The year 2020 had some unexpected twists and turns that kind of blew off all the previous predictions and estimates. COVID-19 brought about a rapid shift towards social justice, safety, and wellness and a huge deal of economic uncertainty in the real estate market. But with new challenges come new opportunities, and the real estate industry has the chance to plan and develop safer and healthier living environments.
There is also an increasing preference for social green spaces professing to better social equity and quality standard of living. These efforts will create opportunity for real estate entrepreneurs who can carefully invest in the midst of social fervour. Here is a look at what is to come starting 2021 based on the observed trends and insights collected from 1600 leading real estate experts.
On the front of bombing real estate markets, the demographics factor remains the topmost driving factor behind new developments. Here are the top locations that continue to dominate the real estate space based on different qualities like growth prospects, home building outlook, affordability, and job prospects.
Low cost of living and growing workforces are a few qualities that attract low budget companies. Cities like Raleigh and Durham top the list for these particular reasons. Here is the list of cities that are expected to be top real estate markets in 2021
Although the real estate sector and the overall economy will thrive since the pandemic, the overall income capacities have gone down. Hence, real estate prices are expected to fall by at least 5-10%. Properties like data centers, single-family homes, and industrial spaces will rise in value, while retail spaces and hospitality buildings will experience a sharp fall in prices.
New government regulations regarding public spaces like officers, retail, apartments, hotels, and sports venues are also a major reason for the fall in prices in these types of properties.
Some of the important issues that further contribute to the real estate industry growth are listed below:
Some trends that have been gaining better focus include:
Here is a compilation of some of the most notable emerging trends explained:
With increasing work-from-home enforcements and restrictions on office spaces, there has been a growing demand for single-family houses. This has ushered in an era of the Great American Move where more people are moving from denser cities to suburbs and preferring homes to apartment lifestyle.
While this trend was already underway, the COVID pandemic paved the way for a rapid movement towards the suburbs where there was better availability of affordable housings. Cities with a combination of economic diversity and housing affordability are the ones that are now experiencing an inflow of demands. Besides the already known boom markets like the Austin, Phoenix, Salt Lake City, and Tampa metro areas like Charlotte, Denver, Nashville, Portland, and Seattle have emerged as new boomtowns.
The demographics shifts with a massive number of people entering family formation years have also increased the demands in suburban areas.
The increasing need for work-from-home practices and remote working has pushed companies to adopt digital transformation and increase their digital capabilities. This will lead to companies shrinking their office spaces, and working environments will also undergo better design changes that allow for more collaboration that accommodate social distancing norms.
As the aftermath, one can expect cities to have slowed down growth rate over the next five to 10 years as more people tend to favor suburbs to work from home over living in denser cities.
Suburban spaces will also increase their access to urban amenities to enable flexible work arrangements.
The retail industry needs an immediate transformation to enable better safety and wellness regulations. While people continue to buy most of their retail products in-store, the retail industry must continue to offer digital services until it is entirely safe to shop, socialize, and recreate in public spaces. But in the short term, thousands of shopping centers have shrunk their capacities and lowered the tenancy rates.
As the COVID-19 virus is found to be easily transmissible in closed indoor spaces more than outdoor spaces, the real estate venues will have to undergo a design transmission that allows for cleaner spaces, effective air filtration, lower density, and other wellness and safety initiates. Safety procedures like sanitization centers, touchless indoor design specs will be included in the indoor designs to make them more inviting for people to use with fewer inhibitions.
Covid-19 caused a sharp decline in the national GDP, and the federal government took up several initiatives to inject some cash flow and aid companies to survive the economic fallout. But despite the market picking up at a slow pace since April of 2020, the significant drop in GDP will lead to a slow-growth decade. The CBO gives an average GDP estimate of 1.7% growth from 2020 to 2030. The government has also thus announced low base rates through 2023, which might keep the real estate borrowing rates low for a while.
COVID-19 has brought about a restructuring of government budgeting and tax regulations. State and city governments will be forced to raise taxes or reduce services and infrastructure, which can have a negative impact on real estate. Revenue from industries like travel, leisure, tourism, and income tax revenue has greatly reduced, leading to several construction projects being slowed or halted. As of August 2020, about 65 % of cities were inclined to cancel or postpone their infrastructure projects.
There is increasing support and movement towards racial and social equality that could directly impact the real estate industry. One can expect increased efforts to promote diverse real estate entrepreneurship and remove any perceived racial biases present in the real estate market.
Though policies and rules regularly profess to promote equality and diversity any changes will inherently favor the bureaucratically adept.
The indicators of the market’s direction is discernible amidst the social and political chaos. Hard assets, like real estate, will continue to perform in the short and long term, which is good news for real estate investors.