Thanks to low interest rates and bond yields in many European countries in the negative territory, real estate investments are expected to retain their appeal to investors if we compare them to other asset classes. Despite political tensions and economic growth stagnation, there are a few real estate investment trends for 2020 that will be appealing for investors.
A new approach to property selection
The competition among real estate investors is on the rise and with it, the need for a creative approach to property selection is one of the most important aspects to bear in mind. Scott McGillivray, David Werner, Ofir Eyal Bar, and other popular investors are thus forced to focus on niche-level opportunities. Markets like data centers, senior housing, cell towers, hotels, multifamily buildings and retail are just a few of the areas where 2020 could be a fruitful year.
Most urban areas are popular for being live-work-play lifestyle heavens and residents tend to want easy access to housing, 24-hour amenities and walkable commutes. Due to the economic development in the suburbs, we now see that not just major city centers are providing this way of life. According to a PwC report, real estate investors should expect more communities to embrace the 24-hour lifestyle since the trend does not show any sign of slowing down.
ESG issues on top of the list
Environmental, social, and governance (ESG) issues are now more important thanks to more millennials investing in real estate. The latest numbers show that more than half of millennial real estate investors believe ESG policies are impacting their investment decisions, much more than just 11% of the boomers and 25% of Generation X.
The investors surveyed noted business ethics as their main ESG concern, followed by corruption, health and safety, responsible supply chain practices, energy use, and waste management issues.
Senior housing properties
With the biggest share of old people out of all continents, Europe will have to face a serious issue during the next decade. By 2029, baby boomers aged 75 will reach their retirement and as a result, they will be in need of new housing options. Senior housing is currently one of the most viable investment prospects for 2020 in Europe. Handling the aging population will be one of the greatest European challenges and real estate investors are already putting their money at work in order to provide housing solutions for the elderly.
These are just four of many other trends that might prove to be effective in 2020. The move towards specialization, potential rent control laws, the focus on community, and ESG issues could influence heavily what types of real estate investments will turn out to provide the highest return. With so many uncertainties on the horizon, investors will need to prove flexibility in the face of unexpected events. So far, the water is calm, but a continuous surge in political uncertainty could evolve in poorer economic performance and the real estate market will be in an uncomfortable situation.