The best places for real estate investing in 2021
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CrowdStreet’s Top 20 Markets
In this new cycle, different metros will recover at different rates, and we heavily weighted regional factors like population growth and the employment base when determining the best places to invest in 2021. Our most favored markets also exhibited a subjective desirability or competitive advantage. Whether we label this as a metro’s “vibe” or “quality of life,” CrowdStreet’s best places for real estate investing possess a curated blend of multiple tangible and intangible attributes that coalesce to create attractive communities.
Not all strategies will play out equally across the various markets. We’ve also ranked our best places to invest by asset class, with the understanding that certain properties are more valuable to certain markets, creating unique opportunities for investors.
Sign up for a free account now to see our best real estate markets for 2021 across all asset classes, including niche offerings like manufactured housing and life sciences.
As the pandemic unfolded, we witnessed a noticeable shift in renter behavior as people migrated from highly populated urban centers to the suburbs in search of larger units and less densely populated multifamily communities.
When it comes to purchasing existing multifamily assets already in existence (known as acquisition), our top cities have favorable business climates, educated workforces, affordability, and population growth. With a focus on above-average population and job growth rates and strong net absorption of apartment units, CrowdStreet sees immense opportunity in our 25 best places for multifamily acquisition.
We see a slowdown in the delivery of new, ground-up multifamily assets beginning later this year and extending into 2022. This creates a window of opportunity in 2021 for multifamily development.
When ranking the best places for multifamily development, CrowdStreet prioritized cities that have demonstrated above-average rates for both population and job growth with the expectation those trends will continue. In addition, we looked for locations that presented at least moderate barriers to entry and which current demand supports both densification and the arrival of new housing supply (typically measured through rapid rates of absorption).
The continued demand for industrial space of all types has been substantially driven by the increase in e-commerce sales, which requires more space than traditional brick-and-mortar retail. CrowdStreet views the land limitation factor as a driver for rent growth, low vacancies, and increased tenant’s renewal rates.
Our list for industrial includes markets located in proximity to large populations with excellent access to highways, railway, and seaports. The best places for industrial real estate also possess favorable ingress and egress, as well as exhibit strong underlying demographic drivers. CrowdStreet also valued smaller infill locations, located closer to the end-user for last-mile distribution.
The office sector entered 2021 with a high level of uncertainty regarding its outlook. At the national level, office utilization rates were exceedingly low at the end of 2020 (on average below 20%) as most office employees worked from home. There are, however, distinct regional effects in play, and businesses such as Facebook and Microsoft have still been leasing space despite offering their employees a flexible work environment.
When ranking the best places for office real estate, CrowdStreet looked for strong population and employment growth trends and an above-national-average net absorption. Markets that CrowdStreet has targeted typically offer employees attractive nearby amenities, lively entertainment, and/or accessibility to nature.
The hotel sector was undeniably the hardest hit in 2020 and the first to feel the effects of the COVID-19 pandemic. However, its dynamic nature also means hospitality is likely to be the distressed asset class with the strongest bounce coming out of the pandemic.
When ranking the best places for hospitality real estate, CrowdStreet looked for demand drivers within the leisure space, both for domestic and international travel, such as cultural amenities, entertainment venues, tourist attractions, and one-of-a-kind destinations.
When it came to business travel, we focused on-demand drivers for essential business travel, such as government, that can’t be replicated in an online environment. We also looked at potential future supply imbalances that could materialize on the other side of the pandemic. Lastly, we considered regulation, specifically in regards to Airbnb, looking at markets with stricter policies in place.
As the second hardest-hit asset type after hotels, the retail sector entered 2021 in a weakened state. However, as we begin to exercise our regained mobility later this year, there is room for optimism in a continued bounce back in the sector.
When ranking the best places for retail real estate for 2021, CrowdStreet placed value on a number of considerations. The first is muted supply. As an asset class experiencing an extended period of strain, most markets are almost entirely shut off to new supply. That means centers that are still relevant to the submarket, particularly grocery-anchored centers, have little to no worries of new supply to contend with. Second, we considered current prices relative to historical prices. As the sector looks to exit its trough and begin its gradual recovery in 2021, we will prioritize any potential deal that is trading at a discount relative to its 2019 valuation. We also looked to macroeconomic factors such as above-average population growth rates and below-average U.S. unemployment rates. Alternatively, we believe we may find value in markets that have been hard hit during 2020 but have an outlook of rapid improvement.
We’ve ranked the best places for more niche asset classes as well. Register to see our favorite cities for:
Life sciences has been a particular bright spot within the office sector. This subset has not only weathered the pandemic, it has thrived. Life sciences real estate focuses on types of work that cannot be done remotely. The pandemic has served to highlight the essential nature of the work performed by these tenants who often exist in the biochemical or medical fields.
The rise of Build-to-Rent (BTR) communities is fueled by the current tenant migratory trend that has been opting out of smaller, denser urban housing in favor of larger, less dense housing options. As an emerging housing product type, BTR can provide more space at a lower price per square foot as it is purpose-built for this specific type of demand.
Manufactured housing is a niche asset class with a long track record of strong performance. While once a mom-and-pop asset class, manufactured housing has graduated to the ranks of institutional ownership and has even entered the public REIT arena. The robust fundamentals in this led Green Street Advisors to rate it as its favorite asset class for both 2021, as well as in its Outlook through 2024.
As we journey into 2021, we view this as a year to hunt value wherever possible and bring it to the Marketplace. We also see continued opportunities in developing assets that stand to deliver excellent yield upon stabilization. Finally, wherever we can identify current yield, we will seize upon it. Markets will undoubtedly change and we will monitor and adjust accordingly. Many of our best real estate markets exhibit strong trends we view as translating to sustainable growth over the next decade. However, we understand that supply can overshoot demand in the short term.
The CrowdStreet Investments team leveraged the following sources of information to determine our 2021 top markets rankings: Green Street Advisors, CoStar, ULI Emerging Trends in Real Estate, CrowdStreet Marketplace portfolio analysis, CrowdStreet Investments team experience, and interviews with real estate industry professionals (operators, capital markets professionals, brokers, etc).
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