Why invest in the American real estate market?

Favorable macroeconomic scenario for the sector

The purchase of a house or investment in real estate development may be related to the current macroeconomic scenario. In particular, three indicators can be important in this decision:

(i) Levels of employment and income.

The current American unemployment rate (3.5%) is at its the lowest level in the last 50 years, which helped to generate increases in workers’ income. The graph below shows this growth in the USA.²

New trends, new possibilities, and more profit?

Like the economy, the real estate market is dynamic and adapts to the transformations of urban spaces. New trends may generate possibilities for good returns on real estate investments. Some examples: the exponential growth of e-commerce has generated an increasing demand for storage spaces for goods that still manage to provide an adequate logistics solution – see that the vacancy rate of industrial warehouses has never been lower in the USA.4 The price per square meter of these spaces would increase by 30% in the last 5 years. Population aging may generate greater demand for hospitals, clinics, nursing homes, among others. The evolution of technology and cloud storage may increase the demand for data center spaces. These are just a few examples of how the real estate sector may continue to grow, even in a mature economy, such as the American. Nevertheless, many of the companies available for investment have global operations and the trends mentioned have growth potential in many other countries, in addition to the USA.

Safety in an uncertain environment?

The year 2020 tends to be intense for the investment market, with themes capable of bringing volatility and increasing the level of global uncertainty. Some events that can shake the market are the presidential elections in the USA and the Trade War issue – which has not yet been completely resolved – in addition to the fears about the price levels of some assets in the USA after the 2019 highs. Not to mention issues geopolitical, among others.

Bearish view on the topic – And what can go wrong?

• Change in the current interest rate scenario in the USA. If interest rates rise again, the sector may be negatively impacted.
• Increased inflationary pressures tend to raise property prices, which could undermine the population’s purchasing capacity.
• With changes in the economy, some sectors may not perform as expected. The change in the consumption pattern of people has led to a reduction in traffic from shopping centers in the USA, negatively affecting companies operating in this segment.
• As in any sector that goes through cycles, high optimism can generate excess investments that lead to an oversupply of real estate, negatively pressuring property prices.

Assets

There is a large universe of US real estate investment alternatives that are traded on Avenue. Below are some examples.
^{Please keep in mind that these are not recommendations.}

American Tower Corporation (AMT)

 

Equinix (EQIX)

Prologis Inc (PLD)

Public Storage (PSA)

Simon Property Group Inc (SPG)