Across the world, various markets are experiencing major labor shortages, soaring energy prices, supply chain disruptions, and increasing shipping rates. Housing prices rose during the Covid-19 pandemic due to a perfect storm of supply chain shortages for materials and workers, high demand for housing, and low interest rates.
To understand what's happening, we need to understand who is involved in the supply chain. It's a complex web of players! Manufacturers, distributors, retailers, wholesalers, and consumers all make up the supply chain.
Availability and costs for building supplies from paint, to lumber, to lightbulbs, all impact the price passed on to consumers—either in the purchase price or in rent. Lack of supplies stalls construction projects, passing on costs and delays to the property owner.
As the basic economic principle states: if there is a high demand for a good or service, the price rises. But if there is a large supply, but not enough demand for these goods or services, the price falls.
Right now, there is a real demand for industrial and warehouse space. Both landlords and tenants are in precarious situations—one needing to receive rent and the other trying to gauge their sales and supply enough to pay that rent.
Wherever you are buying or selling commercial and residential property in the world, be sure to understand two important things:
- Local area's economic landscape
- Local area's employment rates and wages
These two key indicators can help identify the direction of value in real estate, and help you judge supply and demand.