Real Estate Industry

REAL ESTATE INDUSTRY

REAL ESTATE INDUSTRY. Real estate is land, all of the natural parts of land such as trees and water, and all permanently attached improvements such as fences and buildings. People use real estate for a wide variety of purposes, including retailing, offices, manufacturing, housing, ranching, farming, recreation, worship, and entertainment. The success or failure of these uses is dependent on many interrelated factors: economic conditions, demographics, transportation, management expertise, government regulations and tax policy, climate, and topography. The objective of those engaged in the real estate industry is to create value by developing land or land with attached structures to sell or to lease or by marketing real estate parcels and interests. The real estate industry employs developers, architects, designers, landscapers, engineers, surveyors, abstractors, attorneys, appraisers, market researchers, financial analysts, construction workers, sale and leasing personnel, managers, office support workers, and building and grounds maintenance workers. By the end of 2001, 1,544,000 were employed in the real estate industry.

The development and marketing of real estate, common in Europe since the Middle Ages, came with European colonists to the United States. For instance, in the seventeenth century Dr. Thomas Gerard, an owner of land in Maryland granted to him by the second Lord Baltimore, profited by leasing and selling land to other settlers. The new federal city of Washington, created in 1791, was subdivided and the lots offered for sale, although this enterprise proved disappointing to its sponsors. The first hotel constructed in the United States, an early example of commercial real estate development, was the seventy-three-room City Hotel at 115 Broadway in New York City, which opened in 1794. It served as a model for similar hotels in Boston, Philadelphia, and Baltimore. In the 1830s, William Butler Ogden came to investigate land his brother-in-law had purchased near the Chicago River and stayed on to become a real estate developer and Chicago's first mayor. The rapid growth of cities in the nineteenth century provided many opportunities for the real estate industry.

Real estate development is sensitive to fluctuations in the economy and in turn contributes to those cycles. The combination of a capitalist economy and a growing population makes the expansion of land uses inevitable, but developers can misjudge the market and produce too many office buildings, hotels, apartment buildings, or houses in any particular area. As a result rents and sale prices fall. The economic prosperity of the 1920s brought a huge expansion of real estate, especially in housing, but by the mid-1930s, 16 million people were unemployed and the demand for real estate of all types declined precipitously. World War II brought technological innovation and a backlog of demand for new construction. The mortgage stability introduced by federal legislation following the Great Depression and World War II greatly aided the huge expansion of suburban housing and shopping centers that followed the war. William Levitt started building Levittown on Long Island in 1947, with 17,447 standardized houses produced at the rate of 36 per day for a population of 82,000, and by 1955 this type of sub-division represented 75 percent of new housing starts. The 1950s also brought the nationwide development of Holiday Inns by Kemmons Wilson. In the continuation of a trend that had begun with the Empire State building in the 1930s, skyscraper office, apartment, and hotel building construction continued after World War II in urban centers, driving up site values. As population growth shifted to the West and the South after the war, investment in the real estate industry moved with it.

The restrictive monetary policies of the latter years of the 1960s, the energy crisis and inflation of the mid-1970s, inflation in the early 1980s, the savings and loan crisis of the late 1980s, and inflation and overproduction in the early 1990s, all negatively affected the real estate industry. However, a period of general economic prosperity began in 1992 and the real estate industry flourished in the remainder of the 1990s.

BIBLIOGRAPHY

Caplow, Theodore, Louis Hicks, and Ben J. Wattenberg. The First Measured Century: An Illustrated Guide to Trends in America, 1900–2000. Washington, D.C.: American Enterprise Press, 2001.

Gelernter, Mark. A History of American Architecture: Buildings in Their Cultural and Technological Context. Hanover, N.H.: University Press of New England, 1999.

Miles, M.E., et al. Real Estate Development. Washington, D.C.: Urban Land Institute, 1991.

Seldin, Maury, and Richard H. Swesnik. Real Estate Investment Strategy. 3d ed. New York: John Wiley and Sons, 1985.

White, John R., ed. The Office Building: From Concept to Investment Reality. Chicago: Appraisal Institute and the Counselors of Real Estate, 1993.

Judith Reynolds

See also City Planning ; Housing ; Property .