What does the future hold for real estate?

A report outlining the A to Z of trends impacting global real estate identifies a number of potential game changers for investors, says TH Real Estate’s Head of Australia, Nick Evans.

A-Z: What does the future spell for real estate? looks at 26 considerations for investors over the next two decades.

“While many of these trends have been around for a long time, the way they are influencing real estate is changing. Other trends are just emerging, but have the potential to dramatically reshape the market,” Evans explains.

Evans points to the need to think differently about the market in order to make future-proof investments.

“Geographic and sectoral diversification is now essential, because the next shock could happen anywhere,” he says.

“Horizon thinking matters too: short-term prospects may be totally different to long-term prospects – but both are relevant.  

“Our report also looks at versatility, which involves being ready to change thinking and the physical buildings themselves as conditions evolve.

“At TH Real Estate, we look for joint ventures which enable us to achieve far more with a partner than we could on our own – and we expect the preference for joint ventures to only increase with time,” Evans adds.

TH Real Estate’s report also points to sustainability as an ongoing trend that will continue to drive industry thinking.

“Landlords and tenants in Australia understand sustainability. They are committed to a low carbon economy. They are alert to the implications of changing technology and the relentless rise of e-commerce. They are focusing on net positives – giving back more to society and the environment than they are taking out.”

Three social changes are also resonating in Australia. One of these is the ‘Double X economy’: a phrase coined by an Oxford University professor to describe the interconnected economic contribution of women, which can be a key driver of real estate demand.

The second change is an ageing population. Growing numbers of over-60s will increase demand for health facilities that are integrated with retail and leisure.

“However, the youth explosion – the third big change – matters here, too,” Evans explains. “At some point demand for real estate in this country will be driven by Gen Y, who are aged between 15 and 33.”

As this generation matures, they will increasingly influence the real estate market, with their preferences already evident in retail, multi-family housing and the office sector. The influence of Gen Y goes hand-in-hand with the rise of the sharing economy, which is reflected in the success of companies such as Airbnb and Uber.

Australia benefits indirectly from the growing wealth of middle classes in the developing world, through increased inbound tourism. Outlet malls are another growth opportunity, too, given their appeal to fashionable and value-conscious consumers.

“Of course, there are some global trends which apply to a much lesser extent to Australia than elsewhere. One is migration, given that the absolute numbers are a lot smaller than they are in North America or Europe, let alone China. Another is urbanisation, given that most Australians already live in cities. And while inequality exists, it is far less of a problem than in other parts of the world,” Evans says.

“Nevertheless, with its high quality of life, concentrations of highly-educated, high-earning households and high-value homes, Australia’s real estate industry is poised to capitalise on many global trends,” Evans concludes.

Download TH Real Estate research, A-Z, what does the future spell for real estate?