Real Estate Investment Trends

It is normal in every industry to want to create “the next big thing” and the person who has the ability to predict correctly – backed up by evidence and research – is likely to be on an upwards trajectory. Until others follow suit, which they inevitably will. In such a fast-paced world, it becomes harder to get ahead, and even more difficult to stay ahead of the curve.

Higher risk will lead to greater reward, and this is often the case with real estate investment. Whilst core and core plus funds remain popular because of their low-risk nature, the return rate is also lower. Investment into alternative real estate assets will often produce higher yields than traditional sectors, assets can be acquired at a cheaper price and investors hope to see greater improvements on capital values. However, these strategies are not without their challenges, there is often a limited amount of data on niche asset classes, so getting the right price and setting rental prices can be more difficult. Often, industry-specific skills and expertise outside those of a usual real estate investment manager are required, this can mean bringing in outside expertise to support.

In real estate, there are usually some simple rules to follow. The buildings we inhabit are constantly evolving to meet our changing lives, so it is little wonder that social, economic and even political factors all shape the landscape of real estate investment globally. Occasionally we see alternative strategies we hadn’t expected or realised there was a market for, backed up by thorough research and an undiscovered requirement.

The Social Factor

Our nearest neighbour, China, has a population aging faster than most, although this is being replicated across the world. Given many years of one-child policy and a slow uptake now that is has been lifted, we face a rapidly aging population and elderly healthcare is becoming big business. Rather than seeing this as a potential drag to the economy, real estate investors are benefitting from an increased demand for specialised housing and healthcare for the elderly, as well as government and lottery money. Many property companies have begun to build senior living accommodation and care homes, China Vanke and Sino-Ocean Land for example.

The Economic Factor

As well as getting older, it appears we are becoming poorer. In many countries around the world, this generation is set to be the first who will not exceed their parents’ wealth. Urbanisation continues to increase and this means more people crowded into ever more densely populated cities, residential property therefore remains in high demand and at a premium. There has long been an obsession with home ownership as a benchmark for success, however, squeezes to the economy and individuals’ wallets mean that “generation rent” has arrived. This produces an opportunity to invest in the private rented sector. Relatively mature in the United States and some parts of Europe, the multi-family market is set to grow in Asia. Greystar and Macquarie Capital have recently formed Greystar Asia-Pac to capitalise on the growing demand for quality rented accommodation, also known as the private rented sector. It also offers an opportunity for property companies to establish separate operational business lines to manage the rental properties and their tenants.

The Political Factor

A piece of writing from a Brit (abroad or otherwise) would not be complete without a small analysis (read: moan) about Brexit. I will keep it brief, but there is obvious opportunity to capitalise on a weak pound and political instability in the UK, which is affecting the price of property. Perhaps not “alternative” but certainly piquing the interest of foreign investors.

The Alternative 

And then there are the ideas that may not be the most “sexy”, but nevertheless have proven to be unique and very successful. An example of this would be the Limetree Capital China Car Park Fund. Backed up by some targeted research and clear evidence that there was a lack of car parking spaces in China, the fund has been extremely successful in acquiring, developing and operating car parks. If imitation is the sincerest form of flattery (and presumably a marker of success) then this has clearly been a good alternative investment strategy, as we see many companies follow suit and look at investment in car parks.

For further information, please contact Alice Hunt https://www.redpathpartners.com/hk-office on +852 3796 250 or email [email protected]