Energy: the most important issue affecting real estate

Natural gas supply a boon, but how long will it last?

Washington, D.C., was built in a swamp (intentionally, some historians say, because the founders did not want a full-time, year-round government). Then the Carrier Corp. invented (or perfected) whole-building air conditioning. The rest is history, as they say.

Even in temperate New Hampshire, most buildings are air-conditioned, both for creature comfort and to facilitate IT equipment. On a current project in New York City, we are spending significant sums to cool the space so the computer networks will perform without a hiccup.

At the May meeting of the Counselors of Real Estate, energy was cited as the most important issue affecting real estate. The sudden rise in the domestic supply of natural gas has been a boon to America's heartland and energy belt.

Some proclaim that there is over a 100-year supply of natural gas available. I'm skeptical. Despite where you sit on the fracking debate, the fact is we are capturing easy, cheap gas now and over time (10-20 years?), it will be harder and harder to get clean gas out of the ground affordably.

At some point, we will be using as many BTUs to extract the gas as its “energy output” will be in the market. The hope is that through conservation, renewables and, perhaps, hydrogen, we can push off the day of reckoning far enough to allow us to develop other sources.

Water was another issue cited by the CRE report. Water could very well become the most scarce resource and, for human physiological functioning, there are no substitutes.

According to the report, China, with 20 percent of the world’s population, only has access to 7 percent of the world's fresh water. On a recent trip to China with the Greater Concord Chamber of Commerce, we saw lots of water issues. In fact, we were advised to drink beer at lunch and dinner, as it was processed and less likely to give us General Mao’s Revenge (it was a tough task, but we complied).

Here in the U.S., Las Vegas could run out of water by 2035. That would result in a lot of empty real estate. Here in New England, we seem to have a plentiful supply of water, but sometimes appearances can be deceiving. Having dinner recently with friends, I learned that they continued to be plagued by radon in their well.

We baby boomers have taken for granted the many infrastructures in place today. A month ago, I drove to New York City for business and then to Philadelphia, Baltimore and Washington. Hundreds of miles of interstate, hundreds of bridges, all there and functioning, make that trip very easy. Yes, there were a few traffic jams, but relatively minor given a 900-mile trip. So today, we are hearing more and more about our aging infrastructures and the need to invest in them. Alas, such investments come with a price tag, such as increased gas taxes for highway construction and maintenance.

The rub comes as the U.S. has to start thinking seriously about “pay as we go.” Adding more debt is becoming harder to do. Public and private debt has mushroomed. On the public side, entitlement programs such as Social Security, Medicare and Medicaid are choking us, and we baby boomers are about to clog up the works. When Social Security was started in the 1930s, there were 16 workers contributing for each beneficiary. Today, it is less than two. We need to correct/adjust the system soon or there won't be any system (the so called “safety net”) for our children and grandchildren.

At a recent breakfast presentation, retired Sen. Judd Gregg and Gov. Ed Rendell of Pennsylvania presented some startling and sobering statistics. The good news was that it is only a $2 trillion problem, which can be fixed if we act now. If we don't act soon, it will be an $8 trillion to $10 trillion problem that we cannot fix.

All that is needed is some strong, smart leadership in Washington and the 50 state capitals! Any ideas on where we can find that?

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at

Categories: Real Estate