After COVID: The Future of Real Estate Investments in a Post Pandemic Economy
After over two years of living with the COVID-19 pandemic, mask mandates have been lifted, social events are filling up our calendars again, and many workers are returning to the office. Despite the challenges brought on by COVID-19, we have reason to believe that 2022 will be the most prosperous and successful year for real estate growth.
At the start of the pandemic, it was feared that real estate nearly everywhere, nationwide, would take a hit – particularly retail, restaurants, and office spaces. However, these and other industries have managed to bounce back and even thrive despite the grim predictions that plagued real estate investors everywhere back in the Spring of 2020. Real estate investors can seize more opportunities in 2022 – if they know where and when to invest.
In this post, we’re uncovering the latest research from 2021 and relaying the trends we’re seeing in real estate investing this year. Keep reading to learn:
Which real estate market sectors performed well in 2021, despite the pandemic.
The top shifts in the market are likely here to stay, even after the pandemic ends.
Which metro areas saw explosive growth and economic staying power throughout the pandemic.
The State of Real Estate Investments in 2021
At the start of the pandemic in early 2020, the projected impacts of lockdowns, social distancing, and other restrictions were quite pessimistic. However, the real estate sector has not only survived but thrived in some instances.
Real estate is particularly sensitive to supply risk due to the long production lag that occurs in development. In the late 90s and early 2000s, demand was so strong that a bunch of developers jumped into the game and started delivering buildings as quickly as they could get them built. Because delivery of a project can be three or more years from original site acquisition or even groundbreaking, they were unable to pivot when the tech bubble burst, and in fact, additional buildings were delivered long after demand dried up. The market suffered from the Bullwhip Effect, where multiple suppliers enter a market at the same time to meet demand, only to deliver a supply glut years later.
According to Kiplinger, the pandemic has been far more forgiving to certain real estate sectors than others. These three property types fared well despite pandemic challenges:
Industrial Properties: Logistic and shipping companies that serve as distribution hubs performed well in the past year, especially as the trend toward e-commerce shopping and spending increased. Higher demand for delivery had positive implications for industrial real estate.
Multi-Family Properties: With direct aid and rental payment assistance, multi-family properties performed relatively well during the pandemic. Multi-family assets may see a new boost due to unit turnover as the eviction moratorium comes to an end, leading to opportunities to increase rents.
Office and Retail Properties: Suburban office spaces saw a rise in demand, while downtown office space prices declined during the pandemic. Overall, retail property prices have stabilized.
Defying Expectations: Metro Cities are Making a Comeback
One of the most interesting findings to emerge from the past year was the growth major metropolitan cities experienced. According to PwC, ratings for traditionally high-investment cities like San Francisco and Washington, D.C., were down substantially. Seattle was the only city to make the list prior to and during the pandemic.
The top cities for real estate investments in 2020 were:
Nashville
Raleigh/Durham
Phoenix
Austin
Tampa
Dallas/Fort Worth
Atlanta
Seattle
Boston
As higher cost of living cities like Washington, D.C. and Los Angeles have become far less desirable to invest in post-pandemic, cities like Seattle, Atlanta, and even Portland, are being seen in a more favorable light.
The New Normal of Real Estate Investments
In addition to the surprising success of certain metropolitan cities, as well as market sectors that thrived throughout the pandemic, there are several trends that are anticipated to emerge in 2022. According to PwC, we can expect to see continued changes in the following areas:
Climate Change Consciousness is Necessary
2020 and 2021 brought more than just a pandemic – in nearly every state across the country, wildfires, tornados, snowstorms, and other acts of nature threatened the livelihood of both consumers and real estate. A new focus on climate consciousness for real estate investments is a strong trend in 2022 with upwards of 40% of global energy use and carbon emissions.
Business Travel Won’t Return to Previous Levels
According to a 2022 Emerging Trends in Real Estate Survey, nearly 50% of survey respondents disagree or strongly disagree that business travel and large group industry meetings will return to pre-COVID-19 levels. Zoom meetings are here to stay, despite some companies returning to the office. Vacation travel and hospitality sectors, however, are expected to improve.
Increased Focus on Lifestyle and Quality of Life
Working from home gives employees the opportunity to live where and how they want. To accommodate the needs of families that are working from home indefinitely, real estate developments will likely expand their offerings to include features such as home office spaces and other amenities and lifestyle improvements.
The Future of Real Estate Investments in Portland, OR | UD+P
Under the specter of pandemic and conflict-induced inflation and price volatility, it is nearly impossible to predict what the future holds for the rest of 2022 and beyond. However, our principals and investors at UD+P are optimistic as income-producing real estate has historically been a safe and robust investment in the face of inflation.
We look forward to identifying attractive opportunities for our investors this year and the new growth we hope to experience in the community. If you are interested in learning more about UD+P or partnering with us on future real estate investments, please reach out to our team over on our Contact Page or reach us on our office line at (503) 946-3265