A few years ago, a thought came to me about the future of homeownership and hospitality while I was road tripping down Highway 1 to stay at a short-term home. I was trying to get away from the buzz of my city to focus on work for a few weeks.
I’ve always been a bit of a nomad, seeking opportunities that provide the flexibility to work anywhere and enable my discovery of new places and experiences. As I drove the California coast, I pondered a lifestyle shift that would unfold in the years ahead.
Evolving lifestyle trends, a shift in the way people work and new investment methods accelerated by Covid-19 will dictate real estate for years to come. When there is a radical shift in human behavior like we’re experiencing today, it presents different consumer needs and pain points that result in new business models and market opportunities. But the real estate industry often fails to evolve at the same rapid pace as consumer behavior.
The next generation of homeownership is an entirely different beast due, in large part, to consumers now being in the driver’s seat. It’s paramount that the real estate industry anticipates evolving consumer behavior and reevaluates to support this new wave of homeownership and its convergence with hospitality.
A Home Versus A House: The Fall Of The Primary Residence
The next wave of homeowners regards buying differently than their predecessors: A property is an asset, not necessarily a forever home. They’re placing a higher value on optionality, flexibility and liquidity more than ever before. The next decade must cater to new ownership models, and the traditional approach to investing in a primary residence will change forever.
Historically, buying a house has been a lifelong commitment and a massive logistical undertaking with high stakes and a fragmented process from end to end. When you buy a home, you’re committing to a lifestyle, a neighborhood, a demographic — and rigid financial terms. Real estate also remains an attractive avenue for investing, and today’s buyers don’t want to skip out on the opportunity to profit along the way or try out a different lifestyle.
While it’s not unique to any one generation, homeowners across the board are starting to value mobility over traditional ownership factors. This translates into new ways to leverage an asset (including increased interest in alternative forms of renting and innovative models like iBuyers) that will change homeownership as we know it, transforming it into a means to an end. A home will be seen as a purchase, not a residence, and emerging work and lifestyle trends are in line with this shift. In fact, they expedite it.
WFH Gets A Makeover; Destinations Lead The Way
Amid shelter-in-place orders, people have been cooped up in living spaces that weren’t originally found with long-term work from home (WFH) in mind. They’re ready for a change. Zillow reports that 66% of Americans currently working from home would at least consider a move if they were to be working from home long-term.
As seen in the mass exodus from urban markets, consumers want to escape areas where proximity hinders the ability to physically distance, and WFH has evolved into work from anywhere (WFA). A primary residence no longer fits the bill for dynamic digital nomads.
With the ability to work remotely and the desire to get away from major metros, people want destinations that are remote and high value to support secondary living with direct ROI and benefits. I expect that these nontraditional, secondary destination markets will explode at a faster pace than cities and suburbs through supply and demand, and compression by high investor interests.
Investors and real estate agents will need to think differently about the physical rental properties and their amenities. Consumers will prioritize spaces that offer consistent perks such as home offices, outdoor spaces, workout rooms and strong Wi-Fi — similar to how progressive companies once migrated in droves toward fully equipped coworking spaces.
A New Class Of Assets
This on-the-go lifestyle and the real estate model that suits it presents a new opportunity. As this category matures, a new real estate asset class is forming alongside it. Investment upside can be expected to increase at the same pace of market innovation, with solutions that align with consumer needs appearing as the sector matures. Housing inventory is still at an all-time low, thus maintaining strong appreciation forecasts and long-term value. This will continue to price people out of the market, and alternative options need to be made available.
This is something I considered when establishing my company, D. Alexander, an owner-operated hospitality brand focused on destination-oriented markets. I wanted to create spaces equipped for living and working, rather than traditional vacations or second homes. In practice, this model serves a different lifestyle purpose than the timeshare. While timeshares pick at this need for flexibility and hunger to explore, they don’t serve as real, long-term assets with functional benefits. In parallel, individual second homes fall short on providing the flexibility needed for full utilization and require a lot of work to reach maximum benefit. This model allows investors to diversify their real estate portfolios across unique markets, easing the risk associated with a single home.
Although this model is not yet an asset class, it can be viewed as the catalyst for change within its category. As homeownership transitions to asset ownership amid WFA and emerging buying trends, real estate professionals need to rethink how they support this next wave of buyers who want to invest in real estate as an asset instead of a primary residence.
This shift is already happening, and those in the real estate industry who cater to this change have an opportunity to play a pivotal role in the future convergence of home, hospitality and ownership. One-off home purchases will become a thing of the past — the future of homeownership is about supporting this newfound freedom and the digital, nomadic lifestyle that accompanies it.
"Next-Generation Real Estate: The Convergence Of Homeownership And Hospitality" originally appeared on Forbes and can be viewed here.