Location, location, location — you know the old real estate mantra. But, like every industry, the pandemic has turned real estate upside down. And with it, the very meaning and relevance of “location.”
Demand for residential real estate is currently higher than ever, while demand for commercial real estate plummets. We’ve collectively awakened to the joys of working from home, and no one is eager to commute into a city center and stuff ourselves into a crowded elevator for the foreseeable future. It makes sense, then, that home improvements, expansions, and upgrades are on the rise — we’re stuck here, seemingly indefinitely.
Or are we?
I wouldn’t be the first to predict that a portion of commercial real estate will likely convert into apartments, parking garages into houses, and roads into green spaces. But while everyone’s talking about commercial real estate, what we should be focusing on is one particular constant, the quintessential real estate buzzword: LOCATION.
Until a few months ago, most people lived in or near cities out of necessity. Then the switch flipped. Now, with geography largely irrelevant — not only until there’s a vaccine, but for many companies and industries, ongoing — location becomes less about practicality and more about desire.
To many, this might feel like a revival of the 1950s, when the classic American Dream taught us that homeownership is better than renting. But if the financial crash of 2008 taught us anything, it’s that this is not always the case. With everyone going all-in on residential real estate amid the “safer at home” pandemic mandate, it’s a good time to more closely examine the not-so-distant future possibilities of how and where we live.
LIKE MANY INDUSTRIES, THE CURRENT RESIDENTIAL REAL ESTATE MODEL IS LARGELY ANTIQUATED AND OVERDUE FOR DISRUPTION. HERE ARE A FEW PREDICTIONS I FORESEE DOMINATING IN THE YEARS TO COME:
1. Fractional Ownership: Due to a number of reasons, including high student loan debt, Millennials have not historically purchased homes at the rate of their parents and grandparents. In addition to financial hurdles, there’s also a mental one: Millennials love the sharing economy. “Own less, experience more” is a frequent adage applied to the Millennial mindset. When it comes to real estate, that sharing mindset was largely limited to Airbnb — until now.
I believe the pandemic-induced real estate shake-up will usher in significantly expanded options for fractionalized real estate ownership. Co-living spaces amongst like-minded young people, like “hacker houses,” have increased in popularity internationally, with companies like Common, Ollie, and WeLive (an offshoot of WeWork) experiencing more demand than they can accommodate. These spaces are fully furnished, offer flexible commitments, and provide a much-needed sense of connection and community. In other words, they’re the stuff Millennial real estate dreams are made of.
But I believe there can be even more value, in the form of partial ownership. What if, instead of renting from one of these companies, you owned 1/12th of five different properties? All furnished, all flexible in duration. You may be thinking, “Uh…yes, this isn’t new, it’s called a timeshare!” And to a certain extent, you’d be right. But we all know the vast majority of timeshares are either shady pyramid schemes or situated in places that don’t appeal to younger generations.
Plus, home prices have outpaced wage increases for years. This updated approach to fractional ownership would tick multiple boxes: allowing for a desired change of scenery (even if required to go back into an office eventually, Millennials change jobs and move around more frequently), better living with fewer costs, and accessible “homeownership” — albeit differently defined — for exponentially more people, giving them a viable option for investing and growing wealth.
2. Mobile Pods: People want to live and work from the places that make them happiest, but until now, that desire was largely determined by the practical realities of their employment situation, likely tethering them to one particular city. Now, with the work-from-home mandate and long-term flex time, increased mobility is more desirable than ever.
The tiny home craze has become a full-fledged phenomenon, but as fascinated as we are by them, most of us don’t want to permanently live in a space so small that our kitchen table is also the bed. Similarly, the old “prefab” model or traditional mobile homes do little to excite the imagination. The new generation of modern, sleek, architecturally designed pods, however, are a far more attractive option.
And they’re not just for Millennials: As Boomers age, many would love to live near family, but space (or personalities) might not permit moving into a shared space. Starting around $60k, pod homes can be set up in the backyard of a main home — or, if they want to downgrade from a large family home and still live independently, pods fit that need. Or, if you’re still of working age and want the freedom of living off-grid while you work remotely, the pod mobility and optional solar power technology allows you to affordably set up a life — for either a brief or extended stint — wherever you want to live and explore.
Coodo is just one of the growing pod options that is easily transportable and can be situated on land or water. It’s modular, allowing you to expand in space as needed — or, perhaps you decide you only want to take part of your home to a new location, leaving the other part behind. Taking it one step further: What if some of that now-undesirable commercial real estate land were converted into a pod community? You own your mobile pod and move it around to the various pod communities, leasing the land for a finite period? Part ownership, part rental, with a baked-in community.
Mobile pods are far more affordable than the average home, more attractive and comfortable than traditional mobile homes or tiny homes, and with their all-inclusive design, offer a type of flexible living that many feel they must trade-in when they settle into “adulthood.”
3. Home Sharing: We know that the sharing economy isn’t going anywhere, but we haven’t fully embraced it when it comes to our primary residences. Sites like HomeExchange.com allow for periodic exchanges, but what if living on-the-move became your new norm?
For an all-inclusive $2,500 per month, Inspirato allows you to rent one of their tens of thousands of $4 million+ luxury homes in prime destinations around the world. Or, what if the aforementioned pod mobile parks operated as a swapping community, allowing even greater ease for rapid changes and more mobility? Car ownership has already largely gone the way of the subscription model, with fast-growing companies like Fair eliminating the need to ever own a car, so why not do the same with your home?
Location still matters, but not in the way it did four months ago. Cities will still be there, but we may no longer need to be living and working in or near them. And while location felt previously “fixed” when it came to buying a home, fractional ownership, mobile pods, and home sharing will allow us to rethink what “investing in real estate” really means. Asking questions like, Who can afford real estate? What does desirable real estate look like? and Where do I want to live? yield very different answers when viewed through this new constant-busting lens.
Shoot me a message and tell me how you’re rethinking where you live and work.