Professionals like Eugene Bernshtam know real estate is an ever-changing industry, but at its very core remains one constant: buildings are being built to be used. Whether it’s a house, an office building, or a storefront, the majority of all real estate is utilized for some business purpose.
As the world changes and technology advances, investment in certain types of real estate is predicted to grow faster than others. For instance, industrial and logistics use is expected to climb as American cities expand outward. In addition, residential use will continue to rise across the country – especially in major metropolitan areas like New York City and San Francisco – related largely to high demand and further cultural acceptance of sharing spaces with others outside of marriage. On the other hand, office space investment is expected to stabilize as the workforce becomes increasingly mobile and companies rely more on contractors or utilize remote workforces.
And with that, here are some real estate trends that investors should consider heavily in the future:
1) Urbanization is key for real estate investment growth
The nation’s urban population has already reached approximately 80 million people – expected to rise to more than 86 million by 2023. Countries like China, Canada, and the United Arab Emirates are at the forefront of this trend, with over 80% living in urban areas. Even smaller countries are experiencing increased urbanization, including Qatar (90%) and Singapore (85%). This is important because most real estate development is driven by population growth – when there are more people, there is a greater demand for housing, food, transportation, and other infrastructure.
As the world’s population becomes increasingly urban, investors should focus on opportunities in cities and suburbs. Industrial and logistics real estate should continue to be in high demand, as should residential properties close to public transportation hubs. Office buildings will continue to be built in core job areas, but expanding suburbs and edge city office parks should be avoided.
2) High-tech needs will grow rapidly
The average American home contains 24 electronic devices – double the number from 2000. Application of technology to day-to-day operations is a major differentiator for companies across all industries – including the logistics, retail, and shipping sectors. Areas with a high concentration of technology companies are experiencing incredibly low vacancy rates – partly due to the fact that new construction is not keeping up with growth. For example, East Palo Alto boasts a 6% commercial property vacancy rate, while San Francisco has less than 4%. A trickle-down effect of this trend will be an increased demand for office space in peripheral areas around these high-tech hubs.
Investors should keep an eye on technology real estate markets, as well as the surrounding areas that will benefit from their growth. For example, office parks and industrial areas near airports and major highways are good bets. Also, developments catering to the needs of the high-tech industry, such as data centers and fiber optic infrastructure, will continue to be in high demand.
3) The gig economy is changing the way we work
The percentage of Americans working from home has doubled since 2005. This trend is being driven by a number of factors, including advances in technology, the globalization of businesses, and the growth of the gig economy. In addition, businesses are becoming more mobile, with employees spending less time in a specific geographic location. This has led to a decrease in the demand for office space and a rise in co-working spaces and serviced offices.
Investors should consider opportunities to purchase or develop office buildings near transportation hubs that cater to the needs of the gig economy. Areas around airports and major highways are good bets and properties near train stations or rental hubs.