With interest rates rising, real estate is expected to cool off in 2019. But it will stay hot in selective markets, both at home and abroad. That’s according to real estate experts who identify investment opportunities both at home and abroad.
At home, real estate will be hot in certain “emerging” market segments of the real estate industry: warehouses, assisted living, and co-working spaces.
“Warehouse prices both for sale or lease will continue to increase because of the increased demand for warehousing and low inventory,” says New York-based commercial real estate expert Chris Pesce.
There are three factors behind this trend, according to Pesce. One of them is tariffs. “Changes in the increase of tariffs on imports are pushing more manufacturing to take place in the US,” he notes. Then there’s on-line sales. “The general year over year increase in online shopping has led to more businesses needing space for stock to ship both locally and nationally.”
And third, there’s demand for traditional warehousing. “There is also always the need for warehouse space for all of the service trades such as electrical, plumbing, HVAC and other contractors which are trades that are always needed,” says Pesce.
While tariffs and on-line shopping will drive demand for warehousing, demographics will drive demand for assisting living, according to Pesce. “The assisted living facilities and 65+ older complexes will continue to trend upwards because of the baby boomers coming of retirement age that were born period between 1946 – 1964.”
Meanwhile, new technologies will fuel demand for a different kind office space. “As mobile office technology continues to grow and provides an ease of working on the go, stationary office space may start to become an unnecessary cost,” he explains. “Shared space will become more of a trend and a great option for the growing entrepreneur.”
Abroad, real estate will be hot in certain countries, like Germany, Greece, Cyprus, and Malta. That’s according to a recently published report by Tranio, an online real estate agency.
Germany offers “affordable financing, a stable economy, population growth and a secure investment process all contribute to Germany being regarded as a ‘safe haven’ for investors,” says the Tranio report.
Greece, Malta, and Cyprus offer something else. Citizenship. “In spite of the lifting of capital controls, Greeks cannot afford to buy real estate, even at these low prices,” says Athens based real estate attorney Kyriaki Perrou. “Most buyers are foreigners, especially Chinese, buying properties in exchange for a golden visa.” That’s a program that grants a residence permit to those who buy real estate in Greece above €250,000.
Still, real estate investors must be concerned about rising interest rates, which could turn into a headwind, even for hot properties. “We are moderately concerned as we believe that there will be a smooth rise in rates and the regulators will continue to examine the reaction of the markets,” says George Kachmazov – founder and managing partner of Tranio. “The Eurozone growth has lost some momentum (with projections at 2.0% for 2018 and 1.8% growth for 2019, according to European Banking Federation) and the credit conditions will remain supportive.”
Investors in European properties must also be concerned Brexit. “There are still downside risks from Italy, BREXIT and lower than expected growth in the Eurozone,” adds Kachmazov. “This can push ECB to shift the first increase to mid-2020 and the expected pace to one per year.”