If you do any investment research at all, you know that everyone likes to predict trends, especially at the end of one year and heading into a new one. For the most part, these are not subjective musings made as some guy looks out his window munching a sandwich. They are informed opinions after crunching the numbers, doing empirical research and conducting market analysis.
After reading hundreds of pages of research and trends, a certain pattern emerges; one that seems to transcend all companies and think tanks, making one muse, “Hmm, this looks interesting.”
Here’s the top 8 trends everyone is reporting to the investment industry and saying, “Pay Attention!”
Real Estate investing is hot, hot, hot. As we reported in a previous blog, investment vehicles such as bonds and the stock market are shrinking in many portfolios while heavy hitters are investing in real estate. However, there is a caveat to watch out for. Single family homes are becoming more expensive and in many cases are out of the reach of many buyers. This makes other forms of RE investing more attractive, not only for residences, but in commercial and industrial markets.
We see increased investing in secondary markets. As the housing shortage and pricing continues to accelerate in the largest cities, the secondary markets—those smaller towns surrounding the larger cities—are becoming desirable. Usually there is less competition to enter the market, the assets are somewhat less expensive, the suburban lifestyle is appealing, developers are building there with long-term growth in mind.
Investments in alternative property types will continue to rise. Your everyday vanilla flavored investments will still be there: office centers, industrial, retail and multi-family. However, some spicier versions are on the rise, too: data centers, self-storage, senior housing, medical offices and co-living.
The trend in community-oriented development will not go away. This is not a flash-in-the-pan experience. Collaborative consumption is progressively more popular among younger generations. Co-living is here to stay, and many developers are constructing new ground-up buildings just for that purpose.
Younger investors will demand more ESG projects. Environment, social, governance: younger investors want more than a healthy bottom line or yield. They want environmentally conscious projects, those that protect or enhance the living space, such as LEED or “green” buildings. They want to affect projects that help people, that make their world a better place to live. They will want communal living options, common spaces, walking downtowns. A connectiveness.
The “Silver Tsunami” is pushing senior housing. Seniors, a.k.a. baby boomers, are looking for more variety in their housing options. They are living longer and outpacing the years their parents lived after retirement. They want walkable communities and more appropriate activities for themselves. This will spur on not only centers for them, but the design of their surrounding communities, as well.
Technology will not be ignored. It’s wiggling its way into everything, even real estate development and investing. Everything about designing, building, selling, property management and operations will be touched by it. From predictive analytics to cloud computing, blockchain to chatbots and fractional property ownership, all are flooding the real estate investment world. This is especially true for retail and industrial assets.
Global investments will expand. Emerging economies outside of the US will fuel the growth. Savvy investors will be broadening their portfolios with real estate in other countries. This will require a shift in thinking, a trusted professional who is local and has experience. The risk will increase, but so will the reward. “Thinking Globally” is a huge new trend, especially for those experienced investors who believe they are not realizing the yields they are hungry for.
Other trends we’re watching: the rise of Opportunity Zones; building of short-term rentals; the Build-to-rent boom; the spread of shared-living spaces; global capital investments: a cornucopia of tasty items to scrutinize.
Real Estate investing is so fluid that you need to have a professional guiding you at all times. Trends rise up in a matter of months, sometimes to remain for years, or to plateau rather quickly. No one can promise you no risk, but the outcomes are much better when you have a trusted, knowledgeable counselor with you.
