The COVID-19 pandemic has had a significant impact on all facets of life. Social distancing guidelines and travel bans have accelerated the trend towards online shopping. Working from home is now the norm for those fortunate enough to be able to do so. These are only two examples of the many changes that have occurred over the last few months. While recent events have caused us to change how we think about all of our investments, today I will focus solely on Real Estate Investing in a Post-COVID-19 World.
Why Own Real Estate in your Investment Portfolio?
We believe that real estate plays an important role in diversified investment portfolios. It provides the potential opportunity for investors to both collect a high level of income and benefit from price appreciation. Importantly, returns in the real estate market are uncorrelated with more traditional investments like stocks and bonds, meaning that real estate may not be impacted by whether the stock market is up or down on a given day. This principle of uncorrelated returns is the cornerstone of diversified investment portfolios.
Location! Location! Location! This is a timeless phrase that you will undoubtedly hear if you ask for advice in the real estate market. While it is important, it is not the only factor to consider because what was a prime-time location 50 years ago, may not still be today. For that reason, it is necessary to look at current economic trends to understand the sources of future demand. For example, the post-COVID-19 world has seen a rapid acceleration in the trend towards e-commerce, relative to in-person retail sales. While this trend has been in place over the last two decades, COVID-19 has caused its adoption to spike (see chart below). This has put significant pressure on large retailers and malls that now have difficulty attracting customers. Alternatively, e-commerce has been beneficial to industrial warehouses and distribution centers located closer to densely populated areas that can quickly fulfill online orders.
While working from home was an option that many employees took advantage of in the past, the scale of working remotely has exploded recently. Without the need to be close to the office and with social distancing guidelines still in place, there has been an exodus out of large metropolitan cities, such as New York and San Francisco, into surrounding suburban neighborhoods. This trend has softened demand of physical office space, while increasing demand for suburban single-family properties.
These are only two of the many trends that are affecting real estate investments in the post-COVID-19 world. If you wish to discuss how COVID-19 has impacted your real estate investments, feel free to reach out to me or your RegentAtlantic Wealth Advisor.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.