A recent report by Savills, Worldwide Trends 2018, has identified a number of trends affecting real estate on a national and international level. Among the research, aimed at investors, owners, funders and advisors alike, is data indicating that the attitude towards real-estate risk is changing, with alternative sectors being noticed increasingly. Below you will find a summary of the changes expected globally and the UK in upcoming months.
The continuing need for income combined with overcrowding in conventional core markets means that attitudes to risk in alternative property investment opportunities is changing. In China for example, many investors are turning to debt finance, choosing net income flows over directly owning properties.
In countries of political unrest and instability, real estate investment may be viewed as more desirable than government bonds. Physical buildings unsurprisingly are lasting longer than past political regimes in certain cases.
The demand for conventional investments outweighs supply in major cities, but there are other opportunities. Growth in real estate investment is more likely to be in property types, sectors and areas that have not already been saturated and overcrowded with investment.
Investors look for strong investment opportunities, and as conventional asset classes diminish in supply, there is increasing interest in alternatives. The category of ‘acceptable’ asset classes for investment is now expanding to include some of these alternatives.
Research implying the emergence of certain trends will not necessarily translate to reality for new asset classes. The US ageing population may cause an emergence in robotic assistance rather than a real estate solution. Essentially, there are always consequences to shifting demographics, technology, politics…etc., but we cannot always predict these consequences.
Expect alternative classes to be listed as core assets and core asset classes to be side-lined in the near future, as e-commerce, driverless cars, robotics, AI, and other technological innovations transform the nature of real estate risk. Short-term assets may become unpopular whilst long-term diverse mixed-use portfolios become mainstream.
Keith DeCoster, Director of US Real Estate Analytics, believes that not every place can be the next trendy millennial creative hub. Construction starts have spiked for the first time in a decade, and with the last financial crash a dot in the rear-view mirror, the next decade may be one filled with over-exuberance, leading to a correction. Hence it is important for investors to understand and justify their investments.
2017 was a year of uncertainty and the market still lacks complete confidence and clarity. There was high demand for prime assets and long-term income streams to avoid risk. There is opportunity in 2018 within mispricing of assets due to Brexit uncertainty and the falling sterling, as well as growth outside of London.
Core investments are highly sought after but rare, meaning investment activity has maintained consistency, despite Brexit. Offices that are being refurbished or repurposed in popular, affordable areas could see major growth in the next 5 years. The North West of England should see high income returns and capital growth within residential.
There are few sectors left to be considered alternative in the UK, as investors recognise the value of non-traditional assets. British Pearl is a property investment platform enabling people to invest in individual properties as a shareholder or lender for as little as £100. Our aim is to meet changing consumer preferences by offering competitive property backed share and loan investments online. To find out more about British Pearl, click here.