Investing in an uncertain real estate market

Real estate has always been considered a very attractive investment opportunity. Due to its advantages over other investments such as generation of wealth and building of equity, reliability as a long-term investment, as a hedge against inflation and being a form of passive income, investors always turn to real estate for investment. However, these benefits if overlooked can mislead an investor as they are influenced by the market within which the property is located.

Uncertainty in the real estate markets is brought about by various factors evolving around aspects of the local economy, globalization and threats such as financial crises, war, global recession and trade imbalances. Micro and macro-economic factors also affect investments, properties included. 

It is always important to factor in such factors which we have simplified and explained below.

Digitization

The pandemic came in as an acceleration to growth of the tech sector. As witnessed over the past few years, the growth of the tech sector has resulted in the disruption of various real estate sectors, in particular logistics, retail and office. E-commerce has become the talk of the day with an increased demand in logistics accelerated by the lockdowns and restrictions.

As such, this has resulted in a new demand for storage space and parcel hubs together with sorting zones. Urban centers have become the major centers for distribution due to the ease of distribution to the surrounding market. This has led to new facilities being built with these requirements in mind, potentially incorporating automation or robotics.  

Digitization has also increased the effective use of digital platforms for online payments. This has prompted all the users of real estate to be able to search, secure and pay for the real estate service online. Besides having to pay online, marketing had to also be majored online, divorcing from the traditional physical marketing. Such times called for innovativeness. Leengate, would host virtual show-days online in-order to showcase the various projects reaching both the local and foreign market on Facebook.  

Digitization has proved to be the new, in thing. Investors ought to look into how they can effectively explore the available digital platforms in-order to keep their investment afloat. Landlords ought to know how to reach the tenant market outside of the traditional way of doing things. This calls for reasonable digital marketing efforts and effective use of digital platforms. 

However, there are major loopholes one should look out for. Transactions done online should be done after due diligence.

Commitment to making payments and securing investments has to be done if and only if the investor has done due diligence. Leengate hosts a lot of customers who are abroad. After they express their interest in purchasing from any of our projects, it is in the best interest of the investor that they receive a copy of the title deed from the sales department together with copies of certificates of compliance, draft agreement of sale and a stamped layout plan in-order for them to do due diligence. 

Shifting lifestyles

There has been a preference to work and live where there is flexibility, a new trend which is slowly divorcing from the traditional live closer to town trend. Gated communities which are self-contained are becoming more popular for example the Arlington Estate along Airport Road and Twenty-dales. It is a self-contained residential suburb hosting a variety of utilities including shopping-centers, local authority offices, a police station to mention but a few.  

The vibrant nodes of the city are slowly shifting away from the CBD to smaller shopping centers. In Harare, there has been a lot of small shopping malls which are becoming more preferable areas because of availability of parking and inclusivity of various shopping experiences. This goes the same with office spaces. Most offices are now in office parks. The majority of the offices found around the CBD are a result of renovations of dilapidated former residential units. The catch is now in these zones than the CBD. An investor would look to invest in such nodes.  

Global trends

New digital working practices have changed the purpose of offices. Virtual working technology will continue to improve, blurring the line between home and office work. This is reflected in most firms’ preference for a hybrid working model of 2-3 days per week in the office. Some local companies have adopted this model. The purpose of offices will shift towards socializing, collaboration and training. These functions are best served by high-quality buildings in central locations, and so the gap between prime and secondary assets will continue to widen.

Contributed by Leengate