Evaluating real estate investment opportunities in terms of emerging trends can cut both ways. Usually, when one sector shows signs of waning, it means there’s another area with greater security, higher returns and improved efficiency for savvy investors.
As an investor myself, managing a wide-range of portfolios in commercial and residential real estate in excess of $1 billion in value, I’ve already seen promising areas in 2020 that we have already started leaning into. These early promises have realized significant returns above my previous, yet aggressive, 2020 forecasts. My experience over thirty years has come with a demonstrated ability to recognize when and where to strike in markets that are inviting new solutions.
Some of the biggest trends discussed by analysts for this year revolve around persistent low mortgage rates, the rise of artificial intelligence and the continued demise of national retail outlets.
Each of these areas points to a shift away from previous patterns toward new opportunities.
With lower mortgage rates, Millennials are in search of their first homes. Nationally, inventory of starter homes is currently low, which has driven home prices up. Large homebuilders will therefore invest in starters to better supply this market, creating new investment opportunities.
With artificial intelligence threatening many jobs that lease commercial office space, there may be a shift away from investment in suburban office properties. The data centers where artificial intelligence resides will increasingly become a strong bet for investors.
And at malls and shopping centers, where big box retail outlets close in droves every year, investors will gradually identify new opportunities for entertainment, dining and fitness centers.
These are all examples of how framing a problem or change in one area points to a logical opportunity to fill a void, often by improving on a situation that was troubled and reaching the end of a virtuous cycle.
One important area to watch as the year continues — something highlighted by groups including The Motley Fool and Origin Investments is the growing role of private capital in both residential and commercial real estate.
Mobile buying platforms will play an increasing role in the residential sector, while private equity real estate funds, banks and insurance companies can be expected to flood the commercial sector as a result of the Federal Reserve’s lowering of short-term interest rates.
As investors seek new opportunities in 2020, it will be important to monitor and capitalize on various changes taking shape. It is often a matter of perspective on existing market challenges and the instinct to know where their solutions can be discovered with great yields.
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