Linda Isaacson, the Senior VP, Director of Business Intelligence , Data and Analytics recently authored a new report called Acceleration: Forging the Future of Real Estate. In her report, Isaacson identified five factors that will affect real estate investments into the foreseeable future: demographic polarization, digitization, globalization, urbanization and socialization. How might these trends influence flippers decisions? Let explore the ramifications.
Real estate will be impacted by the two largest demographic cohorts in America: millennials (late teens to mid-thirties) and baby boomers (51 to 70). Millennials are technology driven and desire efficiency in the lives–whether that means shorter commutes, walking convenience, mixed use communities, online shopping. Baby boomers too are migrating back to cities where they find more accessible “experiences”, smaller living spaces and better transportation options (including the expectation that car ownership will become unnecessary as technology around driveless cars advances).
Cities that are employing data collection project to help designers build smarter cities are at the vanguard of an movement to use data to enhance our living experiences. Drones, driverless cars, Virtual Reality shopping will impact tremendously the demand for parking in urban centers, retail space, warehousing and office space. The one factor that is constant, though, is that buildings will need the appropriate infrastructure to handle the digital conveniences at home, work or play.
Globalization, Isaacson notes, will continue to impact real estate markets in profound ways. Transparency in real estate markets brought about by digitization has made foreign investment into real estate markets more feasible, and the world’s most transparent markets account for 75% of the global direct investment into commercial real estate. 17% of deal volume in 2015 for US commercial real estate was attributable to foreign investors, according to Real Clear Analytics.
Moreover, hyperloop technologies where people are transported in pods on magnetic lines are expected to be able to move people at the speed of sound, making it a thirty minute commute from Los Angeles to San Francisco. This may dampen the urbanization push if lines can be built into rural areas in a cost effective way.
People are working more independently and in smaller settings, creating a “gig economy”. Isaacson point out that whereas only 10 percent of workers worked outside of a traditional employer/employee relationship in 2005, in 2015 that number had risen to almost 16%. This means that US companies are leasing half as much space per new office worker than in previous expansions, and these trends are likely to continue. On the other hand, shared office space businesses to serve the new formed consultant economy is a growth opportunity.
Millennials and baby boomers alike want to live in cities. 80% of the population lives in urban areas, up from just 66% in the 1960s. While the first tier metropolises will remain in demand, so-called 18-hour cities like Denver, Austin and Nashville are finding a receptive audience because of their diverse cultural amenities and lower cost points.
Over the life of a flipping career, the future seems to indicate that you will want to concentrate on these points–important today and increasingly important over time:
- Look for areas that have nice amenities within walking distance.
- Make sure your houses can handle the technological load–the “smarter” the better.
- Be cognizant that the demand will be for smaller houses in mixed use neighborhoods.
- Look for opportunities that will be convenient to millennials and baby boomers, whether that be areas where there are shared office concepts or continuing care retirement communities and health facilities nearby.
- Stay technologically savvy as big data will continue to differentiate between the winners and the losers.
Click here if you wish to read the Acceleration: Forging the Future of Real Estate report in full.