All of us know that the pandemic COVID-19 has considerably effected real estate investments. A lot of people have to face this reality every day. A lot of investors had to change their strategies for investing in real estate involuntarily so that they could deal with the pandemic’s economic effects. Furthermore, new challenges are being faced by investors after lockdown restrictions. Today, one of the biggest tests is that the inflation rates are increasing.
The inflation rate got up to 7.5% in January 2022 according to Trading Economics—the peak inflation rate in last 40 years. In addition, the energy costs are hitting the roof—and investors have to deal with the labor shortage as well. The question is how real estate investing strategies are being affected by economic trends? And after the country gets out of the COVID restrictions, what do these trends and the following strategy reforms mean for property investment, especially in the rental property business?
The future of the real estate market post-pandemic is not completely clear. Nevertheless, it is still considered to be a good idea to invest in real estate. Continue reading to find out the reason and to know about the types of real estate investments which can bring you profit post COVID.
The impact of COVID-19 on the rental business
As we all know that a lot of uncertainties were brought in by the pandemic for every business. A large majority was kept at home by the shelter-at-home instructions from the government. Most people didn’t go to work, go to stores for grocery, and make a visit to family or friends, or vacation.
A lot of people also lost their jobs or faced a loss in income; as a result it was difficult for many tenants to pay rent. On the federal level, some eviction control processes were put in place, in order to avoid another economic disaster. These saved tenants from being evicted from their rental units. As a result, there were very few units available for renting.
The rental listings were 26% lower in the first half of 2020 compared to 2019, according to a 2021 report on the pandemic’s effect on the rental market of the U.S. There was a decrease of 50% in home sales in urban areas. The average sale prices also decreased by 18%.
Some analyses show that certain real estate investment market sectors were affected more than others. Like investment in hotels, senior care facilities, and gas- and oil-related properties proved to be a bigger risk for investors as compared to domestic properties according to sales data.
All of this can be attributed to the uncertainty related to certain industries, like travel at the peak of pandemic. It also had a great effect on investors’ choice for properties. Since then, most pressure on these industries has considerably reduced. There is still a question on the after effects of pandemic on the real estate investment business. Another related question is what the top real estate investments types are right now. What exactly will happen is difficult to forecast, nevertheless one needs to keep an eye on some real estate styles post COVID.
Top there real estate investment trends to keep an eye on after COVID
What are the types of real estate investments that can do well in 2022?
What trends should one look out for during the recovery period from the pandemic?
You should have the knowledge of the following:
1. Investment in rental properties will probably give a good output.
Despite a halt in eviction, domestic properties showed a comparatively good performance during COVID. Many renters got assistance in rent as well as aid to pay monthly rent at the peak time of the pandemic—this made rental investment attractive to knowledgeable investor. In turn, rental properties remained very high in demand during pandemic.
In addition, landlords sorted out plans for payment with renters so that they receive rent continuously. This also ensured a less number of evictions. Additionally, rent debts were not waived off due to the ban on evictions, hence property owners can collect the rent due from past. So, whoever invested in rental units, will be able to bag the profits now. There is a great chance that the real estate investments of these types will be beneficial after COVID.
2. Commercial real estate will continue to recover.
Owners of homes and offices had different luck during COVID period. There were a lot of empty offices as workers did their jobs from home. People speculated that you will not recover the investment in office units. Nevertheless, people never totally shifted to work from home—and it is not expected in the future too.
Apparently, investment in retail and office units is probably a good one in post COVID world, because the demand will increase. Retail properties become stable when stores reopened to resume businesses in the last quarter of 2021—and probably will continue operating throughout 2022.
3. Investments in real estate will continue to give profit.
Some of the best investments in the commercial real estate area were those associated with shipping and logistics. The top reason for this was that e-commerce companies were doing a lot of business due to increase in online shopping. So, these businesses required much more space for storage and shipping.
Analysis state that there will be high demand for commercial properties because of the continuous growth in online business. What made it even more likely was the lack of physical shopping options.
Some of the remarkable real estate investment styles in 2022
It is agreed by experts in the industry that the real estate investment schemes were affected by the pandemic. Still investments in real estate were targeted by many investors. Some upward trends have already been seen in the first months of 2022, which include:
A change in investment strategies
Due to the varying landscape, a lot of real estate properties need regeneration and revitalization. So, investors need to have vigorous approaches that help them understand the essential traits of their investment related objectives. In maximum circumstances, this means they are acquiring access to component-based analysis and comprehensive marketplace understandings—which enables to profoundly enlighten their approaches.
For example, it was evident after the pandemic that landlords need to make investigating tenant risk profiles a top priority so that they could evade losses. In any case, the pandemic did bring an impending fear of crisis in the rental market—which could have initiated big difficulties for various investors.
Surprisingly a lot of tenants paid their rents on time—probably because of the efforts landlords and investors made on potential tenants. The best way to protect your investment assets now and in future is detailed screening.
Demand for flexible office areas
Due to the return of workers to offices, the need for office space is growing. Though, office unit tenants need flexible workplaces as fusion models is considered the way forward now. As a result there is a need to remodel existing office area to make it handier for hybrid work, which requires space for meetings and teamwork. There may also be a need for redevelopment of office area with keeping in mind these flexibility requirements.
A top priority is environmental, social, and governance (ESG)
Sustainability and ESG are becoming priorities when commercial tenants are looking for new space. Additionally, there is a need for corporate clients to guarantee their investors about carrying out ecological businesses, which means the demand for these kinds of spaces will further go high. Also, the demand for cool roofs, energy efficient places, and reduced water wastage is also increasing because many cities have opted for minimum emission.
Technology will shape the operation of buildings
The pandemic enforced various property owners, real estate investors, and tenants to reconsider their use of technology. For example, a lot of landlords transferred to online ways of rent collection. They offered virtual tours for prospective tenants and began using documents with e-signatures. As a result, they found out that their rental business would soar with the use of these new technologies.
For providing what tenants demand, one needs to use technology. An example would be realizing the importance of using vigorous filtration systems for air in preventing the spread of coronavirus. Another thing that is needed is touch less technology in structures—which includes things like automatic lights, dispensers for hand sanitizer and motion sensors.
This move to technology can mean more workers using apps on to control the office systems, like lights, heating or the elevator. So, landlords having technology friendly buildings with ESG principles in place have the option to ask for more rent.
There is no doubt about COVID pandemic having a huge effect on real estate investing, however we still don’t know a lot of its long-term effects on investment strategies. With time, one can find out how the office segment fine-tunes to a working model that is hybrid. People in the business need to look into the existing trends.
For example, residential property owners will carry on investing in new technologies in order to give premium service to high-value renters—which can also enable you to shape your investing methods. There is an upward trend in rents which means that landlords can recover their losses faced during the pandemic. One thing is for sure, that there will be attraction for investors in real estate. So, the trend of investing in properties for rent is going to stay in the future despite of strategy changes in the long run.