To identify potential real estate opportunities, population trends must be understood alongside macroeconomic drivers.
An aging population means more medical office and life science properties, and a range of age-related residential options.
China’s rising labor costs and projected population declines could alter supply chains, pushing growth to other regions.
What factors will drive real estate investment opportunities and where will they be? Follow the money and people! When economies and demographics shift, real estate opportunities emerge. This is the first in a series of articles on demographics and real estate. It covers the drivers of global demographics that are likely to generate several types of global real estate investment opportunities.
Here are some highlights from my paper, Follow the money — and the people.
Five drivers of global demographic change are likely to stimulate real estate investment opportunities.
Here are the types of investment opportunities that we expect for global real estate based on the drivers.
While each driver is impactful in isolation, it's the interaction of these drivers that produces a fuller range of potential real estate investment opportunities (see table below). This range takes on unique characteristics as the consideration of demographics narrows from the global level to the country level, and down to the local or trade area level. Future papers in this series will look more deeply into demographic trends within regional and local geographies to see how they spur the potential for real estate investment opportunities.
Demographic drivers
| Real estate opportunity | Population vs wealth | Growth vs change | Migration | Aging | Income/wages |
|---|---|---|---|---|---|
| Wealth + migration = more and diverse opportunities | ✔ | ✔ | |||
| Needs of seniors will shape property demand | ✔ | ||||
| Multi-generation housing demand to grow | ✔ | ✔ | ✔ | ||
| Live/work: Hybrid work reinforced; urbanisation to persist | ✔ | ✔ | ✔ | ✔ | |
| housing demand: Less growth, more churn | ✔ | ✔ | ✔ | ||
| China production to shift to East Asia and Mexico | ✔ | ✔ | ✔ |
Read my complete analysis about how global demographics shape real estate investment opportunities in “Follow the money — and the people.”
A global and US real estate recovery with transaction activity re-accelerating and the start of a new real estate value cycle is close in our view.
The time may be right for investing real estate credit - higher yield potential, reduced basis, and opportunities for alternative lenders due to proposed capital requirements for banks signal potential positive outcomes.
Investing through market corrections has historically driven outperformance for real estate investors. We believe this will continue into 2024.
Economic growth is an increase in aggregate production in an economy, which is generally manifested in a rise in national income.
Population growth is an increase in the number of people in a population or group.
Net migration represents people choosing to leave one country and move to another, as well as movement within a country.
Global supply chain diversification refers to developing flexibility and redundancy of the global supply chain in order to minimize risk and increase agility, by increasing number of suppliers and/or expanding and reimaging manufacturing and distribution networks.
The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.
Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer's opinion and may not be realized.
All data is provided as of March 2024, sourced from Invesco unless otherwise stated.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Views and opinions are based on current market conditions and are subject to change.
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