The 2020 occurrences transformed the operations of commercial real estate. The pandemic quickened the pace of numerous modifications that were underway. Consequently, tenants and investors had to rethink the best way of running their businesses and utilizing their spaces. However, it is hard to distinguish the changes that will remain and the ones that emerged as an immediate reaction to the pandemic. Investors aiming to allocate their money to commercial real estate should consider the following trends.
Strong Demand for Industrial Property
Industrial real estate will continually have strong interest due to increased E-commerce transactions. CBRE research shows that every $1 billion used in incremental e-commerce produces an extra warehouse space of around 1.25 million. Commercial real estate demand is expected to remain robust considering the 44.5% rise in e-commerce sales from the first quarter of 2020 to the second quarter. The same research reviewed that industrial space absorbed by the end of 2021 will be around 250 million square feet exceeding the historical annual absorption of 211 million square feet.
Adoption Of Omnichannel Sales in Retail Trends
Due to Covid -19 and other changing patterns, the retailers cannot solely depend on storefronts. They must optimize their income-generating ways by using digital devices and platforms. Therefore, retailers need to use both storefronts and digital channels like social media and websites. Subsequently, this leads to considerable investments in digital capacities and increased traditional sales strategy.
Increased Demand for Stock Room
Shifting to digital platforms means more incoming orders from various channels. Therefore, retailers are likely to continue converting their sales floor into mini delivery centers in their stock rooms. Apart from pulling, packing, and shipping orders via digital channels, space will also manage the business’s local pickups.
Rise of Alternate Assets
Private real estate exposure is likely to rise in 2021. Most asset allocators will prefer private real estate because it offers resilience during this imbalanced recovery. Negative yields and high equity valuation from government bonds will potentially push more investors to alternative assets. Serious wealth advisors and wealth managers are likely to engage in private real estate, especially data, industrial, and healthcare centers.
In conclusion, commercial real estate trends in 2021 will drastically change following the ongoing covid-19 pandemic. Some of the changes will outlive the pandemic, while others will vanish when the pandemic ends.
There can be little doubt that 2020 was a watershed year for commercial real estate; in the fallout from the COVID-19 pandemic, it is unlikely that the work culture of the United States will ever be the same again. To wit, the concept of work-from-home as a functional business strategy went from the stuff of fantasy to reality in the space of only a few months last year. Anyone in the field of commercial real estate must be aware of this change to plan for the future.
Moving With the Curve
With that being said, there are a few things to consider when analyzing market changes in real estate in 2021. Firstly, expect rent costs to fall in areas such as Silicon Valley and New York City. These areas are still major centers for tech and investment companies; however, locations such as these are seeing mass exoduses of workers who favor home offices to office buildings. If you want to get a foothold in these areas, however, now is a great time to find a bargain.
Real Estate Hot Spots
Secondly, investors should be aware of real estate “hot spots” currently emerging around the country. These are regions where real estate investing is extraordinarily competitive and by extension extraordinarily profitable. Austin, Texas made headlines in 2020 after entrepreneurs like Elon Musk announced that they were moving their corporate operations to this up-and-coming city. Expect a boom in real estate prices in Austin in coming years as Texas becomes a haven for big tech companies keen to take advantage of the state’s generous tax policies.
Other “hot” cities include but are not limited to:
- Portland, Oregon
- Birmingham, Alabama
- Boulder, Colorado
- Louisville, Kentucky
- Missoula, Montana
- Atlanta, Georgia
- Boise, Idaho
Most importantly, however, real estate aficionados should know that the work-from-home trend doesn’t apply equally to every industry across the board. Tech companies employ armies of computer science grads to perform important coding work; certainly, for the most part, it is not necessary for these workers to stay in office buildings to complete their tasks. Consequently, tech real estate may see remarkable changes in the next five years.
Playing Against Type
Despite a shift towards work-from-home thinking in the tech world, however, there is still a lot of office-based work that needs to be done across a variety of industries. For example, most doctor appointments still need to be completed in person; real estate space for healthcare clinics will almost certainly be in very high demand in coming years. The same principle holds for sectors of the economy related to lab work and wholesale supply chains.
To wit, there is still life in the commercial real estate market yet. It is true that investors will need to stay on their toes in coming years as America transitions to a new stage of work culture; however, the benefits will be numerous for investors who can adapt to changing times and changing business needs.
Covid-19 pandemic caught us unaware in 2020, bringing a lot of uncertainty in the financial and property markets. Yet, like every dark cloud, the silver lining was the realization that our homes should be a paradise where we can be comfortable even when on lockdown. Well, 2021 is promising to be a healing year. And, we anticipate more homebuyers looking for low-cost properties in less dense areas. Here are three such best locations for real estate investing in 2021:
Population: 1.4 million
Median Home Price: $298,998
Cost of Living: 102.3
Raleigh, a high-tech powerhouse, ranked #3 as the best location for business and careers in the US in 2019. Despite the pandemic in 2020, Raleigh offers lucrative job opportunities, a good climate, and a conducive family culture. According to Zillow, home values in Raleigh grew by 5.7% in 2020. They are to rise by another 7% in 2021. And more people are migrating to Raleigh, making it a prime spot for real estate investing in 2021.
Population: 1.345 million
Median Home Price: $238,156
Cost of Living: 101.6
The Dallas housing market felt the impact of Covid-19, causing its residential sales to drop by 35% in May 2020. But, the market is recovering, experiencing a 20% increase by July. And, the mortgage rates are at an all-time low, a great incentive to homebuyers. This prime spot has a growing job market that supports the 59% renter population. Areas like Flower Mound have 10,000 job openings, accounting for its 115% renter population rise.
Median Home Price: $268,424
Cost of Living: 100.1
Tampa Bay is hosting the 2021 Super Bowl, its fifth time to host the tournament. With this, the international stage shall boost the city’s economy. Already, the city’s unemployment rate is dropping, reaching 6.8% in August from 10.2% in April. Likewise, a third of the population is renters, opting to take part in international events while on vacation. And, rental properties near the MacDill AFB attract military personnel with access to a guaranteed housing allowance. The allowance motivates them to rent first before buying a house in the region.
The millennials are now getting into their prime buying years, and rental income is on the rise. And, the just concluded presidential elections saw politicians doing all they can to support the economy. Hence, 2021 presents real estate opportunities in these three top cities.
If the S&P CoreLogic Case-Shiller Home Price Indices are anything to go by, then the West Coast real estate is experiencing a boom. More home buyers are looking to Phoenix, San Diego, and other West Coast cities for the best real estate opportunities. If you are an investor, what are the top 3 spots to consider for real estate investment at the West Coast? Check them out below.
San Jose is a high-income capital of Silicon Valley with an excellent history of long term investment opportunities. Here, home values are some of the most expensive in the United States. Yet, the San Jose market is currently a buyer’s market with some of the most successful high-tech firms on the listings. In turn, sellers are willing to accept the asking value or below. Zillow estimates the median prices for San Jose at $1,002,873. The last ten years saw the industry appreciate by 77.36%.
In the Los Angeles area lies Hawthorne, a hidden gem for rental properties. Up to 70% of the residents here own or live in rental units. In turn, expect a high and steady rental income from your investment. The average monthly rent stands at $1,736. Typical neighborhoods with rental values are on an upward trend of as high as 194%, including Delta, Washington Ave/W135th St, and Del Aire. Plus, most home sizes fall in the two bedrooms’ apartment complex category.
When you are looking for an affordable real estate investment opportunity on the West Coast, get to Anaheim. With a median price of $685,000 and an appreciation rate of 41% in the last three years, this buyer’s market is popular with single-family homes. Further, it is a favorite tourist spot home to attractions like Disneyland that push up the rental income of the houses. Average mortgage costs stand at $2,535. Then, expect the sellers to lure you with competitive listings as they tap into the lower demand.
Other prime real estate spots at the West Coast include east of Los Angeles as you get to the Interstate 710, Portland’s’ rental units that are popular with students, and Oakland that is now appealing to a higher class of tenants. Then, liaise with an experienced broker who will take you through the steps of owning a part of the West Coast today.
The population growth, growth of job opportunities, and its affordability, primarily determine the best places to invest in real estate. A market with the three factors is likely to have investment opportunities. The rising costs of homes in the United States mean it can be challenging to find the right investment; however, there are cities to invest in and have good returns.
Arlington is attractive and lucrative for real estate investments due to its sustainable population growth. The city’s population growth is 2.2%; the employment growth stands at 3.4%, making it one of the best in the whole country. The value of homes in Arlington increased to 10.3%.
Additionally, the median pricing for homes is an affordable price of $240,000, while that for renting costs most people a whopping $1,498. The combination of the factors translates into a robust rental yield of 7.5%, meaning investors have a high chance of paying off the investment in slightly more than 13 years.
The sunshine state of Florida has seen an increase in the demand for family houses; an individual can get a completely refurbished home in a great neighborhood at a price of below $193,000. Although it is affordable to buy a house in the state, many people choose to rent.
Orlando is particularly interesting because of the magnificent beaches, conducive climate, and numerous entertainment spots. From 2010, the city’s population growth stands at more than 20% and expected to see a 3.44% job growth in the coming ten years. Retirees, job seekers, and students drive Orlando’s real estate business.
The city is popularly known for its space missions and the bountiful Southern heritage. Huntsville offers excellent real estate opportunities owing to its affordability and numerous defense, space, and technological industries.
STEM workers in the city enjoy salaries that exceed the national average. Investors need about $158,750 to acquire a three-bedroom family home in Orlando. The fact that 38% of the residents prefer to rent should further encourage real estate investors to venture into Orlando’s real estate.
If someone intends to have a piece of the real estate market, think carefully about the location because not every town will give a return on investment.