The Rebirth of Real Estate in a Changing World
The future of real estate is looking very different to the past which is largely being driven by a phygital world.
It’s called phygital because it’s part physical, part digital, and it’s creating colossal change in the landscape of real estate with a rebirth well and truly set to come.
Now we understand today that it is now possible, and often practical, for us to work from home. Therefore, your choice of real estate has become an even greater consideration.
Does the property offer a nice backyard or a good balcony to stretch your legs? Does it have a study or a spare room which you can use for work? All of a sudden, the idea of real estate has morphed into not just being a place where you go to sleep, but a place where many now work too.
This shift has led to a rebirth of real estate, and we’re here to witness it all first-hand. So, what exactly will this urban reconfiguration look like? And what should property investors be across as this transformation takes shape?
THE 20 MINUTE NEIGHBOURHOOD
If you had to strictly live, work and play within a five-kilometre radius of your property, how would your real estate strategy change?
This thought process is something urban planners have been working towards for a long time. It’s called the 20-minute neighbourhood and it’s centred around living local.
Living local means choosing an area that you personally could imagine living in. That might mean having easy access to local transport, having bike paths, great local schools, lots of green spaces like parks to visit, and nearby cafes and shops.
Urban rebirth will see real estate being valued on what is within that five-kilometre zone. As an investor, this means thinking more carefully about the neighbourhood you are investing in and what’s local to the area.
FUNCTIONALITY IS KEY, BUT IT IS DIFFERENT FOR EVERYONE
By now we know there is an increase in people searching for properties with functionality – mostly if it will be a practical work from home space.
However real estate will not necessarily be built to fit one mould because everyone still has different needs. Twenty-four per cent of Australian’s are single, so the idea that they’re going to pack up from the city to live remotely in a rural area isn’t viable.
One thing that will start to unfold though is the idea of upsizing. A ‘spare’ room is becoming more valuable as people begin to set up home offices or spend more time visiting family for holidays instead of booking trips overseas. Extra space is now considered a need rather than a want.
For property investors, functionality in the home itself – and how usable its features are – has become more important as people’s behaviours have changed.
THE THIRD PLACE
As a property coach I’m a huge believer in the idea of the Third Place.
The Third Place is tied to movement and walkability. It is simply an area that you can go to which is close to your property.
Let me explain further.
Most property investors buy for the First Place and Second Place. The First Place is the physical home, apartment or townhouse. It’s the property itself.
The Second Place is the backyard, the balcony or the courtyard – the ideal add-on that creates further value. These days every property comes with the First and Second Place – so it’s hard to go wrong there as an investor.
However, now that we are home more, we crave the ability to move around. Therefore, the best investment is within walking distance of features that stimulate this desire.
It might be a property across from a park, or with a walking track, or a block away from the beach. Whatever is it, right now walkable neighbourhoods are increasingly becoming a better investment than any other real estate.
At the end of the day, as more people work from home, the Third Place is going to be vitally important to growth and rental returns. People will pay you more rent if your property offers a good Third Place. And of course, the more rent you collect, the more cashflow you have coming your way.
THE CBD’S WILL BE DOMINATED BY RESIDENTIAL LIVING
Finally, we know through the phygital world we are going to have fewer offices operating in the CBD. The urban rebirth of real estate is famously occurring already, with offices in the CBD now being turned into residential spaces.
In turn what that will do is transform CBDs from 12-hour economies into 24-hour economies.
Think of big cities around the world like London, New York and Tokyo. These cities are 24-hour economies as people want to be living in them day and night – not just experiencing them during office hours every day.
Of course, this means the value of real estate in the future around cities is going to become even more expensive. However, with this shift will come a bigger economy in cities with changes in arts, culture, entertainment, food and retail.
TAKING ADVANTAGE OF THE URBAN REBIRTH
Urban rebirth is reframing the real estate industry quickly and property investors need to make sure they’re keeping up.
Because of this new phygital world, occupants are now working and living in one place, so they’re going to have to love spending time there to commit as long-term tenants.
You should expect to start spending a little bit more to get properties in better suburbs – even within CBD’s – that are surrounded by amenities and are enjoyable and practical.
Urban rebirth is a growing theme in the real estate industry so ensuring you keep up with changes is essential for your success as a property investor. A property coach or professional is the best way to get a good head start.
These concepts (and more) are covered in our free property investing seminar.
Learn how to move with the phygital age and make choices that align with the new rules of real estate.
By Sam Saggers