Differences in how real estate sectors perform have never been as “profound” as they are today, according to Michael Sonnenfeldt, founder and chairman of TIGER 21, a peer membership organization of high net worth current and former entrepreneurs, investors, and top executives.
TIGER 21 members collectively manage personal assets of over $85 billion.
Speaking on the REIT Report, Sonnenfeldt described the current situation in real estate as a “tale of two cities,” with retail “in a difficult strait” and industrial “on fire.”
Sonnenfeldt explained that real estate has been the number one asset allocation for TIGER 21 members since the group was founded in 1999—and is likely to stay that way. Currently, real estate accounts for 27% of TIGER 21 portfolios and is favored by members due to its unique benefits and member expertise in the field, he said.
Looking ahead to the biggest potential changes in real estate by 2030, Sonnenfeldt pointed to “new evolutions” in the office and retail sectors as a result of trends triggered by the pandemic.
Other important factors that have “dramatic potential” to impact REITs and the real estate industry are artificial intelligence and climate change, Sonnenfeldt said.
“Climate change is going to require rethinking not only the production of power and how real estate is situated to use that power, but the efficiency with which the power is used,” Sonnenfeldt said.
He added that climate change will drive uses of real estate in new ways “that we’re only beginning to think about” in terms of location, size, and configuration. Artificial intelligence, meanwhile, “is going to seep into every aspect” of real estate.
Elsewhere in the interview, Sonnenfeldt noted that the REIT industry is going to continue to evolve “as new property types or sub-types catch investors’ fancy and they want the kind of benefits that a REIT focused on that one property type can bring.”