial real estate.”

2024 Top Ten Issues Affecting Real Estate

  1. Political unrest and global economic health – In a market with no shortage of geopolitical, economic and real estate market risks, there was some reshuffling of issues in 2023 and indications of more heading into 2024.
  2. The future of hybrid work – It’s still not clear where the world will land as more businesses call workers back to the office, but the issue impacts a number of real estate businesses. The pandemic created permanent shifts in where work is done, though, and that’s taking a toll on both the office sector and central business districts.
  3. A global housing shortage – People must live somewhere. It’s a basic necessity. Solving the nation’s housing shortage? Not so simple.
  4. Artificial Intelligence (AI) – Access to real-time data is more and more critical to investors in a dynamic market as they decide what properties they want to acquire, exit or hold.
  5. A labor shortage – Almost every sector reports difficulty in finding skilled, willing and able workers, and a series of trends that change requirements for both workers and employers adds to the challenge.
  6. Migration – The pandemic drove a migration shift, but it will continue in 2024 as people seek a more affordable place to live.
  7. Economy, interest rates and inflation – The post-Great Recession era of “free money” ended abruptly after the Federal Reserve quickly raised interest rates. With the federal funds rate now at its highest level since 2007, owners, investors and developers are feeling the effects of higher capital costs.
  8. Supply chains, logistics and U.S. onshoring – Container ships that stacked up outside of the California coastline during the pandemic galvanized action to build more resilient, efficient supply chains.
  9. Pricing reset – If the cost of capital increases, cap rates and property values should decrease. However, an expected pricing reset has been slow to materialize given the freeze in the transaction market with few reliable comps.
  10. Infrastructure – The problems with America’s aging infrastructure are well documented, and the cost to upgrade and repair is “staggering.” The topic of infrastructure tends to start with the American Society of Civil Engineers (ASCE), which has been handing out sub-par grades in the C and D range for the past 20 years (with an overall grade of a C- in its most recent 2021 report card).

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Author: kerrys