Additionally, DellaPelle noted that the higher number of office vacancies is also impacting local small businesses, such as dry cleaners and sandwich shops, as fewer people visit local businesses to meet the needs created by working in an office.
Sustainability
Even more so than previous generations, millennials, many of whom are entering their peak home-buying years, are focused on sustainability and whether a property they invest in can withstand the effects of climate change while also maintaining a smaller carbon footprint. This, combined with the increasing number of extreme weather events and changing regulations, pushed sustainability to eighth place on CRE’s list.
“Property owners continue to feel growing pressure to better understand their carbon footprint and seek to decarbonize their properties. The demand for more sustainable properties will continue,” said DellaPelle. “To make our building more resilient, the real estate sector must embrace technology.”
Artificial intelligence
When we think about how the real estate industry should move into the future and embrace technology, the focus naturally turns to AI. While many in the real estate industry have praised AI as a useful tool to help industry professionals improve the accuracy and speed with which they complete tasks, DellaPelle and CRE believe there are risks that real estate professionals should be aware of when using of technology.
Many real estate professionals have started using AI to create comparative market analysis of a property. While this may save some time, DellaPelle noted that agents should always check the accuracy of AI-generated reports.
“If you look at a computer data sheet, don’t trust it,” says DellaPelle. “Call whoever you need to check that the information is correct, because the AI may not have understood the specific dynamics of the market or something as simple as location. Does the AI know that the property – a multi-family building in an urban core with street-level retail – is near public transportation, and how does that affect the price?
Accessibility of homes
The challenges of housing affordability are certainly not new and not surprising, especially in an environment where house prices have risen rapidly in recent years, coupled with rising mortgage rates.
According to DellaPelle, the lack of housing inventory is a major contributor to this problem, which he and CRE attribute to the changing nature of the population base.
“I’m not going to sell my house as quickly as I used to, because when you’re my age (62) and there are no more children in the house, you either don’t have a mortgage, or the remainder of that mortgage is going to be minuscule. Why would I sell my house and buy a new house while taking out a 7% mortgage to buy a smaller house that will ultimately cost me more than my big house?” DellaPelle stated. “Inventory is decreasing because fewer people are selling than before. Moreover, we also live longer, which means we stay at home longer because we are healthier.”
Additionally, DellaPelle said the buyer’s market has also declined, as many younger potential buyers are frustrated by the lack of affordable housing and are instead choosing to rent longer.
According to him, this means that there should be more programs and initiatives to help first-time buyers and gain access to the housing market.
“We need to look for a way in which housing feasibility can be mitigated by increasing private sector opportunities through the public sector,” DellaPelle said.
Insurance costs
In addition to the challenge of housing affordability, many homebuyers also face challenges related to rising insurance costs.
“It affects the price of your home,” DellaPelle said. “Insurance companies are only in business if they can make money, and they only write policies if they are confident in the level of risk. If you own real estate or help people own real estate, you should be very sensitive to this issue because it will be difficult to predict what it might cost to insure real estate in the future.
Geopolitics and regional wars
While it may seem far-fetched that a war in a far-flung corner of the world could impact your local housing market, DellaPelle says the idea isn’t as strange as you might think.
“All those conflicts affect us today more than before. The world has clearly become more uncertain and risky because of the geopolitical landscape and the way we are all connected,” said DellaPelle. “The world has become smaller.”
As DellaPelle noted, a conflict in another country could easily impact the supply chain, leading to an increase in the cost of certain goods, which could impact consumers’ savings levels, affecting their ability to purchase real estate is hindered. Furthermore, historically, many foreign investors have chosen to put money into U.S. real estate when conflicts have arisen in their home countries, forcing U.S. homebuyers to compete with investors for real estate.
Loan maturities and debt repricing
By the end of 2026, an estimated $2.5 trillion in commercial loan debt is expected to mature. For the majority of these loans, this will be a rapid shift as they were made in a very different commercial real estate market and when interest rates were much lower.
“How does our economy get through that? What happens to real estate, knowing that most of those loans are secured by properties that have a different set of value parameters than when they were issued? DellaPelle asked.
While this issue will primarily impact the commercial market, if it leads to even tighter lending standards across the board, it could make things even more challenging for homebuyers trying to break into the housing market.
Costs of financing
In the same vein, DellaPelle and the CRE do not expect interest rates to cool down anytime soon. Although the Federal Reserve has cut rates by 75 basis points in recent months, DellaPelle said the days of what he calls “free money” are over.
“Whether the Fed cuts rates four times, or two or three times out of five, rates are not going to go to zero,” DellaPelle said. “I don’t think you’ll see people getting mortgages below 3% for a long time unless something strange happens, and I don’t wish that on us.”
Nevertheless, DellaPelle believes that interest rate cuts are a good indicator that monetary policy is starting to normalize.
“It gives us hope that monetary policy is at a turning point, but it may take a few years before that ends,” he said.
Global and American elections
The election results obviously play an important role in shaping future monetary policy. While many expect the election of Donald Trump to become the 47th of the USe To usher in a new era of business-friendly policies, DellaPelle emphasized that no one really knows exactly how things will turn out.
“The policies, not only of our leadership in this country, but in other countries as well, are likely to evolve, especially on issues like monetary policy,” DellaPelle said. “The uncertainty that comes with the fact that there is a lot of change politically is something you have to think about. The decisions made by our elected leaders are very important to all of us and will impact the real estate industry. You have to understand that the elections, not only here, but elsewhere, will have consequences that you probably cannot even foresee now.”
While these issues may seem intimidating, DellaPelle told attendees that the most important thing to consider and monitor is the demographics of the population.
“You have to anticipate where they are [people] to go. Like Wayne Gretzky always said, you want to go where the puck is going, not where it was,” he said.
