GATEWAY PERSPECTIVES: Affordability, Transportation and Climate Change Will Shape Real Estate Industry in the Next Decade
Richard Haggerty | January 2020
I wrote the following article for a reporter for Inman News who was asking folks for their “predictions” for the next decade. I’ve added a couple of new paragraphs at the end of this story as the result of an experience I had the same day I completed the original story for Inman.
Gazing into crystal balls for 10-year forecasts can be a tricky business at best. We certainly have come a long way during the previous decade, with much of the real estate activity centered around the recovery from the recession that began in 2008. As we end the decade, we have made up much of the ground we lost during the recession, but we continue to be mired in a real estate environment of low inventory and sluggish creation of new housing stock. Will we be able to escape that cycle in the next decade? I think so, though it may take several years.
Some of the forces I think will define the 2020s are affordability, transportation and infrastructure, and climate change. Affordability continues to haunt real estate markets nationwide. With many millennials mired in student loan debt and the rising costs of housing, how are they going to enter the market? What kind of housing are they going to be seeking? What about generation Z, who will start to enter the market in the coming decade?
As I look out of my office window in White Plains, I see a hole in the ground that will be replaced by almost 800 multifamily units priced in the $3,000 to $4,500 range per month. When I look out of my north facing window of my apartment on the Upper East Side of Manhattan, I see a new 24-story luxury condominium being built, with asking prices ranging from $2.5 million to $10 million. My crystal ball says when it comes to millennials and generation Z, the multifamily new construction will thrive in the next decade from an affordability perspective, and the luxury condo towers will face stiffer headwinds.
One trend we saw in the 2010s that I believe will continue to be an even greater force in the 2020s is the importance of transportation. Access to mass transit is a driving force in housing choice, and in the coming decade we will see that driverless vehicles and the evolution of drones will reshape our transportation needs, which will have a direct impact on real estate development. What is interesting is that more and more counties and municipalities are starting to incorporate major transit and infrastructure elements in their development planning as opposed to relying on state or federal initiatives.
The City of New Rochelle, in Westchester County just north of New York City, is a perfect example of the type of comprehensive planning that blends residential, commercial and transit components into one master plan that can be marketed to potential residents. This type of integrated planning that incorporates major transit and infrastructure elements will become more prevalent in the next decade. To check out what New Rochelle is doing, visit https://www.newrochelleny.com/298/Development.
A significant issue I see shaping real estate development and consumer choice in the next decade is climate change, and I certainly hope it will not be the force I anticipate it will be. The fact that we are still in a political environment where “deniers” are rolling back legislation meant to slow down the effects of climate change is deeply troubling and disheartening. The science has overwhelmingly illustrated the causes and effects of climate change. A headline in the December 21st issue of the Los Angeles Times read, “In 2019, California was rocked by earthquakes, blackouts and wildfires.” What does that portend for the next decade? How will continued extreme weather impact property insurance and property values?
It’s my fervent hope the next decade will see development that occurs outside those areas that will be most susceptible to climate change, that we embrace new energy sources that have less impact on our environment, and that we take dramatic steps to reduce our carbon footprint in how we live and consume resources.
Obviously, many other factors will shape real estate in the next decade—the growing impact artificial intelligence will have on our daily lives, the growing trend of communal living, especially in urban areas, and reduced reliance on traditional forms of transportation. The next decade will also come with many challenges we do not yet see in our crystal balls, but I’m confident we have the collective tenacity to overcome those challenges when we work together for long-term solutions.
The same day that I finished the story for Inman News I attended a memorial service for Luke Meyers, the son of Chris Meyers, CEO of Houlihan Lawrence, Inc. Many of Luke’s friends and family shared memories of Luke, a young teenager who endured a lengthy battle against cancer, and while there were many tears shed, I kept on thinking while listening to all of the memories, I wish I had known Luke Meyers. From stories shared by family and friends it was obvious that Luke was an amazing young man with a deep curiosity about science and nature. He was also an ardent environmentalist who was already concerned about the effects of climate change in his shoreline community.
I asked Chris if I could share my thoughts about the service and about Luke because I think he is emblematic of a generation that understands that we can’t continue to take our environment for granted. Look at the devastation that is happening right now with the wildfires in Australia, which are being shared on social media in graphic detail.
I believe we are at a pivotal moment, and if we want to have generations to come experience the American Dream of homeownership, we need to have a world where we can build those homes without the effects of severe climate change. Combating climate change may mean some tough choices, but if we don’t make those tough choices now, the consequences may be much more dire in the future. I believe if Luke Meyers were here, he would not be just up for the challenge, he would be leading the charge.