Inflation, interest rates and geopolitical risk among key issues shaping real estate’s near future

CHICAGO (July 14, 2022) — The Counselors of Real Estate®, a global organization of commercial property advisors, today released its annual report on the Top Ten Issues Affecting Real Estate for the upcoming year. Since 2011, the report has identified the current and emerging issues the Counselors expect to have the most significant influence on real estate. As the real estate industry faces an extraordinary era of unpredictability, the effect of inflation and interest rates is the leading concern of the 1,000-member organization in its 2022-2023 report, with geopolitical uncertainty and the impact of hybrid work rounding out the top three issues.

“The Counselors of Real Estate® proactively recognizes crucial themes so we can pinpoint trends and note their evolution and subsequent bearing on real estate,” said Marilee Utter, CRE®, global chair of The Counselors of Real Estate®. “It goes without saying this past year has been both vibrant and turbulent for the real estate industry. But now we’re seeing the longer-term effects of the pandemic on real estate, and inflation levels and interest rates at a 40-year high are front and center as a driving force behind market volatility.

“In addition, we are experiencing geopolitical risk due to uncertainty about the future impact on economies and financial markets, as well as extensive supply chain complications and challenges due to the implications of hybrid work,” said Utter. “All eyes are on the future as we navigate these disruptions with a purpose for developing solutions and a better understanding of how the issues may impact and change the many professional disciplines in commercial real estate.”

1. Inflation and Interest Rates – “An economic slowdown is already underway and the greatest recession risk to real estate is whether rising unemployment and lower household income cuts demand for residential and commercial property.”
2. Geopolitical Risk – “Continued geopolitical uncertainty provides significant headwinds to the economy. The longer it takes to moderate, the greater the negative implications for real estate.”
3. Hybrid Work – “Current decentralization pressures and the potential for property devaluation are sure to keep the entire financial sector on guard during the evolution of the next few years.”
4. Supply Chain Disruption – “Impacting nearly every aspect of real estate, delays will continue to raise costs and cause realignment in supply chain strategies and warehousing.”
5. Energy – “The consequences building and business owners are facing – and need to consider in business continuity and resiliency planning – include rising insurance costs and increased investment in on-site energy resilience.”
6. Labor Shortage Strain – “The implications for property markets are mostly indirect but potentially significant. Occupiers will lease less space if they lack the workers to run their businesses.”
7. The Great Housing Imbalance – “Markets that have not been able to provide lower-cost housing have experienced ongoing out-migration and risk stressing infrastructure capacity as renters are driven further out to the exurbs.”
8. Regulatory Uncertainty – “The emerging conflict between state preemptive legislation and local control over land use, and the litigation from these conflicts, will create regulatory uncertainty for some time to come.”
9. Cybersecurity Interruptions – “This is not a so-called smart building or ‘Internet of Things’ problem, which continues to stack up risks, but rather a 40-year build-up, as our main systems require computers, networks and internet connections.”
10. ESG Requirements Forcing Change – “These requirements are also instigating much innovation in the design, development and construction of new buildings, as well as renovation of existing stock with long lifespans ahead of them.”

The full 2022-2023 Top Ten Issues Affecting Real Estate report can be viewed online or downloaded as a PDF.