Globalization and the Real Estate Industry: Issues, Implications, Opportunities

Abstract

Globalization has reached the local and "non-tradable" bastion of real estate. In the last decade, cross-border transactions, portfolio and direct investments have surged in real estate, impacting prices, volumes and industry structure. A significant share of U.S. builders, brokers, consulting firms, real estate finance firms and investors have extended their areas of operation beyond local markets to a world-wide base. This paper draws on prior research, published data, trade publications, an industry workshop, interviews and a short survey to present a preliminary overview of how real estate is globalizing. The paper reviews questions of measurement of international trade and investment in real estate, theoretical issues surrounding the interplay of globalization and real estate, the impact on the real estate supply chain, issues of risk diversification and contagion, and the global competitiveness of the U.S. real estate industry, particularly in emerging economies. A survey of industry leaders indicates that while Europe has historically been a strong base for U.S. real estate activity, Asian markets now offer diversification opportunities due to rapid economic growth, urbanization, demographic trends and demand backlog. We point to some future research questions, such as the link between banking, capital markets and real estate in the context of global financial integration, competitiveness in global markets and employment generation, and the impact of offshoring and global sourcing on U.S. industrial agglomerations, among others.