Top 10 Issues Impacting

Real Estate in 2015

Changing Retail Model

transwestern.com | @Transwestern

10. Changing Retail Model 10-15% of all retail centers are functionally obsolete Steady increase in online shopping Physical stores still hold value for consumers to browse and try products Incorporating e-commerce positions retailers well in the short term Store sizes are shrinking, but amenities of urban-style shopping districts are being incorporated in to the suburbs

Real Estate Technology and

Crowdfunding

transwestern.com | @Transwestern

9. Technology and Crowdfunding Dynamic sector for technology innovation $241 million venture capital funding in 2014 went to real estate tech startups Crowdfunding gives small investors an opportunity All parties benefit from faster information gathering and transactions Technology is changing how real estate professionals do business

Infrastructure

transwestern.com | @Transwestern

8. Infrastructure U.S. lags behind other developed countries Aging roads, bridges and power/gas/water lines don’t support dense population, business and world economies Cities don’t have the funds to make improvements Limits adaptive reuse and development where existing energy/water lines can’t easily be improved or streets/bridges cannot support increased traffic

Gap Between Rich and Poor

transwestern.com | @Transwestern

7. Gap Between Rich and Poor 40% of wealth belongs to the top 1% Provides new opportunities for discount and luxury retailers Development opportunity for high-density multifamily and affordable housing Creates “placemaking” opportunities – transforming vacant lots into urban destinations Limited purchasing power diminishes housing choices and home ownership, further delays millennials starting new households

Energy

transwestern.com | @Transwestern

6. Energy Drop in oil prices negatively impacts producers large and small, resulting in workforce reductions Decreased buying power impacts retail, housing, professional services, etc. in the greater community Fewer energy company office/industrial needs Alternative energy gaining investor attraction High demand in Asia could change dynamics

Urbanization

transwestern.com | @Transwestern

5. Urbanization Urban migration outpacing suburbs, not limited to millennials Housing choices of all age groups are evolving to live/work/play Shopping malls must adapt to vertical shopping model Pressure increasing in suburbs facing challenges reselling homes Recent rise in corporate relocations to cities from suburbs to attract younger professionals “Urban” amenities needed in suburbs to compete Opportunities in office, retrofits, conversions, transit-oriented

Global Instability and Currency Devaluation

transwestern.com | @Transwestern

4. Currency Devaluation U.S. dollar gained 22% in the past year compared to other world currencies Foreign capital fueling U.S. real estate market Cap rates expected to stay low Continued “hot spots” of conflict and cybersecurity remain concerns Global economy is psychologically linked

Rising Interest Rates

transwestern.com | @Transwestern

3. Rising Interest Rates Rates at near-historic lows for near future Investors should prepare for rising rates and decreased returns and potential depreciation as cap rates rise Opportunities remain in secondary markets Could spur short-term development and slow home sales

Excess Supply of Capital

transwestern.com | @Transwestern

2. Excess Supply of Capital Foreign investment driven by economies with high savings rates, shortage of mature financial markets and few safe assets U.S. commercial real estate still a safe haven Robust competition in major markets forcing some to look at gateway markets and edge cities Multifamily remains highly attractive, but residential real estate is picking up traction

Demographic Shifts

transwestern.com | @Transwestern

1. Demographic Shifts Baby Boomers’ and millennials’ lifestyle choices forcing real estate to evolve Boomers downsizing and moving to senior communities Millennials postponing home ownership and gravitate toward urban, walkable environments Ripple effect prompting adaptation from virtually all real estate sectors – retail, medical facilities, office, entertainment, etc.

transwestern.com | @Transwestern

Data provided by the Counselors of Real Estate and Noah D. Shales, CRE, 2015 chair of The Counselors of Real Estate. Read the full press release from the Counselors of Real Estate here.

GET INVOLVED

transwestern.com