As the coronavirus crisis hit economies and sent shockwaves through global real estate markets, all is not dark. Indeed, according to Aviva Investors, COVID-19 “will not radically transform the way real estate is used in the long term; the best assets should continue to be in high demand. That said, properties like offices and retail buildings are best avoided due to the huge societal changes we’ve seen in the wake of the pandemic, exacerbating pre-coronavirus trends. In this article we will look at the type of real estate investors should be watching.
The hospitality industry, particularly travel and tourism properties, is an industry with significant investment opportunities. Clearly, as a sector, the hospitality industry has borne the brunt of the pandemic, with many businesses prevented from fully opening their doors or forced to drastically curtail their operations. However, the potential for future profit remains enormous. As stated by the real investment company Frame in October, a vaccine or medical breakthrough could allow hospitality to recover as travel resumes: to overlap with eventual recovery. With a number of vaccines showing promising end-stage trial results and ready for imminent deployment, 2021 could be the perfect time to invest in the hospitality industry, especially travel accommodation.
There are so many ways to start, from the valuation of an existing asset to the acquisition of a hotel franchise. An increasingly popular route is through Citizenship by Investment (CBI), where you can invest in real estate like a hotel in exchange for a passport from the country in question. Take the Dominique CBI Pprogram, what was voted the best around for four consecutive years, and gives investors the opportunity to invest in a number of hospitality properties, usually by purchasing a share of them. These include the Anichi Resort & Spa, which was among the Top Ten Caribbean Hotels for 2019 by Forbes, and Jungle Bay, which previously featured in both. National Geographic‘sand Trip Advisor ‘s lists of the best hotels in the Caribbean.
Another impact of the pandemic is the rise of the e-commerce industry, particularly with consumers’ growing preference for “free next day delivery”. With the majority of physical stores closed during closures, the gradual shift from physical to online shopping before Covid accelerated by about five years thanks to the crisis. And while this is bad news for the commercial real estate industry, it is good news for those who own or wish to own industrial properties. Companies have been forced to increase their investments in their distribution and logistics networks to meet consumer needs, causing demand for industrial properties like warehouses and factories to skyrocket. Overall, industrial tenants “are picking up available space at a pre-pandemic rate,” according to Marcus & Millichap, with Savills noting that industrial and logistics assets were a record 20% of the total real estate investment in the first half of 2020. As such, jumping on this trend seems like a smart move.
When it comes to invest in industrial property, there are a few things to keep in mind though. The first is to define your investment criteria, for example if you want to find a long-term tenant for the property or use it yourself. Another is to ensure that it is sustainable through approaches such as investing in industrial properties near residential areas and critical transport nodes, and to ensure that it has a good office ratio. / warehouses – the less office space the better.
The global housing market has also shown incredible resilience in the face of the pandemic. Prices have largely held up, with underlying demand from economic powers such as the United States, the United Kingdom and China remaining “very strong” according to Sean darby, global head of equity strategy at investment bank Jefferies. This is in stark contrast to the last global recession after the 2008 financial crisis, when real house prices fell an average of 10%. The reasons for this durability in 2020, central banks cut interest rates to lower the cost of borrowing, government distribution policies to preserve household incomes, and direct housing market measures like suspension of mortgage payments. And again, all of this signals positive news for real estate investors, with housing demand stronger than ever.
When it comes to the type of housing to invest in, Cadre recommends multi-family properties, as demand has consistently exceeded supply over the past decade due to low number of housing completions and a growing gap in housing. affordability. Specifically, they talk about Class B housing (also known as workforce housing), “where the initial cap rate reflects the rents in place which could potentially experience significant growth as economy as a whole is recovering.