4 Reasons Real Estate is the Best Investment in a Post-COVID World

Just when it seems like things are getting back to normal, another wave of world-shaking news hits, from new COVID variants to mass power outages and wildfires. It can start feeling next to impossible to predict what the next few years will look like and how to plan for your financial future.

You’re probably wondering if there’s any stable investment you can rely on. The answer may be right under your nose—or actually, the ground beneath your feet.

Real estate continues to provide a steady, lucrative investment opportunity for investors seeking to diversify their portfolios. In fact, banking giant Wells Fargo noted that investment in apartments has outperformed many other property types over the long run because “we all need a place to live.”

Is real estate a fit for your portfolio? We’ve put together a few reasons why real estate investments can endure these mercurial times, offering the best investment horizon for a post-COVID world.

Real estate offers steady returns.

In 2020, we saw the economy take a major nosedive as COVID reached the US. The Dow Jones Industrial Average experienced the largest single-day fall in its history on March 16, 2020, dropping nearly 3,000 points.

After months spent licking those wounds, the Dow dropped about 725 points (2.1%) on July 19, 2021, as the Delta variant began to sweep the nation. The S&P 500 ended that day down 1.6%.

However, real estate rents have remained relatively steady. When people are in a financial bind and trying to manage their money, paying rent largely remains a priority while other discretionary spending may be cut.

Real estate will always have value.

With other investments, you can lose money quickly. And when it’s gone, it’s gone. Would-be investors in cryptocurrency, for example, lost more than $80 million to scams between October 2020 and April 2021.

Sadly, the pandemic also caused many small businesses to shutter their doors, swiftly stealing years of hard work and invested capital from those owners.

When you invest in real estate, even if the market drops, you still have a tangible asset to hold until the market’s outlook improves. If you have a roof and four walls, you reserve the power to sell it, hold it, or rent it to recoup your investment.

Different sectors of real estate can boom even in troubling times.

Some experts suggest that the pandemic accelerated the shift to e-commerce by more than five years. And according to Upwork’s “Future of Workforce Pulse Report,” 36.2 million Americans will be working remotely by 2025, an 87 percent jump from pre-pandemic workplace trends.

But what do these statistics have to do with real estate investing?

As consumers increased their online purchasing, industrial real estate (e.g., warehouses) has benefited from higher demand. The market for industrial leasing grew by more than 20 percent during 2020, as e-commerce vendors pivoted to keep up with the massive shifts.

The same advancement concept applies to the remote workplace, resulting in a mass exodus from certain cities once jobs became location-agnostic. As workers continue to seek a better cost of living or a more temperate climate, they need places to store their possessions.

Thanks to a hot single-family market, many of these professionals can’t buy right away or may not know where they will land long-term. Even those staying in place may find themselves utilizing self-storage to create some elbow room for their home office setups.

Self-storage units provide a convenient solution for all of the above scenarios. As a real estate investment, self-storage facilities can be stable during good and bad economic times, are not dependent on intensive staffing, and benefit from strong population growth and increased urbanization.

Real estate provides a hedge against inflation.

Inflation, which hit a 13-year high in 2021, is still on the rise. But since real estate is backed by a tangible cash-flowing asset, these investments can protect your portfolio (and savings account) against inflation and an increasingly volatile market. Here are a few reasons why that is:

Rents typically increase in reaction to rising inflation and a decreasing dollar value, bolstering cash flows and, thus, investor returns.

Multifamily housing is contracted under short-term leases, meaning rental rates can be amended often to keep pace with inflation.

Longer-lease commercial assets (e.g., industrial, retail, and healthcare) can include contractual rent increases that plan for inflation.

People may be less likely to invest in new construction because of the rising costs of supplies. This combination of market forces can make renting particularly appealing to people who aren’t able to buy or who can’t afford to build.