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Real estate 2021 outlook
No one can deny how challenging 2020 has been. As coronavirus spread around the globe, life for many was put on hold. Unprecedented government-imposed measures curtailed social and economic activity to protect people’s health and save lives.
Looking to 2021, the pandemic continues, but people continue to adapt, adjusting to the new normal as treatments for the disease improve and vaccine hopes are high.
Five themes shaping the real estate landscape in 2021 and beyond...
1. Awash with cash
While governments have restricted activities, they have also pumped cash into economies. Global monetary conditions should buoy capital markets and asset values, supporting real estate investment.
2. Rethinking urban centers and suburban life
Prompted by the pandemic, people are reassessing their living situations. Cities are changing and people are rethinking urban centers and suburban living during, and after, the pandemic.
3. Fast forward to the future
Some of the fundamental changes that were already underway in the real estate market, driven by technology and demographics, are accelerating as a result of the virus.
4. Identifying the winners and losers
Distinct winners and losers will emerge, with resilient assets in demand while others become obsolete. We look at the sectors and subsectors where those assets will emerge.
5. Climate change
We expect renewed focus on this key risk in 2021, as the year begins with the new US administration in January and culminates in the United Nations Climate Change Conference (COP26) in November.
...resulting in significant changes to real estate portfolios
- Portfolio exposure to traditional office and retail will shrink significantly, making space for alternative sectors.
- Healthcare will grow as demand for life science facilities, medical offices and senior housing increases.
- The focus on apartments in the residential sector will shift to alternatives such as self-storage, manufactured housing and single-family rental units.
- The growth of viable assets such as data centers and mobile towers will expand and establish the technology sector.
- As investment opportunities evolve over the coming decade, we anticipate target allocations to alternatives growing from around 12% of a typical real estate portfolio to more than 50%.