Emerging Trends in Real Estate 2012 - Urban Land Institute

Chapter 1: Facing a Long Grind
workers. No wonder many Americans take pay cuts in new
jobs. The corporate pension turns into a dinosaur, and employers
increase worker cost burdens to pay for medical care and
other benefits. Insidiously, take-home pay either shrinks or does
not grow enough to propel upward mobility for many people.
“Manufacturing jobs exemplify what’s happening: new hires
earn at much lower wage rates than legacy workers. How can
you support a family on $15 an hour”
Productivity’s Costs. The vaunted corporate gains from
technology-enabled productivity enhancements may help fatten
company bottom lines—many firms sit on cash, “waiting out
uncertainty”—but the advances lead to reductions in hiring and
demand for space. Mobile communications devices and wireless
internet links eliminate old-line, bedrock office jobs—from
secretaries and travel agents to file clerks and messengers.
More employees can work from home or in the field, reducing
the need for leased office space, and even computers take up
less room. Hulking mainframes and workstations get replaced
by microchips and tablets. Shopping centers and industrial
properties take their own hits: logistics advances require less
warehousing and reduced storage space in stores. Internet
shopping, meanwhile, relentlessly chews into market shares of
bricks-and-mortar stores.
Personal and Government Debt Loads. During the past
decade, low interest rates and easy credit masked signs of fraying
living standards. As long as housing bought without much
equity appreciated and credit card offers piled up in the mail,
consumer buying could accelerate into high gear apparently
without consequences—that is, until values plummeted and bills
piled up. “Now earnings will need to go to savings, consumption
will stay down, and it won’t come back to the way it was.” Often
spendthrift governments (federal, state, and local) had followed
suit, borrowing excessively to pay for—among other things—
wars, social programs, and public employee benefits. Unwieldy
debt service loads now constrain future government spending.
That may translate into more layoffs not only of public employees,
but also workers at a host of private sector government
contractors, including in the defense industry, at construction
companies, and in not-for-profit organizations. “Deleveraging
and austerity take a toll on jobs.”
Demographic Realities. Unlike Germany, Italy, and Japan,
the United States will not lose population during coming
decades as long as immigration continues. But increasing
percentages of seniors, as well as expected gains in the under-
20-year-old population, could strain wage earners in prime adult
years who overall will have more dependents per capita to support.
Many older Americans may face tough times in tarnished
golden years, weighed down by limited savings, abrogated
pensions, and potentially diminished Social Security payouts.
Exhibit 1-2
Investment Prospects by Asset Class for 2012
Publicly Listed Property
Companies or REITs
Investment Grade Bonds
Publicly Listed Homebuilders
excellent
good
fair
poor
abysmal
Source: Emerging Trends in Real Estate 2012 survey.
Private Direct Real Estate
Investments
Publicly Listed Equities
Commercial Mortgage–
Backed Securities
The difficult jobs environment likely will keep more young adults
living at home longer, too. As more “retro Waltons” families pool
resources and share living arrangements out of necessity to
make ends meet, they won’t buy as much to furnish homes or
require as much space per capita.
Emerging Trends in Real Estate ® 2012
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