In this era of modern development, the construction and real estate sectors are two of the most important and profitable industries to invest in. With the ever-growing population and the need for new housing and commercial spaces, these sectors will only continue to grow. Investing in construction and real estate can be a great way to make a difference in your living financially and by providing much-needed housing and commercial space.
Here are some of the reasons why you should invest in construction and real estate:
- High demand: The demand for construction and real estate is always high, as there is always a need for new housing and commercial spaces.
- High returns: The potential returns on investment in construction and real estate are very high.
- Diversification: Investing in construction and real estate can help diversify your investment portfolio.
- Inflation hedge: Real estate is a good hedge against inflation, as its value tends to increase over time.
- Tax benefits: Several tax benefits are available to investors in construction and real estate.
Construction and real estate are two great options if you are looking for a safe and profitable investment.
Whether building social Real Estate infrastructure such as community housing or business-enabling facilities such as logistics and industrial parks for companies, the construction and real estate sector is essential for economic growth and development.
When done right, investing in the sector can make a real difference in people’s lives – creating economic opportunities, enabling inclusive urbanization, or fostering environmental sustainability. That’s why it’s one of our priority investment areas.
Importance of thriving construction and real estate investment for economic growth
Across the countries where we invest, construction and real estate projects growth is driven by macro-economic and disruptive megatrends, including:
- Increasing urbanization
- Expanding trade
- Rising income levels
- Young workforce
- Technology
- Sustainable environment
While these trends increase economic activity, they also create incremental demand for quality and sustainable real estate, largely unmet across most of our focus markets.
Construction and real estate investment can play a large role in determining whether cities become local and regional centers of sustainable development. But with this investment and growth, local populations can stay caught up.
However, construction and real estate investment face several challenges in meeting this unmet demand and maximizing its potential to make a difference in people’s lives. This sector is fragmented with sub-scale developers, and efficient, sustainable construction practices and technology.
All these factors typically result in high construction costs and an increase in small to mid-sized low-quality projects. As a result, it increases the need for more scalable construction and real estate investment opportunities.
This industry often helps attract institutional investor interest for more long-term thinking, and activity on shorter-term projects for higher returns. Those sub-sectors typically foster long–term economic growth, support the creation of sustainable communities, and offer scalable development opportunities. These construction and real estate investment opportunities include:
- Housing
- Industrial and logistics parks
- Student accommodation
What’s the impact of construction and real estate investment?
When we get involved in construction and real estate investment, we aim to deliver a positive impact on communities in three ways:
- By creating economic opportunities
- Enabling inclusive urbanization
- Fostering environmental sustainability
Because we provide long-term capital aiming for sustainable, risk-adjusted returns, we can focus on the most sustainable construction and real estate investment.
For example, by focusing on housing, we support the provision of adequate homes for underserved households in our markets. It helps to improve their quality of life, health, and foster inclusion. On the other hand, our investments in the industrial and logistics sub-sector have a different impact. They create jobs, build skills, improve the business environment, and increase efficiencies in the production, storage, and transportation of goods. And in turn, this boosts tax revenues for local government that can be fed back into the community.
How do our construction and real estate investment drive inclusive and sustainable development?
So how do we go about achieving this impact? Essentially through ‘six themes’ falling under two pillars of activity.
The first pillar is ‘sector development,’ which means activity to address the imbalance between demand and supply.
- To meet this objective, we have three themes.
- First, we join with best-in-class partners on projects that create socially inclusive sustainable communities.
- We also invest in much-needed industrial space for production and distribution.
And we invest in business-enabling infrastructure that allows businesses to operate, be more efficient, and interact with suppliers and customers.
With the second pillar, our objective is ‘market strengthening,’ which supports the development of stronger businesses to address the systemic challenges that hamper the sector.
- That involves, first, supporting best-in-class partners to develop the capacity and competencies needed to address market challenges.
- It also includes developing sustainable companies that, in time, will attract much-needed private investment and mobilize capital into our markets.
- And we’re focused on helping businesses to build sustainable real estate. That means promoting the construction of green buildings and taking steps that make buildings resource efficient.
Lastly, Think Beyond Construction is well-positioned to invest in much-needed community-shaping construction and real estate investment projects.
Read our sector strategy to learn more about why the real estate sector is important to us and our investment priorities.
To read factors for real estate investing in the sector, read our Insight report; The Most Important Factors for Real Estate Investing.
