Demographics, technology, urbanization: The DTU method of investing in real estate, and the secular trends that drive performance
As real estate values rise to new heights in major cities across the world, investors need “cycle insurance” to protect the values of their portfolios in the event of a cyclical downturn. One strategy is to seek out properties and markets that participate in longer-term secular shifts in economies or societies. Such investments should exhibit a degree of immunity from the ups and downs of the credit cycle, the business cycle and the real estate supply/demand cycle. In a sharp downturn, such as the 2008–2009 global financial crisis, all property values decline. But, in the ensuing recovery, assets that serve secular demand drivers often outperform. By definition, these secular trends supersede cyclical ups and downs and, given enough time, distinguish themselves as fundamental determinants of long-term return — for better or for worse.
Each industry has its own set of secular trends. In computing, for instance, Moore’s law stipulates the amount of processing power on