PwC and the Urban Land Institute put out a report on the Real Estate Industry every year. You can find 2017’s report here.
Name a major event in the last 10 years and there’s a good chance this report predicts some implications – the succession of President Trump, Brexit, Climate Change, the Internet of Things – will all impact the Real Estate markets in their own way. This is a long report, with a lot of great information. Here are three things I learned reading this report.
1.The industry is planning for climate change’s impact.
Global warming and sea level rise are part of the reason I am not investing in the Virginia Beach-Norfolk area, in addition to that area’s lack of economic and industrial diversity. (Over 40% of the Hampton Roads economy is dependent on US military spending).
Investors controlling $24 trillion in assets have signed a pledge to factor climate change into their investment direction. To put that in perspective, total world real estate was valued at $215 trillion in early 2016. That’s a smidge over 11% of the world’s real estate value, which I’d call surprisingly substantial.
The pledges were not binding. However, the willingness of these big players to consider their climate footprint in their decision making process is a great sign.
We might as well prepare for sea level rise. Unfortunately, it’s probably too late to turn the ship around.
2. Mike Rowe (the Dirty Jobs guy) was right – there are jobs for folks who want to work with their hands. The skill gap is real.
From 2014 to 2024, the demographic aged 25 to 34 will be up by 3.2 million, while the generation 65 to 74 will fall by an estimated 9.4 million. The falling population combined with a declining labor participation rate (since the late ‘90s) means there are many job openings in many sectors of the economy, including the skilled trades involved with new construction.
I found this quote from the report more shocking than the rest:
Executives for a firm intermediating offshore wealth into the U.S. real estate market note that they see “five-to-seven-month construction delays due to labor shortages, while costs are inflating.” (Page 10)
Be useful and willing to work hard – the construction industry needs you.
3.Bitcoin’s underlying technology will change every finance-related industry.
The introduction of Bitcoin was on the back of an underlying technology, blockchain. PWC expects that the biggest influence on real estate will be on secure record keeping and transfer.
Right now I see cryptocurrencies as a fad and a speculative investment. Money should act as a store of value, but general price volatility shows that Bitcoin isn’t there yet. Fiat currencies in general are rife with concerns, but most are widely accepted right now at stable valuations.
There is a strong argument for the underlying blockchain technology to have a considerable amount of use in other industries. That’ll be fun to watch.
There’s a lot to learn in this report. I haven’t touched on the market-specific intel, trends in capital markets, the Internet of Things, and so much more. Take some time to read it. If you’re investing in real estate for the long run it will be worth your time.