The Future of Real Estate

Reverse Tide
Oct 17, 2017 · 11 min read


Real estate has been hot for a long time. In our current era of cheap credit and global expansion, owning and developing land has been big business. It has become part of our established culture. Individual homeowners invest in real estate with appreciation expectations and have done quite well. And professional real estate agents, developers, financiers, and others have done quite well themselves.
  • Hotel occupancy hovers at outstanding rates despite the short-term rental market’s growth. This varies by geography but data suggests record highs across many major markets. This is consistent with statistics showing tourism and business travel at strong growth rates.

Looking Forward

The question is what will real estate trends we will see over the coming 10–20 years? Which sectors will be hot and which will not?

  • Short-term rentals are big for tourism today. But might we see a shift away from 12 month leases and toward more flexible rental structures? I believe we will. People are more mobile than ever before. They don’t want to sign long commitments. I believe we’ll see an expansion of short leases and furnished properties. It may not be popular with older demographics but will change as millennials gain more purchasing power.
  • Business travelers overwhelmingly stay in hotels. Why? Corporations usually sign special deals with hotel companies due to the volume of travel they bring. But I believe we’ll increasingly see travelers choose short-term rentals. This is especially true if larger companies start operating such properties (and can offer similar incentives). This can be a huge boom for the short-term rental market. Business travelers are some of the most reliable segments for hotels.
  • Regulations haven’t really addressed the short-term rental market. It’s simply too new. This has deterred a lot of investment, as people fear jurisdictions will make regulatory compliance too difficult or expensive. As governments remove the ambiguity, look for investment to grow. And if the area becomes over-regulated, it favors the larger investor. They can afford to handle higher regulatory costs. Likewise, high regulation restricts supply, prices increase. This can be favorable for the savvy investor.
  • Virtual reality is probably going to have the biggest impact on our lifestyle. Most think of virtual reality as a glorified gaming system. That’s exactly what we thought of PCs not so long ago. Then the technology improved and influenced our lives in amazing ways. Computers are irreplaceable. Virtual reality is primed to follow a similar path. It’s only on its first release. Like PCs did, the technology, software, and use cases will grow exponentially in the next decade. I’d encourage you to visit another of my websites where I talk about virtual reality and where I expect it to go. I talk all about why individual consumers, businesses, and investors should be paying close attention to this industry. It will change the world bigger than anything. LINK — RT Virtual Reality. What does this mean for real estate? I write about how VR will impact many traditional businesses on this Medium account. Take a look, as it’s important in real estate and many other aspects of life.
  • Autonomous vehicles. We are not far away from transportation radically changing. Gone will be the days where every household owns 2 cars and we sit in rush hour. Self-driving vehicles will eliminate the need for this. Delivery drones will reduce the need for many cars on the road. A smart city that better regulates traffic will clear congestion. And look at all the projects Elon Musk is working on. He’s digging underground commuter tunnels and building rockets that can transport us anywhere in the world in under an hour. This means we’ll spend less time using transportation. Our spending habits will adjust. How does this affect real estate? I mentioned urbanization earlier. Might this be the technology that reverses that trend? Maybe. Maybe we can get to work from longer distances much quicker than today. Maybe we won’t need logistical centers around big urban areas. Maybe we will be able to do more of our work remotely. VR/AR, automation, and other tech advances will facilitate that. Not that urban areas will become bad investments. But consider how these technology trends will impact where we live/work. We might see some adjustments that impact real estate demand.
  • Biotechnology. Ask anyone involved in the health sector and they’ll tell you we’re on the cusp of living longer lives. Biotech advances have already helped treat many bad diseases and conditions. But as we learn more about our body through big data and as we have better technology to diagnose/treat illness, major advances are likely. These advances are possible in our current generation. What if life expectancy goes from ~80 to ~100? The societal impact will be huge. We’ll work longer, spend more of our life at advanced ages, and population trends will change greatly. Remember what I said about aged care. Biotech advances might exasperate those trends. And it might contribute to various others. It’s a hard one to predict. But still worthy of consideration.
  • Internet of Things / Robotics. The “smart home”, “smart office” and “smart city” are all around the corner. What happens when all aspects of a building are connected. This has huge real estate implications. Developers will need to be cutting-edge on such technology. This creates outstanding opportunity for those that understand it. We’ll inevitably see a boom in demand for high-tech real estate. This means the electric, plumbing, heating/cooling, appliances, and other aspects of the building and its use. Those in the real estate sector need to pay attention and stay competitive.
  • 3D printing. Construction may change substantially if we can 3D print household items, aspects of a building, and possibly the entire thing. The entire cost and timeline assumptions of development would change. If you haven’t seen this video, check it out…
  • Offices. As I’ve said, the need for a fixed office space will decline. We can do more work remotely and that will accelerate with virtual/augmented reality advances. We’re also seeing a trend toward more flexible office space. Developments relying on long-term lease models might find difficulty.
  • High credit markets. When you examine certain geographies, it’s a bit shocking the level of credit used for real estate. Homeowners with negative net worth and negative equity. Businesses that rely on low interest rates and credit lines to stay in business. As a society, we’re in for a big credit reckoning some day and it will hit real estate hard. If you’re getting into real estate with a long-term horizon, you have to look at credit sustainability. It fuels many markets and can’t do this forever. Fundamentals win on a long-term horizon. What markets am I talking about? Sydney, Vancouver, San Francisco are large and well-known examples. However, they are far from the only example. Look at UBS Global Real Estate Bubble Index…


As I mentioned, these are the real estate trends I am looking at and how I interpret them. Others may feel differently. It’s up to you in deciding.

Our Future

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Reverse Tide

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Our Future

Perspectives and predictions on the future of work, technology, economics, society, and more