In Auburn, the real estate investing industry will find itself at the center of rapid economic and social change, which is transforming the built environment. While most of these trends are already apparent, there’s a natural leaning to minimize their connections over the next six years and beyond.
The real estate managers will have a full range of opportunities, with greater risks and new value drivers. As real estate is a business with long development cycles, from planning to construction takes several years and now is the time to plan for these changes.
By 2020, this migration will be firmly established. The cities will swell and some entirely new ones will spring up. When the growing developing markets’ middle class and growing global population are increasing demand for specific types of real estate. Sub-sectors such as agriculture, education, healthcare, and isolation will be far bigger by 2020.
In Auburn the past few years, the demand for private capital for real estate investing and supporting infrastructure has increased enormously. Talking about the emerging economies, the great migration to the cities, growing population, and swelling middle class are creating a desperate need for more urban real estate. In the advanced economies, the cities are also growing, although not so rapidly, while technology, demographics and environmental issues are becoming new value drivers.
The changing real estate landscape will have substantial implications for the real estate investing community, which we highlight below Implications for real estate strategies:
- The global invest able real estate universe will expand extensively, leading to huge development in opportunity, especially in emerging economies. Fast-growing cities will present a wider range of risk and return opportunities.
- Technology innovation and sustainability will be key drivers for value.
- Collaborating with governments will become more important.
- Competition for prime assets will intensify further.
- A broader range of risks along with new risks will emerge.
By 2020, the 21st century’s great migration to the cities will be well underway. Cities will be swelling across the fast-growing countries in the south, central and west United States. While some become great centers of wealth creation in a multi-polar world, others are likely to fail. The volume of building activity will be huge, expanding the world’s inventory of the institutional-grade real estate.
The philosophy of ‘build it and they will come’ won’t prove universally successful. Some cities will grow and become creative hubs, generators of economic growth. Others will destroy wealth, with poor infrastructure, slums, and rampant crime. In some countries, the density of main cities will drive people away, to rural environments or satellite cities.
Things you need to know about the current real estate strategies:
In Birmingham, the Real estate platform changing landscape will have major implications for real estate investment and development. It will increase the size of the asset pool, yet change the nature of investment opportunities. Real estate organizations will need to adapt early to survive and prosper.
The Real estate platform becomes far bigger and more global. Sub-sector themes will emerge which can be utilized on a global basis. Specialists are already emerging in areas such as agriculture, education, retirement villages, high-end shopping centers, and new urban development. In the future, these themes will become far more established. What’s more, the real estate investment community will be able to match them to their own specific needs – for example for funds with shorter maturities and differing return profiles.
Economies of scale will become more important. Some of today’s large global managers will become mega-managers, with a foot in all geographies and channels. Some of these mega-managers will expand inorganically by acquiring smaller managers with a specific market or specialist property expertise.
But real estate is a business where local knowledge is key. So there will always be a place for local and niche players. And those mega-managers that lose sight of the importance of local knowledge will suffer.
2. Understand the underlying economics of cities:
The Real estate investor community can deploy urbanization plans ranging from higher risk opportunistic development, to lower risk prime investment. But no matter which approach they choose, they’ll need a clear strategic view of why a city will be successful.
3. Factor technology and sustainability into asset valuations:
Rapid changes in the application of digital technology will continue to reduce demand for retail and office space while increasing demand for new types of warehousing, close to the customer. What’s more, the investment community will learn to make use of smart data to add value. By monitoring resident information, real estate owners will be able to judge demand and make better investment decisions.
The advance and commoditization of technologies will also accelerate the ‘greening’ of buildings. As the cost of improving buildings’ environmental performance falls in line with the lower costs of technological innovations such as solar panels and efficient heating systems, so occupiers will demand these enhancements and be willing to pay a premium for them.
Technology will have become mission-critical. It will drive customer engagement, data mining for information on clients and potential clients, operational efficiency, and regulatory and tax reporting. What’s more, customers’ demands for seamless, integrated, and tailored solutions will only be met through better use of technology.
4. Collaborate with governments to enable economic and social progress:
Developers of urban schemes will need to have closer relationships with governments, even advising and influencing them as well as being experts in creative ways of structuring collaboration on a case-by-case basis.
5. Decide where and how to compete:
Real estate investors will need to focus on the markets they understand while focusing more than ever on the basics of local knowledge and tenant demand. They’ll also need to innovate by designing investment agencies that reflect the needs of the investment community for shorter maturities and greater liquidity or developing funding models that can take on new types of risk, often with longer-term investment horizons.