Introduction to the Real Estate and Construction Industry

The real estate and construction sectors, including the many professions and fields associated with them, are among the larger components of the global economy. As of end of year 2022, the U.S. Bureau of Labor estimated that 7.5 million Americans were employed in the construction industry (up from 7.0 million at the beginning of 2020, and close to 2007’s peak of 7.6 million). The agency also estimated that 1.8 million Americans were employed in the real estate industry as of end of year 2022.

Unfortunately, the Coronavirus pandemic of 2020 created many challenges in the real estate sector. Problems include homeowners who temporarily lost their incomes and were unable to pay their mortgages, construction projects that were temporarily halted and the closure of a large number of commercial businesses such as restaurants, therefore creating empty office and shopping center space. In response, governments in many nations enacted financial support that provided much-needed relief. In the U.S., mortgage deferral was available, and the Payroll Protection Plan (PPP) enabled many small businesses to remain open that otherwise would have promptly folded. Meanwhile, a combination of exceptionally low interest rates and a new work-from-home trend led to a boom in residential housing, as many people wanted larger houses or moved away from cities to larger homes in locales such as Florida, Utah and Arizona. One result was a shortage of both building materials and construction workers. Another was soaring home prices, combined with a dire shortage of inventory of houses for sale. By mid-2022, interest rates had climbed significantly, making home ownership less affordable, which reduced total home sales.

Home prices have risen to the point that bargains are hard to come by. In 2022 through early 2023, there was very little inventory of homes for sale in most U.S. many non-U.S. markets, leading to bidding wars among buyers.

There was $19.3 trillion in outstanding mortgage debt of all types in America at year-end 2022, up from $17.0 trillion one year earlier, including homes and commercial projects. This total included $13.4 trillion in home mortgages, up from $11.6 trillion in 2020.

Construction of all types, including commercial, has enjoyed a strong market in recent years. About $337 trillion in new American construction was expected to be put into place for 2022, according to the U.S. Bureau of the Census.

Many home builders have been challenged in finding enough new lots for future building. In many markets, they are also challenged in creating new homes at price points that are attractive to first-time buyers, as lot prices are high, and cities are often charging significant infrastructure fees for each new home built. In fact, housing affordability in general is a significant problem in many major markets worldwide.

Retail centers in the U.S. are seriously overbuilt, and there are too many stores trying to sell to too few shoppers. The result of this glut has been large numbers of retail store chain bankruptcies—a trend that accelerated dramatically during the Coronavirus pandemic. Many major retail chains are now opening much smaller stores than in the past. Meanwhile, retail stores are facing dramatic competition from sales made over the internet. Online commerce has been growing at stellar rates while mall traffic and store revenues are generally disappointing. Mall owners in many areas are accepting large non-retail tenants in an effort to fill up former department store sites.

Apartment house operators have been enjoying brisk business in general. Low vacancy rates have been encouraging the construction of new apartment buildings at a rapid rate. However, as of mid-2023, commercial and rental property investors of all types were struggling with much higher interest rates when mortgage renewals dates come due.

Meanwhile, on a global basis, there will be continuing demand from the health care sector for new or remodeled properties such as out-patient clinics, as the percentage of the population over age 65 continues to grow in many nations from North America to Asia to Europe, boosting the need for medical care and assisted living centers. Another growing trend in construction is the use of energy conservation technologies in new buildings. This is true in both residential and commercial construction. Several “green” building certification plans are now in place, so that architects and builders may seek to attain certain energy conservation and eco-friendly standards. Other advancing technologies include “smart home” features that control lightning, air conditioning and security via smartphone apps, as well as a small but growing use of robotics and 3D printing in home construction.

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