We’re definitely entering uncharted territory going into 2021. Between the national pandemic, urban unrest, and a host of consumer behavioral changes and desires, there will be some real estate sectors that grow less popular and others that will be the next “hot” thing. So what are some of the changes coming in real estate and what are some of the creative deal making strategies to harness these changes?
The “Great Reshuffling”
This is the phenomenon set in motion by the pandemic and urban unrest – essentially people moving out of urban markets for lower density suburban and exurban options. Zillow has coined the phrase “Great Reshuffling” to describe this mass exodus in the housing market. It may be a permanent shift, as many Millennials are, at the same time, creating households and feel the need for larger homes and yards, rather than city amenities such as clubs and restaurants. This trend will create more real estate opportunities in suburbs and exurbs, as well as new re-positioning opportunities in vacant urban space.
The death of office, retail and lodging properties – and the chance for a rebirth in a new manner
The pandemic has led many Americans to now office from their homes. And, in addition, it has also changed the way people shop and vacation. The new focus revolves around non-traditional on-line options such as Zoom and AirBNB, but those are still backed-up with real estate to fulfill their on-line bookings and commitments. Forging new age ways to get the same customer experience are a huge opportunity.
The necessity to find debt in unusual places
Bringing properties back to life that have failed due to the pandemic and these megatrends will also require figuring out new ways to finance them since banks will be gun-shy. And, at the same time, new concepts for real estate are not always initially embraced by banks. So to make things happen in 2021 and beyond, you need to get creative with debt and equity sources. Some new-age methods to do this may include crowdfunding/Reg. D 506 concepts, getting sellers to carry paper, and even getting banks to carry paper on foreclosed properties to at least get them back into performing status.
The push for creativity to tie it all together
Major dislocations have historically led to opportunity for those who have realized it’s the chance to set a new course. But to be a pioneer in real estate requires vision and the ability to overcome hurdles. There’s no question that America has entered a new phase in which the old fashioned methods no longer work. The money will go to those that solve those complex puzzles. This is the moment for creativity in real estate.
There has never been a moment in recent American history in which there is so much raw possibility in real estate for those creative enough to harness it. Every disaster has winners and losers, and the key is to put the pieces together in a profitable manner that nobody has figured out yet.