The real estate industry has been experiencing an unprecedented boom, unlike any before, despite the ongoing pandemic impacting all industries alike. However, a lot of factors have been posing challenges. Climate change, rising mortgage rates, shifting political climates, and other technology trends among others have been affecting the real estate industry.
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If you were to ask your typical real estate agent, they would list some of the above factors among the challenges facing the real estate industry currently. In this post, we’ll take you through some of the most common and biggest challenges faced by real estate agents.
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The pandemic
As the year 2019 came to an end, the world was threatened with the fear of an unknown virus that had claimed lives. There were no proven facts or data on how the virus originated, how fatal it was, or how likely it was to spread from one person to another. However, it spread like wildfire, causing a lot of fatalities, affecting people’s normal lives, and, in the event, causing worldwide economies to crash.
Most industry sectors are struggling to recover from the aftermath of the impacts brought down by the pandemic. Like all other industries, the real estate industry is going through its ups and downs in an economy driven by the pandemic-induced recession.
Real estate experts are imagining a newer market, post-pandemic, where considerations would be made based on existing fragility, potential relevance, and adaptability to new demands.
The likeliness of an increasing or declining demand would depend on how the crisis shapes people’s habits (how comfortable they are with abandoning old habits and embracing new ones).
If one thing that the lockdown has taught us is the growing restlessness when people are forced to be confined within the four walls of their homes.
However, we need to examine our willingness to shop in crowds, sit in theaters, and live close by as we did before the whole pandemic thing happened.
Two things could likely drive the real estate industry as a result of the pandemic: One could raise the demand and the other could bring down the demand.
How far is the transition to a home-office model going to increase the real estate demand? With an increasing need to socially distance, and looks like social distancing would become the norm over time, would it be required to maintain a reduced density in malls, restaurants, offices, etc.?
However, it would take some time for the economy to recover from the aftermath of the pandemic, which would impact the real estate industry for a while.
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Migration
The COVID-19 pandemic has brought about a temporary halt to people’s movement within, across, and outside the US. Mobility has always influenced the real estate industry.
As the migration declines and the behavioral changes brought about by the pandemic start to take shape, the demand for retail real estate, residential, and hospitality would be hurt.
According to a poll, over 40% of city-dwellers are planning on moving away from the city as the fear of the virus and economic effects grow stronger. However, the urban flight would be a viable option only for wealthier households and those who can continue working from home, given the expenses of shifting and the requisite for a disposable income.
However, as people looking for newer and better job opportunities could mean an increase in demand in the real estate sector.
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Technology
The pandemic has made it essential to implement technology for monitoring, managing, and mitigating risks. The transition to working from home, changing operating methods are increasing the need to adopt new technology. Some of these technologies would be mandatory, while others would fall in the category of “nice to have”.
Technology would include contactless doors, elevators, quality monitoring, health screenings for staff, and more.
With organizations taking further measures against cyberthreats, the web becomes a safer space and gives more leverage to explore the benefits of newer and innovative technology.
Technology would help to ensure spaces are safer, more efficient for property owners, and residents, helping drive the demand for real estate.
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Environmental, Social, and Governance (ESG)
The real estate industry has adopted environmental, social, and governance (ESG) as a critical investment. The changing climate risks the environment, which means there need to be measured for tracking and controlling the ESG performance. Thankfully, millennial investors and corporations are substantially recognizing the growing need for innovative ESG initiatives in place to protect and safeguard the world against the threats posed by changing climatic conditions.
When it comes to the real estate industry, ESG would be the result of a more conscious effort from stakeholders, including residents, investors, clients, building staff, tenants, and others. The decision-making process would be based on several factors, including diversity, equity, health and wellness, and sustainability.
Other factors, such as economic renewal, capital market risk, public and private indebtedness, affordable housing, space utilization, and infrastructure would factor into what other challenges are awaiting the real estate industry post-pandemic.
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