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Investment outlook

Real estate 2021 outlook

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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%. 

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Endnotes
Endnotes

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.

Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

A word on risk
Investing involves risk; principal loss is possible. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, derivatives risk, dollar roll transaction risk and income risk. As interest rates rise, bond prices fall. Below investment grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Foreign investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. Please note investments in private debt, including leveraged loans, middle market loans, and mezzanine debt, are subject to various risk factors, including credit risk, liquidity risk and interest rate risk.

This information represents the opinion of Nuveen, LLC and its investment specialists and is not intended to be a forecast of future events and or guarantee of any future result. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. There is no assurance that an investment will provide positive performance over any period of time.

Nuveen, LLC provides investment advisory services through its investment specialists.