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You must dig a bit to see the true view of the real estate industry currently.
All we hear on the TV or social media is what’s occurring in the residential sector.
And that’s fine, as it’s a huge part of any nation’s real estate sector.
We all must live somewhere, right?
However, the true opportunities, ones which you yourself may be able to take advantage of, are barely mentioned.
Well now, even these areas of the real estate sector may be about to undergo a seismic shift themselves.
One which will completely and irrevocably change the type of investments you will make in this area of property.
Let’s find out where the true opportunities are today.
And then look at how they themselves are about to be overtaken by an unstoppable changing of the guard.
Read on.
An existential threat?
I’d like to take you to the recently concluded Australian Financial Review (AFR) property summit.
Described as such.
The Australian Financial Review Property Summit is the preeminent gathering of the commercial property’s most influential leaders and insiders to dissect the issues facing the sector and identify the opportunities in real estate investment.
Straight away, you can see the area of interest today.
It’s the commercial property sector.
Both in Australia and across the world, the drivers for this sector are the same.
This summit found that landlords are starting to see a big turnaround in demand for commercial office space, challenging the pandemic narrative that the office is dead.
“Charter Hall office chief executive Carmel Hourigan said the number of private sector tenants briefing the landlord on their plans to secure office space had increased by 50 per cent in the past few weeks, rising from 26 to 40, and by 150,000 square metres.”
On the surface, this is indeed welcomed news for the sector.
If you are a commercial landlord, you can now plan with higher rents in the short-medium term.
Likewise, an investor in one of Charter Hall’s many REITs is exposed to commercial real estate.
You can look forward to higher earnings, leading to stock price growth and rising dividends.
This trend is being played out across the globe too.
So, what exactly is the existential threat I alluded too?
It isn’t what you may think.
Let me explain.
I have written to you in the past about the impact the so-called ‘Proptech’ is having. Proptech is short for “property technology” and represents the digital revolution the real estate sector went through when the COVID-related lockdowns first occurred.
No longer on the margins, Proptech is here to stay as a fundamentally unique way of doing business.
But even this isn’t the threat.
It’s the companies behind the tech. The big players too.
Summed up by one of the participants of the summit Jonathan Hannam, the co-founder and managing partner of Taronga Ventures.
“Who knows the most about real estate customers? It is not the landlords or the agents or managers; it is Facebook or Microsoft.”
Consider the amount of data these behemoths collect on all of us during a single day.
They also have mountains of cash sitting there ready to invest in something, anything really.
You can add Apple to this mix too.
Here is the threat to the establishment. Not only are they armed to the teeth financially, but thanks to data mining they are aware of not only what prospective tenants are looking for, but when.
How big can a company like Microsoft become if they get seriously involved in real estate?
Trust me, the management there are all too aware of this.
I mentioned Apple. Here is why.
Source – wral
Their US$1 billion campus they are building at Raliegh City in the US has already seen instant double digit gains in surrounding properties.
Apple is also providing finance to employees who wish to move in.
Welcome to the future of real estate.
And what a conundrum for investors and landlords.
How to choose the right winners?
If the language being spoken at this summit is any indication, it really does seem like there is only one expected winner in all this.
Either the traditional landlord focussed model which also includes publicly listed REITs which many of you may indeed hold shares in.
Or the tech behemoths with their data and their mountains of cash.
The battle lines are being drawn as I write this.
How will this all play out?
Does Apple and Microsoft’s first tentative steps into the world of real estate and mortgage lending signal the end of these once powerful commercial real estate conglomerates?
It’s interesting to note that most banks haven’t as yet revalued their loan assets since the pandemic began.
What if they value them much lower than before? Is that the opening the tech companies need to begin hostile takeovers of exposed REITs?
How can these traditional landlords possibly hold off this threat with diminishing asset bases?
It’s a critical theme that the Property Sharemarket Economics (PSE) team will be following for the remainder of the decade.
We have advised that exposure to the REIT sector will prove an astute move for investors over the next few years.
But what if in fact the best way to play the real estate cycle is to buy shares of Apple or Microsoft instead?
What should you do?
Get educated, that’s what! Start here with a membership to the Boom Bust Bulletin..
This is where you’ll learn the history of the 18.6-year Real Estate Cycle, why it continues to repeat and the best way to ensure you and your family can take full advantage of this knowledge.
All for $4USD a month. That’s less than your weekly takeaway coffee bill!
Amazing value.
Our members can follow the real estate cycle alongside us as it unfolds.
If the above comes to pass, and big tech is the best way to play the remainder of the cycle, they will be the first to know.
Make sure you are one of them too.
Sign up now.
Best Wishes,
Darren J Wilson
and your Property Sharemarket Economics Team
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