CHICAGO—The number one issue affecting commercial real estate in the near and long term? America’s growing energy independence, says the Chicago-based Counselors of Real Estate, which put it at the top of its annual Top Ten Issues Affecting Real Estate list, released Wednesday.
Other issues in the association’s top 10 list this year: jobs, millennials, healthcare, globalization, water supply, the capital markets, housing, manufacturing and agriculture. “The list reflects growing economic and political turmoil, changing demographics and the lifestyle choices of an emerging generation, rising energy independence in the United States and a strengthening job market fueled in part by massive changes in the delivery of healthcare,” Hugh F. Kelly, clinical professor of real estate at New York University’s Schack Institute and 2014 chair of the CRE, said during the opening address at the National Association of Real Estate Editors’ annual conference in Houston.
Energy’s implications for commercial real estate are twofold, according to the CRE. On the one hand, there’s the boom in employment in many markets, ranging from Houston to the Bakken oil fields in North Dakota, which can lead to a ripple effect in housing and services.
On the other hand, says the CRE, “Uncertainty in the energy sector created by dueling reports from environmentalists and the oil and chemical companies provide investors with opportunities. The potential for relatively low natural gas prices (now one-fifth the cost of Europe and Asia) in combination with other factors has improved the outlook for manufacturing and could significantly advance the expansion of rail, shipbuilding and related industries should gas exports increase.”
The jobs picture is even more varied in its effects. Although strong job numbers per se could have a positive effect on residential and multifamily, conversely office could suffer even as hiring and the quality of jobs increase, due to employers’ emphasis on scaling back their per-employee space requirements.
Further, according to the CRE, job reductions in retail and branch banking, due mainly to changes in consumer behavior and online technology, “will take a toll on housing, may benefit the apartment sector and could negatively impact commercial real estate. Service sector jobs may absorb some of those displaced. Communities and neighborhoods that once valued big-box stores may be well served by courting schools, physical therapy services and even independent and assisted living facilities for senior citizens drawn to a retail/lifestyle/entertainment environment.”
