In the past few years, demand for private capital for real estate investment and supporting infrastructure has increased enormously. In the emerging economies, the great migration to the cities, growing population and swelling middle class are creating a desperate need for more urban real estate. In the advanced economies, the cities are also growing, although not so rapidly, while technology, demographics and environmental issues are becoming new value drivers.
This is obvious that global mega trends will change the real estate landscape considerably in the next six years and beyond. While many of the trends highlighted are already evident, there’s a natural tendency to underestimate how much the real estate world will have changed by 2020. Real estate as an asset class is changing fast and real estate Developers like Nakheel , Emaar , Azizi Developments, Damac Properties , Aldar Properties etc are emerging and positioning their self not only locally, but globally as well. Backed by solid financial credibility, these developers are building and investing in real estate on an epic scale; yet, small scale developers are also playing a significant part. The landscape is becoming more widespread and complex, with a wider range of risk and return than ever, plus new drivers of value. Looking forward to 2020 and beyond, the real estate investment industry will find itself at the center of rapid economic and social change, which is transforming the built environment. While most of these trends are already evident, there’s a natural tendency to underestimate their implications over the next six years and beyond. By 2020, real estate developers will have a broader range of opportunities, with greater risks and new value drivers. As real estate is a business with long development cycles – from planning to construction takes several years – now is the time to plan for these changes. It was been witnessed that already thousands of people migrate from country to city across Asia, the Middle East, Latin America and Africa on a daily basis, attracted by the new wealth of these economies. By 2020, this migration will be firmly established. The cities will swell and some entirely new ones will spring up. Meanwhile, the growing emerging markets’ middle class and ageing global population are increasing demand for specific types of real estate. Sub sectors such as agriculture, education, healthcare and retirement will be far bigger by 2020. The changing real estate landscape will have substantial implications for the real estate investment community, while determining the Implications for real estate strategies keeping in view of below mentioned predictions; 1.The global invest-able real estate universe will expand substantially, leading to a huge expansion in opportunity, especially in emerging economies. World population growth and increasing GDP per capita will propel this expansion. By 2020, invest-able real estate will have grown by more than 55% compared to 2012, according to PwC forecasts, and then will expand by a similar proportion in the following decade. 2.Fast-growing cities will present a wider range of risk and return opportunities. Cities will present opportunities ranging from low risk/low yield in advanced economy core real estate, to high risk/high reward in emerging economies. The greatest social migration of all time – chiefly in emerging economies – will drive the biggest ever construction surge. 3.Need to have ‘sustainability’ ratings, while new developments will need to be ‘sustainable’ in the broadest sense, providing their residents with pleasant places to live. Technology will disrupt real estate economics, making some types of real estate obsolete. 4.Collaborating with governments will become more important. Real estate managers, the investment community and developers will need to partner with government to mitigate risks of schemes that might otherwise be uneconomic. In many emerging economies, governments will take the lead in developing urban real estate and infrastructure. 5.Competition for prime assets will intensify further. New wealth from the emerging economies will intensify competition for prime assets; the investment community will need to think laterally to earn attractive returns. They might have to develop assets in fast-growing but higher risk emerging economies, or specialize in the fast-growing sub sectors, such as agriculture, retirement, etc. 6.Broader range of risks will emerge. New risks will emerge. Climate change risk, accelerating behavioral change and geo political risk will be key. In China, India and the Middle East, entire new cities will be built, using eco-efficient technologies to reduce their environmental impact. Governments and the investment community may need to work together to fund and build these cities and their infrastructures. Masdar City in Abu Dhabi, Jaypee Sports City in India and Sejong City in South Korea are just a few of the entirely new cities. But it’s unlikely that all of the new cities planned will attract the residents forecast, as the high vacancy rates in some of Asia’s newest cities already show. Note: In near future, affordability will fall, leading to greater urban density and smaller apartments. Developers will have to become more innovative about how they design and build commercial and residential real estate, seeking to use space more efficiently. Therefore, In order to prepare for these implications, the real estate investment organisations / Real Estate Developers will need to make sure they have the right capabilities and qualities to be a successful and profit motive as well...
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