What are the five pillars of a successful residential investment strategy?

It is going to be a transformative decade for the living sector. Strong structurally supportive market dynamics, evolving socio-demographics and an expanding, more discerning occupier base will revolutionise existing living offers.

It will inevitably become a more globally institutionalised sector, as investors seek security of income, yield stability, rental appreciation and the desire to align portfolios with tomorrow’s world.

How does an investor create a living model fit for the future? At Nuveen Real Estate, we believe in five pillars that will principally shape the sector’s future.

1. User-centric focus

There is a clear need to improve the traditional consumer experience of mass-market renters via the professionalisation of the leasing and property management process. And as the consumer base for rented accommodation grows, either by choice or necessity, those needs have evolved rapidly beyond an additional desire for flexibility, into experience, community and personal well-being.

Professionally managed living is at the forefront of the hospitality evolution present in rental living, with design, services and technology all embodied to focus on the consumer and improve the living experience. As such, a strong, experienced and modern operator is fundamental to a well-managed residential concept.

2. Product-driven

Design is now just as important as location and affordability. Good design ensures the appropriate unit mix and amenity provision reflect the local, target demographic, as well as the delivery of best-in-class standards of sustainability, well-being and accessibility. As consumer demands change and evolve, it is essential that design stays relevant. Better understanding can come from effective data gathering and analysis, to constantly improve the product offering.

3. A multi-stakeholder approach to value creation

A living concept that serves the needs of all stakeholders – landlords, consumers, investors, borrowers and the society at large – will become the winning formula of the future.

Demographic and lifestyle changes continue to demand improvement in facilities, operational upgrades, professional management and more value-add services. To evolve as an institutional-grade asset class, residential property is going to require greater mutual understanding and closer co-operation between government, investors and developers.

4. Technology and innovation

At Nuveen, we see technology as a positive disruptor and enabler of change. Tenant demand for online information and digital interaction, such as virtual tours or ongoing building support services, will grow, driving greater efficiency in the sector.

As tenants become accustomed to this level of service, we expect an improvement in the quality and depth of technology’s role in the sector. We also expect changes in social norms and attitudes will increase the use of automation in greater allocations for public spaces, and potentially the physical lay-out of a building.

Investors and developers will be looking for more informed micro-level analysis, aligned to changes in consumer needs. There will be more emphasis on data-driven locational, asset and liquidity market intelligence; and arguably a shift away from some of the more traditional metrics.

5. Sustainability

It is widely recognised that to meet the objectives of the Paris Accord, all buildings will need to be net zero carbon by 2050. At Nuveen Real Estate, however, we are aiming to achieve net zero carbon in our real estate portfolio no later than 2040.

At Nuveen, there is an environmental commitment to work with partners and customers to target best-in-class environmental credentials across our whole portfolio, while incorporating thoughtful approaches to operational efficiency, including the integration of smart building technology to optimise energy efficiencies.

Residential buildings that can operate to nurture relationships are more likely to be successful as people are social animals. Creating sustainable communities, which create or reinforce a sense of community and well-being is something, we think, tenants will both value and expect going forward.