Outlook Conference Recap: Trends Impacting the Future of Real Estate

On Thursday, October 6^th, the Graaskamp Center hosted the Wisconsin Real Estate and Economic Outlook Conference.

The second keynote presentation featured Christian Beaudoin, Managing Director, Research & Strategy, JLL Research, who discussed trends impacting the future of real estate.

You will find the key takeaways from his presentation below.

Population

• The current decade is expected to have the lowest total population growth of any period since the founding of the US
• This is leading to the competitive nature between cities and states, as any population migration is a zero-sum game
  • When any one region gains population, it must come at the expense of another, rather than both growing
• Outgoing baby boomer talent won’t be easily replaced, as the birth rate has dropped below replacement level since 1971
• Immigration is not filling the labor gap, with numbers declining significantly in recent years amid policy changes
• LinkedIn population migration data shows accelerating growth of Sun Belt and Mountain West markets
• Over the last one hundred years, the distribution of the US population has flipped
  • In 1920, 60% of the population was in the Northeast and Midwest
  • In 2020, over 60% was in the South and West

Sustainability

• Sustainability is now a mandate rather than an option – focus now on decarbonization
• Sun Belt cities are most vulnerable to climate risk
• Cities have increasingly ambitious net zero carbon targets
  • Notably San Diego in 2035 and Austin, Denver, Salt Lake City, and San Francisco in 2040
  • Growing cities like Austin, Denver, and Atlanta are facing the challenge of reducing emissions in the face of rapidly growing population, yet this provides an opportunity to build sustainably
• Retrofitting existing building stock will be essential to meet market demand for net-zero carbon space
  • 80% of office building stock standing in 2050 has already been built
  • Retrofitting rates will need to exceed 3% to meet 2050 targets (currently only 1-2%)

Office

• Hybrid working is the new normal with an average of 2.7 days in the office
• Office space demand is forecasted to have a 15% to 20% reduction for large corporate tenants

Housing

• The national housing stock is structurally undersupplied long-term
  • Since 2010, the imbalance has become more pronounced
• Escalating construction costs are expected to serve as a headwind to new development and drive value for existing assets
• The cost of owning a home in the US is skyrocketing, extending rentership across markets while contributing to record rent growth
• Significantly declining housing affordability is prolonging renter tenancy
• Multi-housing rent growth is surpassing inflationary growth

Industrial

• The pandemic exposed significant risks to the global supply chain
  • This has exposed companies to the benefits of re-shoring and near-shoring
• The largest industrial markets in the US are strapped for vacant space
  • Low vacancies in gateway markets is causing some industrial tenants to shift demand to secondary and tertiary markets

Retail

• E-commerce is back to normal, pre-pandemic levels
• Retail foot traffic is back
• Employee shortages remain retail’s greatest challenge

Access all of the presenters slides from the Trends with Benefits – Trends That Will Define the Future of Real Estate and Housing outlook conference here.

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