It’s a different world than it was 3 months ago.
Our world is constantly changing.
Thousands of years ago, the Greek philosopher Heraclitus summed it up best when he wrote, “Change is the only constant in life.”
Hundreds of years ago founding father of our country Benjamin Franklin echoed the sentiment, observing, “Change is the only constant in life [and] one’s ability to adapt to those changes will determine your success.”
In the present day, founder and chairman of the X Prize Foundation and noted entrepreneur, philanthropist, and engineer Pete Diamandis added his two cents, stating, “The only constant is change, and the rate of change is increasing.”
That, of course, brings us back to my initial observation, that we are living in a vastly different world than we were just three months ago, and the rate of change is increasing.
Consider our population centers and movements. For the last 10 years, people have been moving inward, drawing closer together in big cities and increasingly densely populated areas. Now, however, that trend is reversing, and it is doing so much more quickly than the original trend emerged. Highly populated areas are becoming less popular (and populated) by the day, while areas right outside of highly populated areas and, increasingly, event farther out, are becoming more popular. I predict that although this “depopulating” trend is emerging more quickly, it, too, will last at least a decade.
Our Residential Preferences are Reversing Course
As more people move outward, away from cities and concentrated urban areas, we expect to single-family residential living to continue to increase in popularity. Although multifamily assets have been enjoying “a moment” lately, I believe people will be increasingly likely to sacrifice other elements of their lives in order to have their own home in which to live in the event of another lockdown. Furthermore, single-family residences are already showing higher rental payment rates than multifamily residences, and the single-family asset class has posted rising application rates as well. Multifamily, on the other hand, is showing lower payment rates and also lower applications.
While this shift is probably not surprising to most people, since “sheltering at home” or “voluntary isolation” is much easier when you live in your own home, it is a polar shift from what we have been seeing and also what housing analysts have been telling single-family investors for years now. In the future, we will see increased value placed on living in a single-family residence and less value placed on the previously highly touted “community amenities” that come with multifamily living.
Warning: Memories Do Last Forever
As real estate investors and entrepreneurs, it will be important for us to watch this depopulating trend and adapt our business practices, products, and services to accommodate the changes it brings. However, it will also be important for us to remember that our clients and customers will have long memories when it comes to the past three months – and those with the wherewithal to do so will react to how their states handled this pandemic and how their product- and service-providers did so as well.
State governments that were reasonable when it came to dealing with stay-at-home orders and about opening back up in a timely manner will likely see people migrating toward those states. After all, when you take away rights and freedoms, people remember. Similarly, your business will benefit from judicious but timely reopening processes and from staying in touch while things were shut down. This is relevant now, and it is also worth considering when you think about where your business should be located in the event there is a “second wave” in the fall or that this becomes an annual event much like the more “traditional” flu.
The 3 Hardest-Hit Sectors in Real Estate
Of all the sectors in real estate, the hardest-hit will be hospitality, retail, and office space. Hotels, resorts, and short-term rental hosts (think: Airbnb) have lost billions of dollars in revenue already. Many will be forced to close permanently, sell at a loss to get out of debt, or permanently alter and shrink their business models.
In the office space, predictions that nearly half (estimated 40 percent) of small retailers may not reopen their brick-and-mortar stores have commercial property owners shaking in their boots. Recently, Nationwide Insurance and Twitter both announced their work forces will be working from home permanently. Nationwide is closing up its physical office spaces; Twitter is offering the option to most of its employees. The latter has also canceled all in-person events for the remainder of 2020.
As a mass exodus from physical office space manifests, there could be huge loan defaults hitting the market and creating shockwaves that could topple banks and lenders. Although this is by no means a certainty, the unsettling possibility is definitely there.
Real Estate Investors and Entrepreneurs Will Adapt
The good news for real estate investors and entrepreneurs is that most of us have long accepted that change is a constant. We are among the most adaptable populations in any business sector or industry today. However, we cannot make these changes alone. The time has come to leverage the knowledge and experiences of our peers to make the best decisions for our investments and our businesses.
If you are in an industry mastermind, now is the time to take the “hot seat” and get advice and insight about your situation. Take the time to pray and seek God’s wisdom as well. Keep your eyes open for every opportunity you encounter, and make sure you have clarity when it comes to your core values and your greater purpose so that you do not miss the opportunities that come your way.
As an investor and a business owner, I’m working hard to continue building relationships – and I’m encouraging my students and mastermind members to do the same. This means keep reaching out to private lenders. Keep looking for opportunities to do the right thing. Pay attention to markets. Talk to others about the markets. Do not dismiss others’ insights just because they do not align with your own.
In addition to keeping connected in your industry, you can take some significant action as well. For example, make sure you know your numbers in your business so you can tell how things are going. Ramp up your marketing efforts so your customers and clients know what you can do for them and what you are already doing.
This is not the time to get lazy. This is the time to get after it! In all labor there is profit. Sometimes this profit comes now and many times the big profits come later! Those big profits may be tangible or intangible, but staying involved, alert, and faithful will pay off for you during and long after this time.
- Love your neighbor as yourself.
- Love your spouse and your kids and spend quality and quantity time with them.
- Exercise, eat right, read, prioritize, and believe enough in your mission that no matter what you keep going.
This is also a good time to look at shifting trends and get in front of the growth pattern. Real estate investors often call this “building in the path of progress.” For example, there is huge growth potential right now in warehouse space thanks to Amazon and other online retailers. These online retailers are generating vast revenues and wealth, and that means that logistical issues are going to be bigger and bigger concerns moving forward because companies are going to “live and die” by deliverability. Sometimes, the trends you see are going to be obvious. You will wonder why no one else is getting involved. You may be tempted to doubt what is right in front of your face.
Don’t doubt yourself. Not everyone, not even most people, will have the courage and the guts to tackle the opportunities that will soon be coming your way. It’s okay to consult trusted advisors, but do not be afraid to look for opportunities, identify and evaluate them, and then seize the ones that fit your particular requirements. How will you make this type of determination? Well, you will need a group of highly qualified, trustworthy advisors with high integrity who care about you and want to see you succeed. That is what a mastermind is for, and the rewards you reap from having this group available to you during these times of accelerated change and enhanced opportunities will be priceless. Surround yourself with these people, and you will soon see extremely positive changes for the better.
Want to learn more about the Good Success Mastermind? Click HERE, or email Tom Olson directly at Tom@GoodSuccess.com.