2012 will be another interesting year for the real estate industry. Our research has shown that the level of institutional investments had been robust throughout 2011, led by REITs and real estate private equity funds.
Recoveries in many sectors of the economy had also contributed to the recovery of commercial real estate markets in many cities and regions.
Some real estate asset classes have performed better than other sectors in North America due to transformation of industries as well as new demands created by new industries or technologies.
The following are the 10 types of real estates we believe will be of good demand from institutional investors in 2012.
- Medical facilities: there will be a worldwide demand for medical facilities – this includes hospitals, medical centers, diagnostic centers as well as more niche opportunities like blood banks or special needs facilities. In 2011, several funds were launched as medical facilities or healthcare investment funds with sole purpose in investing in healthcare related real estates.
- Telecommunications facilities: The telecommunications industry is undergoing rapid changes due to introduction of 4G and other new technologies. These new technologies and services will require upgrades of telecommunications facilities such as new Internet Data Centers, network operating centers, the increasing use of satellite communications will also see increasing demand for satellite farms or communications centers.
- Universities related facilities: The growth is due to the significant growth of international students, as well as initiatives to retain employees and professionals. A number of universities and colleges are upgrading their campuses to accommodate the new students; new accommodation facilities are also being planned for many universities across North America; some of them are funded by the banks or by the REITs.
- Entertainment Facilities – interestingly, spending in entertainment and sports have been quite robust in 2011; and this has created niche opportunities for entertainment related complexes and facilities. We may start to see some new developments for casinos and large entertainment centers in tourism hubs like Las Vegas in 2012.
- Industrial warehouses, particularly those along the West Coast because of the significant increasing trading activities between Asia & the United States.
Exports volume has been on strong rise, recording 16% growth on month-to-month basis, this is likely to climb further in 2012. As the result, there had been a good recovery in industrial real estate in the West Coast both for storage and distribution facilities.
- Asian Shopping Malls: Asian mails are being developed across the main cities in North America because of the rapid increase of Asian populations in major cities.
In 2011, niche Asian malls were developed in Vancouver, Toronto, San Francisco, Boston, Atlanta and Texas.
More Asian malls are likely to be developed in 2012 as the number of Asian immigrants continue to increase in North America.
- Properties in cross-border cities. Recent study has shown that cross-border cities (Canadian & Mexican borders) have shown good growth in employment and property price.
Institutional and private investors had been developing new shopping centers and accommodations in these cities to capitalize on the growth of tourists from Canada and Mexico. New hotels and niche malls had been developed in 2011, and more such activities are likely to occur in 2012.
- R&D facilities; the current US economy is pushing the R&D activities in multiple sectors – particularly the Cleantech and Biomedical facilities.
These facilities often require large-scale purpose built facilities for their R&D activities. Many of them had acquired the ex-semiconductors or automotives facilities and convert them into new buildings.
- New regional shopping centers; suburban shopping centers with big box stores continue to rise in 2011, and is likely to continue in 2012.
More opportunities are likely to be in the southern states where we are seeing continuing population growth – mainly led by the baby boomers retiring in the southern states.
- Canadian retail shopping centers: Canadian cities are still showing continuing growth of suburban retail shopping centre developments due to increase of newly arrived immigrants.
Opportunities are still available in areas that are 20 to 25 km away from the downtowns, or in new economy hubs like Calgary, Edmonton, Ottawa or Regina.
Large supermarkets and stores including both American & Canadian retailer have been moving into these areas; announcements by major US retailers moving into Canada can provide further opportunities for real estate investors to find anchor tenants.
In short, we believe 2012 will be a better year for real estate investors, with interest rate remains low, and signs of recovery of housing markets in the United States as well as the gradual recovery of unemployment rate, real estate will become a popular investment choice for many investors in 2012.
It is likely to be another active year for real estate investment trusts (REITs), which had been showing good recovery since mid-2010.
For investors interested in commercial real estate opportunities, another good strategy will be to invest through REITs or through Exchange Traded Funds or Mutual Funds that invest in the REITs, as these companies often hold multiple investment assets including commercial, industrial and special purpose real estate assets.