The year 2021 has brought about a number of changing trends in publicly owned stock markets. When you consider that the Covid 19 pandemic has changed the way in which Americans shop and do business, it naturally has an effect on the businesses, hence, the market. REITs struggled to pay returns, most of them lower throughout the crisis. The good news is that there is a rebound in the market since the low at the beginning of the health crisis and this leaves us along with some optimism for the future. We’ve had our eye on several emerging trends since in the year. For REITs and any real estate related investments, listed here are 5 trends that you should focus on for 2021.
1. Acceleration of E-Commerce
There is a tremendous upsurge in e-commerce sales since the pandemic forced millions into quarantine. Brick and mortar establishments were forced to close their doors. Those who remained opened were required to limit occupancy. Customers didn't have choice but to take much of their business online. We anticipate seeing retail tenant file more bankruptcies and will also continue to impact rental growth and occupancy for those with investments in real estate. It’s hard telling what the final impact will be months in the future.
2. Increases in Telecom Carrier expenses
There is going to be a greater demand for cell towers due to the increase in virtual business transactions. More consumers are meeting online for medical appointments, education, entertainment, and much more. The increased strain on the infrastructure will result in the need for more towers to be built. This is something that will impact the real estate market as changes in the way that we work and the way that people live put the stress on other industries. Although this may not sound like its related to real estate, these conditions affect every sector from the market and it is likely to have long-term ramifications as well as opportunities for the real estate market. It bears watching as there will be various reactions within different sectors from the real estate market.
3. Changes in the Supply Chain Configuration
This is yet another trend that has already begun to modify the real estate sector. The global pandemic has led to multiple disruptions within the supply chain. Consumers have changed their shopping habits due to issues within the US and China trade agreements. The impacts that this has on REITs is the volatility of relations in trade and people investments that focus on foreign regions where you can find tensions will begin to suffer consequently. Rents are likely to go down or to be modified due to a more lenient attitude towards struggling businesses. This can have long term impacts upon real estate investments with a focus on rents in impacted regions.
4. The emphasis is shifting towards liquidity and balance sheets
One of the most popular trends in REITs that has been brought about by the pandemic of 2021 is really a greater emphasis on balance sheets and liquidity. The recent events of this year have been detrimental to many of the occupants of the real estate interests held by the REITs. A lot of companies will not survive the crisis and people who do may experience issues paying the rent, or paying full rent. The demand for rentals is likely to decrease as a host of businesses are closing their doors permanently. Cost is accelerating and a more conservative approach is being taken by real estate investment trusts with a new focus on liquidity. The crisis has a domino effect in this case, from the bottom upwards to the top vs roller. It’s likely that lease agreements will also change to espouse more specific wording.
5. Portfolio Composition changes
Publicly traded REITs within the healthcare sector are being observed at close range by investors. They’re watching for any sign of red flags that indicates trouble. REITs in the public arena have begun making disclosures to soothe investor concerns and they’re presenting hopeful scenarios amidst an outlook that is more grim than other things. Some of the hardest hit sectors inside the REIT portfolios have been hospitality and retail. One strong point is the life science division of healthcare as research has been ramped up to find new treatments and vaccines for that ongoing pandemic. This is the one sector that shows a solid demand for rent collection with the greatest stability. Some other subdivisions under the healthcare sector such as nursing homes, senior living facilities are even more regulated than before. Labor issues abound and also the costs of operation have raised significantly.
Within the healthcare industry, an oversupply of help has arisen in response for the increased demand for healthcare workers, particularly in the senior care sector, once the demand drops and the companies are left with too many workers. This is a positive trend that we look forward to in the future after the current crisis has transpired. It will leave such facilities having a strong pool of staff to choose from when it’s time to make adjustments within the worker pool.
Expect to see alterations in the portfolios held by investment trusts. There may be a change in the mix of properties and also the sectors that they represent within the healthcare real estate industry. These modifications within the portfolio may be coming sooner rather than later.
We can thank the current pandemic for upsetting the applecart in real estate investing. The impacts happen to be a big hit on REITs in lots of sectors of the real estate market, particularly when businesses have closed their doors and the demand for rental spaces has declined rapidly. It’s less a gloom and doom scenario, but instead, a time for assessment and making the most common sense adjustments including shifts within the portfolio mix, and diversity. It’s a period when some losses will be noted but doors will also open for new opportunities.