Making Money in Real Estate Investment and Development – Challenges and Trends

The real estate industry serves the society’s need for people to occupy space. As those needs have evolved, so has the real estate, and the requirements are growing or shrinking in particular sectors. What good investors do? They stay ahead of the changes.

The demand for private capital for supporting infrastructure and real estate investment has increased massively. The swelling middle class, the great migrations to the cities, and the growing population in the emerging economies are creating needs for an increase in real estate in urban environments. As that happens, environmental issues, demographics, and technology are becoming new value drivers in real estate. With new challenges and trends that are emerging, the landscape is becoming more involved with a broader range of return and risk.

Global Changes in Real Estate Demand

Some of the fast-growing countries in Latin America, Africa, Asia, and the Middle East will have their cities swelling. However, only the centers of wealth creation will be less likely to fail. The fastest growing region will be Asia and sub-Saharan Africa. The cities that don’t grow to be generators of economic wealth will destroy wealth with rampant crime, slums, and poor infrastructures.

China is expected to see the most significant migration as people are increasingly moving to major cities, pursuing a prosperous middle-class life. It also brings the increase in demand for supporting infrastructures as connections to public, road, and rail transportations are vital for urban success.

Shifts in city population drive the change in real estate demand fundamentally. In Latin America, Africa, and Asia the middle-class population will need more housing. The size of apartments is also likely to shrink because of the enormous competition for space which increases urban density. Real estate developers will need to find innovative ways for how they use space.

The population in advanced economies is aging, which will limit house pricing, and suffer price deflation. Several real estate subsectors will emerge due to population growth and aging, such as retirement, healthcare, agriculture, and affordable pricing – retirement accommodation, nursing homes, and agricultural land.

Another critical factor is sustainability, which dramatically transforms the design and developments of buildings. Cities occupy only 2% of the world’s land but contribute to about 70% of the global energy-related greenhouse gases. The pressures for making buildings more eco-efficient are mounting, with developers integrating sustainability criteria into homes, office buildings, and new cities to reduce waste and make better use of natural light to improve performance (environmental, social, and economic).

21st Century Real Estate Strategies and Success Factors

Real estate organizations should plan to adapt early to survive, as the changing landscape will change the nature of investment opportunities but also increase the size of the asset pool. They will need to start thinking globally as the market will become far bigger due to the emerging economies in South America, Asia, and Africa, leading to a broader range of investment and development opportunities. However, real estate was always a “local game,” so real estate players shouldn’t lose sight of local knowledge, and be specialists with their expertise of locations and areas of their activity. They will also need to pay attention and understand the economics of cities and get a strategic view of why a city will, or will not be successful. The demand will drop for office space due to rapid technological advancements and innovations, which will further contribute to the “greening” of buildings.

What real estate players need to understand to stay in the game and keep making money are the new value drivers and the future opportunities for real estate development. Things are changing at a pace that keeps becoming faster and faster. Europe and North America are already crowded, and as the global population keeps growing, the demographic migration will redirect to other areas. They will need good government relations, a global network with local knowledge, specialist innovation, and expertise, and to keep trends in technology.

As a long-time player and expert in the real estate industry, Blackhawk Partners can provide you with guidance on the road to success in the global real estate game. By helping you rationalize your financial commitments, we’ll make sure that you learn when, where, and how to buy and sell the right properties.




Written by

Ziad K. Abdelnour, Wall Street financier, trader and author is President & CEO of Blackhawk Partners, Inc., a private family office that backs accomplished operating executives in growing their businesses both organically and through acquisitions and trades physical commodities – mostly oil derivatives – throughout the world.