Investing is about competing visions of the future. Different perspectives on the outlook at a macro, market and asset level are embedded in estimates of an asset’s value. Given the long-term nature of real estate, understanding structural trends and macro themes is essential. Today’s real estate investors, for example, will benefit from having a strong knowledge of demographics, technological innovations and labour market developments.
Identifying significant structural trends is not always easy, however. Leaving 2020 aside, change is typically incremental: our lives do not normally shift dramatically from year to year. But they do evolve meaningfully decade to decade.
It can be hard to perceive how society, and consequently our use of real estate, is changing. Sometimes, major structural trends are hiding in plain sight – even when they relate to something as important as how we meet the person we choose to spend our lives with.
Traditionally, partners often met through introductions from friends or family or at work. Today, most new relationships begin online, as a recent report by Tyro Capital Management highlighted. Aided by increased smartphone usage, what was a cultural taboo has become a cultural norm.
With the rise of dating apps, the search costs associated with finding a suitable candidate for a date have dramatically fallen, while the supply of good potential matches has expanded greatly. It is easy and quick to find a promising date from an almost infinite supply of candidates. And the risks associated with dating are lower. Specifically, online dating is safer for women. Rejection takes place virtually rather than in person, and prospective dates can be well vetted. And, if that date happens not to work out, there is no need to worry about seeing them in the office or when hanging out with their friends.
The world of Tinder and Bumble might seem far removed from property, but the changes that have revolutionised dating are set to have a significant impact on real estate investing in three ways.
First, online dating is an under appreciated factor determining household formation. People are getting married and starting families later in life. Economic uncertainty and high housing costs are often presented as primary reasons for this. These are important drivers, but by no means the only ones.
Improved dating opportunities with lower costs incentivises people to be more selective when choosing their partner. The pressure to settle for an average match rather than risk being left on the shelf is reduced. This has the effect of extending the average years of singledom. This, in turn, will increase demand for certain types of accommodation – rental apartments targeted at young professionals, for example.
It is not all positive for apartment demand, however. Properties catering for fragmented families and divorced parents may see a decline in interest. The superior matching that occurs through online dating is one reason divorce rates are falling and expected to continue to do so.
Second, online dating has a meaningful impact on the attractiveness of cities. Historically, proximity to a large potential dating pool has drawn people to cities. For some young people, dating apps would add to the appeal of these large pools and therefore cities. Others, however, may be content to live in smaller towns now the dating market is more efficient.
In isolation, this may not be transformative for the investment outlook, but could be important alongside other ways in which technology is reducing the need for people to share the same physical space. A greater ability to work from home rather than in an office is one example. Another is increased virtual socialising. Having a virtual beer via Zoom may be an inferior substitute to the real thing, but online gaming can provide a great forum for connecting with friends remotely. Socialising, rather than gameplay, is often the primary objective: think of Fortnite as a place, not a game.
Finally, online dating is changing the places we need for socialising. Bars and nightclubs remain popular, but spending time there in the hope of meeting someone new is less common. Consequently, property owners may consider reducing their exposure to such occupiers. They may find more attractive income streams from occupiers that better cater for date nights. To that end, the premium casual dining sector may be more resilient than many think. Competitive socialising should continue to grow: Leisure operators offering rich and unique experiences should benefit from this structural trend.
Tinder claims to be “more than a dating app. It’s a cultural movement”. For once, this isn’t just corporate hyperbole. Real estate investors would do well to understand how the ‘swipe right’ phenomenon can help in their own search for the perfect property match.
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.