Real Estate Market Trends Investors Need to Watch

While the mantra has been location, location, and location, there are several other factors to consider when it comes to investing in real estate. To keep up with the rapidly changing industry, investors need to know what is happening and adapt accordingly. Below are several areas investors need to consider when planning any real estate investment.

Investor competition in real estate is on the rise. Those intending to invest must develop more creative approaches in their property selection. The competition has resulted in new and more complex strategies by investors to find sectors that might fall outside the standard property size or growth metric projections. Prime assets, particularly those located in preferred segments such as industrial real estate, multi-family, data centers, and industrial/logistics, will continue to witness the stiff competition. A sluggish supply of new buildings has augmented this fact due to the impact of COVID-19 on construction costs.

Interest rates are having and will continue having a significant impact on the property markets. If, for example, you are planning to acquire a home with a mortgage, it’s prudent to research and compare applicable interest rates. Changes in interest rates can significantly influence your ability to buy property. The lower the interest rates are, the lower the cost of obtaining a home mortgage—this fuels the demand for real estate, which again drives up prices. The same is true for commercial assets when evaluating the yield on your return versus the cost of your debt. In a low interest rate environment prices will increase however as rates rise this can eat into investor returns.

Even as businesses and organizations navigate and grapple with employees returning to the office in earnest, it’s important to note that the demand for hybrid and flexible work arrangements won’t go away. Real estate investors need to consider adopting ways to attract tenants and their employees to the office through things such as improved ammenities for tenants.

In commercial blocks, the office layout will continue to witness a change as the need to create more office stations for all workers declines and the space needed for meeting and collaborative spaces increases. At the same time, these work styles changes will necessitate increased day-to-day coordination of when and where a given employee or group of workers are working. An investment strategy that investors can consider for the years ahead is modifying the traditional property ‘fix and flip’ approach into a more innovative ‘flex and flip’ model.

A notable trend in real estate is community living. Co-working, co-living, ride-sharing, and short-term rental hosting are the hallmarks of community living. The willingness to share and interact is trickling down to the world of real estate investment. Today, more co-living buildings and apartments, farm-based communities, and reimagined office blocks exist. It’s worth noting that the shift to community living is generational, fueled by the need to save and share amenities such as technology.

Environmental, social, and governance (ESG) and sustainability issues contribute to the earning potential and overall attractiveness of real estate. These are now being integrated into building designing in the blueprints stage. In the real estate industry, ESG and responsible investing are taking center stage, and you need to consider them as you plan to invest.