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Introduction to the Real Estate and Construction Industry, Business and Industry Trends Analysis

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 year-end 2023, the U.S. Bureau of Labor estimated that 8 million Americans were employed in the construction industry (up from 7.26 million at the beginning of 2020).  The agency also estimated that 1.86 million Americans were employed in the real estate industry as of year-end 2023.
Home prices have risen to the point that bargains are hard to come by and many would-be purchasers are priced out of the market.  In 2022 through early 2024, there was very little inventory of homes for sale in the U.S. and many other nations.
There was $20.2 trillion in outstanding mortgage debt of all types in America at year-end 2023, up from $19.3 trillion one year earlier, including homes and commercial projects according to the Federal Reserve.  About $2.0 trillion in new American construction was expected to be put into place for 2023, according to the U.S. Bureau of the Census. 
Many home builders have been challenged in finding enough new lots for future building.  They are also challenged in creating new homes at price points that are attractive to first-time buyers, as lot prices, materials costs and labor costs are high, and cities are often charging significant infrastructure fees for each new home built. 
Retail centers in the U.S. are generally overbuilt.  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 physical store revenues are often disappointing.  Significant strategic changes in the shopping center and mall industry have developed.  Some owners are accepting large non-retail tenants (such as churches or medical facilities) in an effort to fill up former department store or big-box retailer sites.  However, owners of Class A malls and centers in prime locations with good tenant lists have been adapting by adding new features, including entertainment venues and outposts of very popular restaurants in order to boost foot traffic.  At the same time, national retail chains have learned to tightly integrate online shopping with in-store shopping, making it desirable for customers to come into physical stores to try before they buy online, or to return merchandise that was purchased online.  These strategies are paying off well for smart operators.
Apartment house operators enjoyed brisk business in general in recent years, with high occupancy rates and rising rents.  However, in 2023-2024, this encouraged the construction of new apartment buildings at a rapid rate.  Some markets have become overbuilt, and a significant slowdown of new building openings is expected for 2025-2026.  Meanwhile, as of mid-2024, commercial and rental property investors of all types were struggling with much higher interest rates when mortgage renewals dates come due.  This has been particularly hard on owners of office buildings, where occupancy rates have been very soft ever since the onset of COVID and the growing interest in work-from-home opportunities.
A 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.
A very significant trend for the real estate and construction industry is the boom seen in technology-related projects.  The soaring levels of investment in artificial intelligence (AI), including popular generative AI tools like ChatGPT, is leading to unprecedented growth in the need for new data centers:  massive, highly specialized buildings that can provide locations for computer servers and meet their needs for electricity, power backups, internet pipelines and high levels of cooling.  At the same time, there is a major boom in construction of extremely complex, giant facilities for the manufacture of semiconductors, fueled by federal government investments and incentives.

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