October 31, 2022 · 4 Minutes
9 key real estate investment trends to follow
As the world continues to change, both the real estate industry, as well as real estate investors are riding on new trends. We have picked nine of the most important and interesting trends to follow when considering investing in real estate.
A lot of cash is waiting for investment opportunities
Quantitative easing, combined with a low- and negative interest rate environment, has resulted in real estate investors having a lot of cash and pressure to invest it to avoid being hit by high inflation. At the same time, the investment themes have changed, and investors are not too eager to invest in any previously popular real estate classes, e.g. shopping centres. The new hot areas now under focus are last-mile logistics, data centres and residential real estate.
Rethinking suburban and secondary-cities
People’s expectations of culture, leisure and well-being are playing more roles than before, and days of daily life spent in the office at the desk are gone forever. Instead of spending time commuting between home and office, both people, as well as companies are happy with employees working from home, being more productive and happier.
High-density urban areas are experiencing a mass exodus of residents fleeing the expensive and populated metro centres for more space and budget-friendly accommodations in the suburbs and second-tier towns.
Increasing housing supply deficit
The globally low housing inventory – the supply of homes that are currently available for purchase – has resulted in a seller’s market. The number of for-sale listings plummeted in 2020, reaching the lowest levels ever recorded. All major and minor real estate markets are experiencing rising home prices, erupting bidding wars and sellers having the upper hand in negotiations.
Just a few real estate assets will remain in the middle of the K as the values and rents for hospitality and retail sectors fall, and the specialized alternative real estate assets, such as cell towers, data centres, self-storage and medical care facilities, will rise. Real estate will definitely be impacted by disruptive technologies, such as driverless cars and last-mile delivery innovations.
Adaptive reuse is the process of converting and redeveloping unwanted real estate into a different type of real estate that better serves current and future market demand. Hotels and entertainment venues, office buildings, and retail were severely impacted by the coronavirus crisis, and they are the first targets of adaptive reuse. Turning an old hotel in the heart of the city into an affordable housing project or converting an old retail building into an industrial distribution centre may be a more profitable long-term solution. Other disused real estate assets might find a new and better life as being used for indoor farming so the food is produced closer to where it is consumed.
Floods, droughts, heat and rising sea levels, combined with legislative efforts on energy efficiency and reuse of building materials, are causing environmentally-friendly real estate developments to become mainstream. From the investors’ side, environmental responsibility requirements are driven by professional investors like real estate funds, pension funds and investment managers. Sustainability measures are increasingly being adopted at all stages of the property lifecycle, from acquisitions to leasing, to asset management.
The massive shift towards online ordering combined with the fast and digitized delivery services have caused the emergence of ghost kitchens – the professional kitchens that are set up for the preparation of delivery-only meals. The lack of dining space allows restaurateurs to affordably open and test new concepts before investing in a build-out and signing long-term leases.
Research estimates that between 2000 and 2050, the proportion of the world’s population aged 60 years and older will double, going from 11% to 22%, creating a demand for purposefully built senior living spaces – the housing solutions that combine health care and independent living.
Coliving developments combine close-knit communities with affordable living formats for those having difficulties renting in a saturated market. Coliving has been seen as the most feasible solution to ease the housing crisis affecting most commonly large urban centres.
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