Real Estate Investment Megatrend: Urbanization

Real Estate Mega Trends: Urbanization

One of my personal theories that helps me think about real estate investing is the idea of "urbanization". Urbanization refers to the movement of people and businesses away from rural areas to dense urban cores. This trend has been in tact for the past several decades and I don't think it's likely to stop and I don't think enough people take the time to consider it's potential impact on the long-term real estate investor.

Studying real estate over the past several years led me to stumble on the idea of "city planning" which I didn't really know was a thing.  "Urbanization is not merely a modern phenomenon, but a rapid and historic transformation of human social roots on a global scale, whereby predominantly rural culture is being rapidly replaced by predominantly urban culture."  Further, At the turn of the 20th century, just 15% of the world population lived in cities.  According to the UN, the year 2007 witnessed the turning point when more than 50% of the world population were living in cities, for the first time in human history.  Wikipedia: Urbanization

All cities have a planning comity and their job is to= plan their city's growth in a logical, thought-out way.  My research showed that the new trend in city planning is urbanization, or planning around dense city cores.  For years, the trend has been suburbanization, or the movement out of the city and into the suburbs.  Too much suburbanization, however, without a solid city core, can lead to major planning problems including huge flows of traffic into and out of the city at the same time.  "Living in a city can be culturally and economically beneficial since it can provide greater opportunities for access to the labor market, better education, housing and safety conditions, and reduce the time and expense of commuting and transportation." Wikipedia: Urbanization

Further, as residents (particularly those of the younger generations) of more rural areas with small populations and few amenities continue to log onto social media, they are more-and-more likely to experience the "fear of missing out" on all the attractions that "city life" has to offer.  Imagine the 15 year old boy or girl living on their parent's farm watching all their friends and acquaintances enjoy the attractions of city life!

Urbanization is key for real estate investing because property in cities with growing population is almost guaranteed to increase in value over the long-haul as land becomes more and more scares as populations continue to rise.

I suggest that all real estate investors buying real estate in densifying city cores continue to hold in their minds that the trend of urban densification is unlikely to stop and that holding real estate in these densifying city cores is a solid, solid investment.

There is an interesting demographic that I have shared below for more information: