By: Tom Delark and Christopher Dunlap 

The real estate industry isn’t what it used to be. But, it’s not hard to find the silver lining either. Flexible work schedules and remote workers have upended the office market over the last decade, while technology and online resources have brought novel data collection and sales tools to property developers and managers, buyers and sellers. Urban migration has led to strip center and multi-family housing growth, bringing real estate transaction volume and prices back to record highs in urban centers. 

These and other changes have created new efficiencies in real estate sales and usage, led to additional exposures and forced industry players to seek growth and opportunity in new places. Expect more changes in the coming year. Here is HUB International’s 2018 Real Estate forecast: 

  1. The 2017 storms will harden the insurance market. Many insurance carriers faced greater than expected losses during the 2017 hurricane season, the result of offering highly competitive rates over the last few years coupled with a rise in claims, post-catastrophe. In 2018, premium rates will increase and carriers will expect businesses to have more robust emergency preparedness plans in place moving forward. Affecting both the commercial and residential markets, organizations should anticipate inspections/audits or safety visits from their carriers who might suggest fixing the roof, upgrading the sprinkler system or repaving the parking lot.

  2. The National Flood Insurance Program is sinking with our storms. The National Flood Insurance Program (NFIP), providing coverage to those in high flood areas, where traditional, third-party insurance will not, was $23 billion in debt before Hurricanes Harvey, Irma and Maria arrived. Because the program only covers those exposed to the greatest risk, it has endangered itself. Even if Congress allocates more to the cause, as the insurance market hardens, NFIP prices are bound to rise. In 2018, flood insurance will be harder and more expensive to secure.

  3. Cyber liability is creeping into the real estate world. Now a top worry for property managers and any real estate organization that collects tenant data, cyber security is of special interest to small businesses that lack a robust firewall to prevent attacks, or a comprehensive network backup to enable quick recovery. In 2018, consider hiring a third-party vendor to back up your data, put up firewalls, institute anti-virus software, anti-phishing campaign and overall breach response plan. Learn more about how to fight back against a cyber breach

  4. Construction is on the rise – especially warehouses and distribution centers. The market is flooded with acquisition and construction activity across sectors, from warehouses and distribution centers to office space and multi-family buildings. The increase in e-commerce will continue to drive growth in warehouse and distribution center construction, while retail brick and mortar development remains in decline. 
2018 Growth and Beyond
Thanks to a strong recovery from the 2008 Financial Crisis, the real estate market will see continued growth throughout 2018 as well. And, as we’ve come to expect, change will accompany that growth, too.