Is It The End Of The Real Estate World As We Know It?
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“Is it the end of the world as we know it”? That seems to be true in many areas of life. Hybrid work has replaced traditional in-office work for many, online purchases are catching up to in-store purchases, people are divided on whether to get vaccinated or not and there’s a war going on in Ukraine. Treasury Secretary Janet Yellen recently had to say she was wrong about inflation. Did you think we would be facing $7 per gallon of gas in some parts of the country? What are the knock-on effects that’s causing?
This time isn’t akin to anything that’s happened in the past. And there’s no escaping that fact for the real estate industry. The old tropes and wisdom on what to expect now are out the window.
And since just about everyone is a participant in the real estate business, in some form, just about everyone is impacted.
So, is this the end of real estate as we know it? Let us say that it’s the start of a significant change in the value and usage of many property types. Since we have an economy that is in the throes of decarbonization and live in a world where a significant producer’s output of oil, natural gas and coal has been removed in great part from the global market, we have to reevaluate, well, value.
If change is going to create cost burdens in order to fit the change narrative, a whole lot of reevaluating is needed. For example, what if the government decreed that a new, greener HVAC system be required in all new construction and older buildings by a certain date in the future? Consider what happened in New York City: “A measure passed [in 2019] as part of the city’s Climate Mobilization Act requires owners of structures 25,000 square feet or larger to often make sizable cuts in carbon emissions starting in 2024 or pay substantial fines. The legislation affects 50,000 of the city’s roughly one million buildings, including a substantial number of residential buildings. ‘There is a laser focus now on reducing carbon emissions from the built environment in New York unlike ever before,’ said John Mandyck, the chief executive of Urban Green Council, a nonprofit advocacy group.”
Is that mandated expense beyond what is plausible for many property owners? In 2019, I wrote an article on fee ownership and your bundle of rights, wherein I discussed the need to be vigilant when it comes to your property rights, as people in a democratic society typically vote for their interests, and if change doesn’t directly affect them, the cost tends to get lost in translation.
This is just one area of concern. Another is the condition of your tenancies and whether you can make good financial moves based on those tenancies paying per contract. It may be time to have a discussion with your tenants and discuss how they are doing since it affects you. If they are having difficulties, perhaps you can assist them with some type of time-delineated structure. This way, you will know where you stand, and the tenant will hopefully thank you.
Once again, we’re seeing changes to the real estate industry that haven’t happened before, so there is no common knowledge here. Study the uncommon. Study change and the effect it could have on your real estate.
And remember that the United States is a representative democracy. Advocate for your property rights.
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