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Investors Foresee Best ROI in Medical Facilities, Opportunity Zones

February 5, 2021

What will the real estate investment market look like this year? A new survey by Millionacres, a Motley Fool news service, surveyed 250 of its readers and real estate investing experts to learn their 2021 predictions.

Investors are particularly bullish on medical buildings, with 39% of survey respondents saying such facilities will become the hottest type of commercial real estate property this year. Industrial follows at 32% as well as self-storage properties at 18%. But due to the pandemic, investors continue to express concerns about the office and retail sectors. “The pandemic is de-emphasizing the unnecessary conventional office model, and there will be an increasing number of people realizing they don’t have to live in crowded cities to be gainfully employed and can have a better quality of life elsewhere,” says one survey respondent.

Still, investors believe that retail properties will slowly bounce back as the pandemic comes under control. As of Nov. 30, 2020, an estimated 8,379 stores closed this year, according to Coresight Research. Analyst Maurie Backman told Millionacres that mall operators are struggling as they lose tenants and anchor department stores. She offers an idea to spark more foot traffic from shoppers: walk-in health care clinics and diagnostic centers. “It may be a little unconventional to sandwich a doctor’s office between a clothing store and an accessory shop,” Backman said. “But if it brings in the revenue malls need, so be it.”

Opportunity zones could be another area ripe for growth with investors in 2021, according to the survey. While only 16% of survey respondents say they’ll definitely invest in an opportunity zone in 2021, 40% say they’ll consider it. Analyst Tyler Crowe told Millionacres that holding periods of at least 10 years, which would enable investors to ride out market volatility, could make opportunity zones more appealing. He added that all investments are seeing a lower rate of return during the pandemic, so the standard rate of return for opportunity zones may be more appealing to investors. “There are still monumental tax benefits for real estate investors in qualified opportunity zones, but investors should still look for quality deals with proven developers rather than chase a risky bet simply for the tax advantages,” Crowe says.

Other findings from Millionacres’ 2021 investment survey:

· Venture capital opportunities—particularly around real estate technology—could be big.

· 40% of investors believe housing prices will remain high.

· Urban rents likely won’t return to pre-pandemic levels this year, 73% of survey respondents say.