Archives for March 2022

Even for houses, growth rates are still in double digits.

Between people looking for more space and major demographic shifts from north to south, housing has been a strong market during the pandemic.

That continues, but there’s a shift in dynamics, according to a report from the National Association of Home Builders. The NAHB Home Building Geography Index (HBGI), which is “a quarterly measurement of building conditions across the country” using county-level data, found that year-over-year single family residential building growth peaked in the second half of 2021. That was true across small and large metro areas, suburban markets, and rural locations.

Still, even at the end of the year, growth rates remained in double digits, which is good, given the ongoing critical shortage of housing stock.

In contrast, multifamily construction continued to maintain its pace as demand returns to some to high-density cities.

“As the economy reopened in most parts of the nation during the latter part of 2021, solid home building activity occurred in all regional submarkets,” NAHB chief economist Robert Dietz said in the report. “Multifamily production posted strong gains in all regional markets as the demand for apartments increased. Meanwhile, supply-side constraints that include ongoing labor shortages and a lack of key housing products that include garage doors, appliances and windows have delayed single-family construction times across the nation and put upward pressure on home prices.”

Although the Federal Reserve said that supply chain issues might be leveling, building material prices are still on the cutting edge of inflation.

The bad news for homes is the lack of inventory means higher prices at a time when mortgage rates are also starting to rise. That will put additional pressure on rental markets.

Here are some of the NAHB’s observations about single-family building growth rates:

• Construction growth in large metro core counties fell from 26.3% in the second quarter to 13.0% in the fourth quarter.
• In large metro suburban counties, construction growth fell from 31.6% in the second quarter to 13.2% in the fourth quarter.
• For small metro core counties, construction growth was 27.7% in the second quarter but fell to 16.7% in the fourth quarter.
• Construction growth in small metro outlying counties fell from 31.8% in the second quarter to 20.3% in the fourth quarter.

And here are the figures for multifamily construction growth rates:

• Construction growth in large metro core counties rose from 1.2% in the second quarter to 21.8% in the fourth quarter.
• In large metro suburban counties, construction growth rose from 4.1% in the second quarter to 21.8% in the fourth quarter.
• For small metro core counties, construction growth was 16.0% in the second quarter but increased to 34.9% in the fourth quarter.
• Construction growth in small metro outlying counties rose from 23.7% in the second quarter to 70.4% in the fourth quarter.

In Q4, 51.1% of single-family construction was in large metros, 38.4% was in small metros, and 10.5% in small towns and rural areas. For multifamily, those figures respectively were 66.5%, 27.4%, and 6.1%.

Source: “Single-Family Growth Cools While Multifamily Is Still On Fire“

Many firms aren’t normally prepared to deal with malware, and this could be worse.

Before the Russian troops and tanks moved into Ukraine, Microsoft got alerts for new malware aimed at government systems in the besieged Eastern European nation, according to the New York Times.

But to assume that cyberattacks will direct themselves only to government systems and not to companies located in countries that have attracted Putinian ire would be foolish.

“Overall, real estate companies are maintaining sound cybersecurity practices in the case of traditional systems and data,” Tom Shircliff, a member of The Counselors of Real Estate global real estate group and co-founder and principal of Intelligent Buildings, LLC, tells GlobeSt.com.

But overall isn’t necessarily enough. Last year ransomware attacks threatened CRE businesses, and some examples show the existence of CRE firms that don’t learn. Like the one that fell prey to three different ransomware attacks.

Shircliff says that Russian cyberattacks have previously aimed at “critical infrastructure, including dams, manufacturing and oil and gas facilities.” Given steps that governments and corporations have taken to isolate the country, a much wider set of targets could come under attack.

Even those that do have reasonable cybersecurity systems may have troubles.

“Real estate companies not only have the vulnerability of back-office data like all organizations but the additional vulnerability of all of the physical systems that control the conditions in the buildings,” Tom Shircliff, a member of The Counselors of Real Estate global real estate group and co-founder and principal of Intelligent Buildings, LLC, tells GlobeSt.com. “The largest vulnerabilities for real estate companies are systems such as HVAC, elevators, lighting, metering, parking, and physical access control. The problem has been building since the 1980s when all these systems transitioned to digital and Web-based systems since this was done by a value chain devoid of IT and cybersecurity skill sets.”

The so-called industrial controllers as well as Internet of Things devices intended to provide status information and receive instructions over an Internet connection weren’t originally designed with security in mind. Some may be particularly vulnerable.

With physical systems potentially vulnerable, the risk profile changes for the worse. “Problems can include issues such as life safety, financial loss, insurance gaps, network hopping, equipment damage, all which can be devastating to a company’s brand and reputation,” Shircliff says. “As to the insurance, building system cybersecurity is generally excluded in property and casualty, general liability and cyber riders.”

A CRE company should consider an immediate cybersecurity assessment and then undertake necessary remedial steps, although the process can take significant time to put into place.

Source: “Russian Aggression Could Mean Cyberattacks on CRE Firms“