- Interest Rates & The Economy
The Federal Reserve’s plan is to nudge interest rates back to historically normal levels. Concurrently, the passing of The Tax Cut and Jobs Act has enacted fiscal stimulus through deficit spending. As expansionary fiscal policy collides with tightening monetary policy, some speculate increased Federal borrowing could crowd out private entities from the debt market, while those who successfully secure financing face higher interest rates.
2. Politics & Political Uncertainty
Geopolitical uncertainty, The Tax Cuts and Jobs Act, and potential trade wars are policies with the potential to affect real estate indirectly. However, some policy changes have more direct implications for real estate, particularly in the regulation of community banks. The new law relaxes some requirements of the Dodd-Frank Act, adjusts rules regulating HVCRE, and reduces HMDA data requirements.
3. Housing Affordability
There has been a shortage of housing supply for nearly two decades. Simultaneously, income stagnation for all but the highest income households has hampered access to affordable homes and rental units. Now, as Millennials and others move to cities and begin to gentrify aging neighborhoods (formerly de facto affordable housing stock), a crisis of affordability is beginning to emerge. As this issue develops over the next few years, key questions regarding solutions are “Who pays?” and “How?”
4. Generational Change & Demographics
The real estate market is currently influenced by four demographic groups: Millennials, Baby Boomers, Gen X, and Gen Z Some companies have already started to adjust work processes, location, and space utilization in response to demographic changes; the housing market will also have to respond to evolving demands. Even though the different groups have overlapping desires, there are important differences in timing and ability to pay.
5. E-Commerce & Logistics
The U.S. Department of Commerce estimates that $123.7 billion of retail sales were conducted through online channels in 2018 Q1, accounting for nearly 30% of all retail commerce net of automobile and gasoline sales. As retailers cope with this changing landscape, several big name stores have announced waves of store closures, while others open new locations. Commercial real estate will be directly impacted by these shifts in retail strategy.
About the Author
Alejandro E. Jordan, Esq. is the Founder and Chief Executive Officer of ESQ.suites, leading provider of shared office space rentals exclusive for law professionals, attorneys and lawyers in South Florida, Miami, Coral Gables and Downtown Miami. Mr. Jordan has over a decade of experience in commercial lease negotiations for all property types, including office, shared office arrangements, multi-family, retail, and industrial properties. His broad base of knowledge allows him to stay ahead of the game and keep abreast of the latest real estate issues and trends.