Adjusting to Emerging Opportunities and Roadblocks in Real Estate

Roadblocks in Real Estate

The real estate industry is constantly evolving as new opportunities and challenges arise. Staying on top of emerging trends can help savvy investors and developers take advantage of new possibilities while navigating potential roadblocks. In this post, we’ll explore some of the key shifts currently impacting the real estate sector.

Roadblocks in Real Estate

Remote Work Boosts Demand for Second Homes and Vacation Properties

One of the biggest changes to come out of the pandemic has been the rise of remote and hybrid work models. With more flexibility to work from anywhere, many people are rethinking where they live on a permanent basis. This has led to surging demand for second homes, vacation rentals, and properties located in smaller towns and rural areas that offer a better quality of life compared to major cities.

Websites like homers.ng that allow people to search properties for sale in Lekki, Nigeria, have seen a huge uptick in traffic as remote workers scout new locations. Areas near lakes, beaches, mountains, and other scenic outdoor destinations have become especially hot. 

While this trend bodes well for sellers and developers catering to second-home buyers, it could push prices up in traditionally more affordable small towns. Local governments may need to implement zoning laws to ensure an adequate supply of affordable housing remains for full-time residents.

Rise of Build-to-Rent Communities

The build-to-rent model, where developers construct entire communities solely focused on rental housing, is gaining serious traction. Large institutional investors are pouring billions into build-to-rent projects that offer residents hotel-like amenities and services without the long-term commitment of a mortgage. Rents are generally higher than traditional apartments but come with more perks.

This new asset class provides much-needed rental supply and appeals to millennials less inclined to buy. However, it could squeeze out first-time homebuyers if build-to-rent properties dominate new construction. Local governments may need to implement policies ensuring a portion of new developments include for-sale units as well. For real estate investors, build-to-rent offers a stable cash flow investment appealing to big players.

Rise of Co-Living and Co-Working Spaces

The sharing economy has also made inroads into real estate with the emergence of co-living and co-working spaces. Co-living developments provide small, fully furnished private bedrooms or pods with access to shared community spaces like kitchens, lounges, and outdoor areas. They appeal to young renters seeking an affordable yet social living experience in expensive cities.

Meanwhile, co-working spaces allow freelancers and remote workers affordable drop-in office access without the long-term commitment of a traditional lease. As more people embrace location-independent lifestyles, demand will remain robust for these flexible, on-demand housing and work arrangements. Developers are rushing to meet demand by converting older office and retail properties into co-living/co-working hubs.

Climate Change Poses New Risks

A sobering trend is the growing threats posed by climate change-induced extreme weather events like hurricanes, wildfires, floods, and rising sea levels. Coastal areas face especially severe risks, with many properties likely to become difficult or impossible to insure over the long run. Investors need to carefully evaluate climate risk reports when underwriting new developments or acquisitions in vulnerable locations.

Retrofitting existing buildings for greater resilience will involve major costs. Local governments may need to implement managed retreat policies as some areas become permanently uninhabitable. Overall, climate change brings huge uncertainties that will force the industry to adapt building practices and underwriting standards to our new environmental realities. Proactive mitigation and preparation will be crucial to navigating this challenge.

Rise of PropTech and Data-Driven Investing

A bright spot is the booming proptech sector that’s ushering real estate into the digital age. Advanced data analytics, property management platforms, 3D tours, and virtual/augmented reality are enhancing the customer experience online and off. Cash flow and underwriting is becoming more scientific with powerful tools that aggregate huge property datasets.

Crowdfunding platforms are also democratizing access to investment opportunities previously reserved for large institutions. Going forward, real estate success will depend more than ever on leveraging cutting-edge technology to make smarter, data-driven decisions. Early adopters stand to gain significant competitive advantages in sourcing off-market deals and squeezing maximum efficiency out of their portfolios.

As this brief overview shows, forces of disruption are remaking the real estate landscape at an accelerating pace. While new risks and challenges arise, opportunities also abound for adapting businesses and investing strategies. 

Overall, a dynamic, innovative approach focused on understanding emerging trends will serve real estate players well in capitalizing on the future shape of this industry. Staying ahead of the curve through ongoing research and embracing new technologies will separate winners from losers in the years ahead.

William Brown

Learn More →