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“Is this the end of the world as we know it”? That seems to be the case in many areas of life. For many, hybrid work has replaced traditional office work, online purchases are overtaking in-store purchases, people are divided on whether to vaccinate or not and there is a war going on in Ukraine. Treasury Secretary Janet Yellen recently had to say she was wrong about inflation† Did you think we’d be dealing with $7 a gallon of gas in some parts of the country? What are the domino effects that cause it?
This time is unrelated to anything that happened in the past. And there’s no escaping that fact for the real estate industry. The old tropes and wisdom about what to expect now are out the window.
And since just about everyone is a participant in the real estate industry, in one form or another, just about everyone is affected.
So, is this the end of real estate as we know it? Let’s say this is the beginning of a significant change in the value and use of many types of real estate. Since we have an economy that is in the struggle of decarbonization and live in a world where the production of oil, natural gas and coal from a major producer removed from the world market for a large partwe need to re-evaluate, well, value.
If change entails costs to fit into the change story, a lot of re-evaluation is needed. For example, what if the government determines that a new, greener HVAC system is needed in all new and older buildings by a certain date in the future? Consider what happened in new york city?: “A measure succeeded [in 2019] as part of the city’s Climate Mobilization Act requires construction owners of 25,000 square feet or larger to often make significant reductions in carbon emissions or pay significant fines beginning in 2024. The legislation covers 50,000 of the city’s roughly one million buildings, including a significant number of residential buildings. “There is now a laser focus on reducing carbon emissions from the built environment in New York like never before,” said John Mandyck, the chief executive of Urban Green Council, a nonprofit advocacy group.
Is that mandatory expense beyond what? is plausible for many property owners? In 2019 I wrote an article about fee ownership and your bundle of rights, in which I discussed the need to be vigilant when it comes to your property rights, since people in a democratic society usually vote for their interests, and if change does not directly affect them, the cost is often lost in translation.
This is just one concern. Another is the state of your leases and whether you can make good financial steps based on those leases. It may be time to talk to your tenants and discuss how they are doing as it affects you. If they’re having trouble, you might be able to help them with some sort of time-bound structure. This way you know where you stand and the tenant will hopefully be grateful to you.
Again, we’re seeing changes in the real estate industry that haven’t happened before, so there’s no general knowledge here. Study the unusual. Study change and the effect this can have on your real estate.
And remember that the United States is a representative democracy. Lawyer for your property rights.