Real estate proved its resiliency despite the pandemic and possible market crash forecasts. If anything, the real estate industry emerged from the pandemic unscathed, according to real estate guru Byron Carlock.
It’s only after breaking down the various real estate entities will you discover that specific properties are still thriving despite the chaos the pandemic heaped onto the market. By looking at events in the industry, you might think there never was a pandemic.
That only happened because real estate players tapped into their creative sides to develop innovative solutions for the challenging conditions. So, what will the housing market be like in 2022?
This article examines the emerging trends in real estate in 2021 and maps out what will drive the real estate industry in 2022.
Insights from Real Estate Investors
Now that the real estate market is relatively stable compared to 2020 trends, investors are taking it as an opportunity to invest in housing and real estate products in high demand. That has driven up prices so that you can expect near-instant results from investments.
As much as there is an opportunity for agencies to grow, there are a few speed bumps–rising costs, labor shortage, and infrastructure bills. These factors pile on the traditionally high costs for labor and construction materials.
Considering the current industry shortage, as seen in the table below, you could choose to go for the win by ignoring all the doubts and doing your best to meet the industry demands.
Experts seem to believe the real estate market trends in 2022 will be apparent in the following ways:
Real Estate Investments in Alternative Sectors
Private investors will likely show interest in various alternative sectors rather than traditional ones like office, retail, and industrial. Investors will have to bear the high cap rates, which come with less risk.
Therefore, tenants, driven by economic growth, are the primary source of promise for real estate investors. So, what are these alternative sectors that have appealed to investors?
A) Recession-Proof Student Housing
Real estate investors understand the stability that comes with multifamily housing, especially student housing, as normalcy resumes. The pandemic minimized demand for student housing since students had to switch to remote learning.
However, once we achieved relative normalcy, the need for new leases spiked in the summer of 2021, leading to a marked rise in occupancy rates and rents.
In 2022 investors will have more confidence and invest in multifamily housing for its strength after the pandemic.
B) High Demand on Self Storage
Subsequent house moves peaked when the pandemic hit. As workers switched to remote work, there was an increased demand for self-storage facilities. Vacancy rates tanked to lows of 5.5% in the second quarter of 2021, an unprecedented event.
2022 is likely to feature high demand for self-storage facilities even as the dust settles. Renters have discovered a new system that works for them, involving remote work and emphasizing outdoor activities, fueling the growing demand.
2. Investing in Sun Belt Markets
There is a likelihood real estate dealers will commence investing in Sun Belt Markets because of their rich promise. Experts think it is worth watching these markets in 2022. The said market withstood the exodus that came with the pandemic.
That said, what is the fastest growing real estate market? Here are at least ten markets with promising prospects:
- Austin Texas
- Nashville
- Atlanta
- Phoenix
- Boston
- Raleigh/Durham, North Carolina
- Charlotte, North Carolina
- Seattle
- Tampa /St. Petersburg, Florida
- Dallas/Fort Worth, Texas
Sun Belt markets hardly experience the clearing out that major cities like New York and Chicago experienced. Additionally, the markets are in tax-friendly states, and the quality of life there is better than in other states. The main elements driving their growth include:
- Strong growth
- Affordability
- Job Prospects
- Homebuilding outlook
A) Rebounding Senior Housing
Senior housing registered some decline at the beginning of the pandemic. The discovery of a vaccine changed as demand peaked in the second quarter of 2021.
Given that the world is still trying to adjust and considering how hard the pandemic hit that age demographic, it is still amazing how senior housing continues to rebound.
According to recent reports, the demographics favor the sector as most people will age into potential tenants of senior housing. Once it turns out this way, the low occupancy levels will ultimately stabilize by 2022.
B) Life Sciences Research Spaces
Real estate investors turned their attention to the high demand that came with the focus on vaccine developments. The application of new technologies, in particular, has caused a reaction where investors are showing interest in laboratories and medical buildings.
Investors will work to meet the demand for healthcare properties in the future. Renters, mostly healthcare providers, are moving facilities closer to consumers for convenience.
That is in stark contrast to how it was in the past where healthcare providers settled in old–school hospital campuses. Therefore, it’s more suitable to consider the transformational move as a trend.
C) Mom and pop rental owners market (for smaller investors)
Smaller investors have a real chance of thriving by meeting mom-and-pop rental owners’ demand for rental space. They could take up affordable renovation projects which will build a portfolio.
For the best chances of success in 2022, smaller investors can sell family land and invest in income-producing property.
Success in this sector would require paying keen attention to the community’s needs. The local market is full of promise and would be a great place to start.
Shifted Focus towards Environmental Social and Corporate Governance
Another top trend that will feature the real estate industry in 2022 is stakeholders’ strive to alleviate climate change. Real estate leaders have taken the responsibility to adopt green building to other socials–economic changes.
It comes after real estate stakeholders finally started paying real attention to environmental, social, and corporate governance (ESG) in the following ways:
- Considering primary ESG elements will be the main point of consultation for real estate investors when making operational and investment decisions.
- There will be intentional attempts to respect social issues and to solve them.
- Perhaps from the point of self-interest, investors will want to mitigate climate-related property damage.
- Stakeholders in real estate will likely invest in affordable housing. Housing problems were evident during the pandemic.
- There are also hopes to make the real estate industry more diversified and inclusive.
Conclusion
Everything that the financial market experienced during the pandemic had a less severe impact on the real estate market than expected. The 2022 real estate market will thrive once real estate leaders start investing in the new sectors.
These include student and senior housing, self-storage, and investing in the Sun Belt markets. Even better is if real estate investors can successfully implement ESG since the benefit would be far-reaching.
