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Daily Real Estate News | March 25, 2009 | Top 10 Business Risks for Real Estate
The 2009 Ernst & Young real estate business risk report, produced in conjunction with strategy consultancy Oxford Analytica, itemizes the top business risks faced by the industry as ranked by leading sector analysts.

The top 10 risks in 2009 are:

1. Continued uncertainty and impact of the credit crunch. Not only is credit so tight that it is squeezing business, the economic downturn is affecting commercial vacancy rates as well as property valuations.

2. Effects of globalization. The real estate industry has become a truly global industry and, as such, is increasingly susceptible to global market fluctuations.

3. Impact of aging and inadequate infrastructure. Lack of transportation and utility infrastructure is a threat to economic and real estate growth, especially in the United States.

4. A global war for talent. Globalization of business has created a worldwide talent pool with countries forced to compete for human capital.

5. Changing demographics. Aging and urbanizing populations are changing competitive dynamics and creating new markets in real estate.

6. Big profits are hard to find. With competition increasing worldwide from sovereign wealth funds and others, many global investors face a tough time sourcing new deals that will meet their expectations for high returns.

7. Pricing uncertainty. With few transactions taking place in the real estate market, valuations are a problem for existing owners, as well as buyers and sellers.

8. Green revolution, sustainability and climate change. Real estate is at the forefront of the green movement with pressures intensifying to build and operate in sustainable ways and minimize the carbon footprint throughout all types of real estate.

9. Economic vulnerability and regulatory risks in developing markets. Developing markets are a key focus for global real estate firms, but regulatory risk in these markets is constantly changing as these countries try to jump start their economies.

10. Increasing energy costs. Few analysts expect more than a temporary respite from high oil prices because, in the long run, demand is greater than the supply.

Source: Ernst & Young (03/24/2009)