Investing in real estate can be an option to help diversify a portfolio because the market isn’t directly correlated with stock and bond markets. You don’t have to buy properties and become a landlord to participate, and there are a number of different financial vehicles available based on an investor’s key objectives, timeline and tolerance for risk.
The commercial real estate (CRE) sector shows signs of growth, according to Deloitte’s “2019 Commercial Real Estate Outlook.” Among the global CRE investors whom Deloitte surveyed, 97% are looking to add to their position within the next year. In the U.S., CRE investors expect to increase their capital commitments by 13% during that time period.1
Another survey, this one conducted by AFIRE, an association for global investors, found that institutional real estate investors have a great deal of confidence in the U.S. market. Fourteen percent say they expect even more attractive investment opportunities this year over 2018. These investors favor industrial and multifamily property sectors and rank New York as the most stable market.2
Those who wish to help drive economic growth in economically distressed areas might want to know more about qualified opportunity funds. These funds invest in low-income communities that are designated as “Opportunity Zones.” With this type of fund, capital gains taxes are deferred until 2026, which may make it an option for long-term, buy-and-hold investing.3
Interestingly, mounting concerns over climate change are permeating the real estate market. In fact, large real estate firms are making significant investments in tools to help calculate the risk on property portfolios. Climate change risks as they apply to real estate investments include rising sea levels and natural disasters such as floods, mudslides and wildfires.4
One new concept on the horizon is that of “floating cities.” The United Nations Human Settlement Program (UN Habitat) has partnered with a company called Oceanix to design ocean-based cities. Created with a series of interconnecting floating structures, the cities would feature the ability to withstand natural disasters, including those caused by climate change.5
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1 Deloitte. 2018. “2019 Commercial Real Estate Outlook.” Page 2. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-fsi-dcfs-2019-cre-outlook.pdf. Accessed April 17, 2019.
2 Boston Real Estate Times. April 4, 2019. “New York #1 and Boston in Top Ten Global Real Estate Markets: AFIRE Survey.” https://bostonrealestatetimes.com/new-york-1-and-boston-in-top-ten-global-real-estate-markets-afire-survey/. Accessed April 8, 2019.
3 Rebecca Lake. US News & World Report. April 5, 2019. “8 Best Ways to Buy Real Estate for the Long Term.” https://money.usnews.com/investing/real-estate-investments/slideshows/best-ways-to-buy-real-estate-for-the-long-term?slide=3. Accessed April 8, 2019.
4 Diana Olick. April 9, 2019. “Climate change will crush real estate values for investors who don’t prepare, new report says.” https://www.cnbc.com/2019/04/08/climate-change-will-crush-real-estate-values-for-unprepared-investors-report.html. Accessed April 17, 2019.
5 Christopher Carbone. Fox News. April 8, 2019. “This futuristic, floating city can withstand Category 5 hurricanes.” https://www.foxnews.com/science/this-futuristic-floating-city-can-withstand-category-5-hurricanes. Accessed April 8, 2019.