Technology and demography are transforming the real estate business

Future and Growth of Real EstateA few thoughts on new trends in the real estate industry, by Alvin Wade, Real Estate National Managing Partner

The real estate industry has been invigorated by the Trump administration’s plans to reduce environmental and financial regulation, overhaul the tax system and expand the economy. Campaign promises of additional spending on domestic infrastructure have raised hopes for the construction industry and the real estate segment. At the same time, there is concern that these efforts at fiscal stimulus will — after many years of industry-friendly low interest rates — make borrowing more expensive for buyers.

In the short-term, however, predictions for the sector are optimistic, since expected U.S. yearly economic growth is above 2%, the unemployment rate is low and consumer confidence is high. As globalization continues, competition for residential properties in urban areas heats up. Overall, the U.S. real estate market retains its attractiveness to overseas investors as they seek properties with high ROI.

Like other sectors, however, the industry faces disruption. A business that has been built largely on personal relationships is becoming technologically driven. Lease administration, property listings, billing, financing and investing are all undergoing a technological transformation.

The upshot is that innovation is changing traditional industry relationships. The sector’s many intermediaries and go-betweens face displacement. Industry leadership is moving away from family dynasties toward entities like real estate investment trusts and large private equity firms.

Demographic change will further challenge the industry. Aging baby boomers are deciding whether to stay put in suburbia, or move to communities that better fit their changing lifestyles and increased health care needs. Will the millennials eventually follow their parents’ road out of the cities, or will large numbers continue to opt for urban choices better suited to their work and values? The winners in the real estate industry will be those companies that best adapt to these shifting work and lifestyle priorities, as well as technological innovation and a globalized marketplace.

To see how the sector’s leaders are driving change at their companies, please view our report on the future of growth in the real estate industry, and sign up for our webcast.