Niche Markets
3 Specialized Markets & Sectors to Watch in 2025
by Carole VanSickle Ellis
In late 2024, the National Association of Realtors (NAR) released its annual forecast for “The Top 10 Housing Hot Spots” for 2025. Not surprisingly, most of these markets were located in relatively affordable areas of the country, had posted job growth in 2024 appearing likely to continue into 2025, and showed positive net migration into the area. NAR evaluated these and other markets based on ten performance factors relative to national levels, and the predictions were relevant, likely accurate for the most part, and, naturally, generally optimistic – particularly where retail homebuyers were concerned.
“Home buyers will have more success next year,” NAR chief economist Lawrence Yun said. “The worst of the affordability challenges are over as more inventory, stable mortgage rates, and continued job and income growth pave the way for more Americans to achieve homeownership.” Interestingly, the association also predicted at the same time that national median home prices are likely to reach heights exceeding $410,000 in 2025 and observed, “The national housing shortage remains.”
For real estate investors, most of this information is nothing new, which is why REI INK has decided to focus our 2025 forecast on areas of the market that are a little more, well, “uninspected” in today’s economic commentary. With the cost of labor and supplies pushing developers out of their traditional comfort zones and traditional fix-and-flip or rehab-to-rent investors to investigate new variations on historically tried-and-true strategies, the New Year is the perfect time to examine niche markets where innovation and creativity are still rewarded with solid returns.
Niche Market #1
Senior Living
A little over a decade ago, the term “silver tsunami” began to emerge in real estate investing circles.
At that time, the oldest Baby Boomers, those born in 1946, were nearing retirement age and entering retirement. Statisticians and economists avidly announced nearly 10,000 Baby Boomers would turn 65 ever day while innovative real estate investors began coming up with new types of senior living assets that would cater to a generation projected by the Federal Reserve data to be “the wealthiest generation that has ever lived.”
Today, Baby Boomer movements and trends directly and dramatically affect the nature and health of the markets into which they migrate while their needs and preferences have a direct and significant impact on real estate trends.
“Senior housing has ‘better-than-expected’ momentum [in 2025],” wrote The Street contributor Edward Fernandez in December 2024. He explained, “The decline in the construction of assisted living facilities since 2018 has resulted in an inadequate supply nationwide…. This imbalance underscores the investment potential in the senior housing sector, where investors can leverage the rising demand for investment in quality accommodations for seniors.”
The shortage in senior housing options in many markets creates natural opportunities for investors, but that is just the beginning. Because Boomers are likely to live longer in retirement than earlier generations and have expressed not only the intention of “aging in place” but also demonstrated they have the financial wherewithal to do so; factoring in their preferences and desires when renovating existing assets or constructing new ones is an easy way to broaden your appeal to potential buyers.
According to the SIMS Luxury Builders “What Home Buyers Really Want” report, senior buyers’ sentiments about [desirable and undesirable] features “tend to be stronger than other sub-populations.” This means, for example, the presence of outdoor living space, garage storage (vs. attic), and a full bath on the main level of a property can make or break a property’s appeal for this generation of buyers. Boomers also expressed a desire to purchase homes that enable them to live on a single level and aversion to two-story family rooms and properties with elevators.
While not all investors are renovating properties with an eye toward appealing to senior residents, eliminating such a large portion of the population could be dangerous. Monitor senior migration trends in your markets of interest, and rehab with their preferences in mind if they are a major force in your area. For example, Myrtle Beach, South Carolina, and the surrounding Grand Strand area posted a 23% increase in its 65+ population in 2024, and that trend appears likely to continue in 2025. Analysts at the Wall Street Journal cited the presence of distinct (but “not extreme”) seasons, a coastal region that is not “all the way south,” and Myrtle Beach’s international airport as factors in the population growth.
“There are multiple hospital systems and nationally ranked medical institutions within driving distance,” added local agent Melanie Hellmer. She also noted the market supports a variety of retirement lifestyles, including living near the ocean, golfing and tennis, and inland residences for “more privacy and space.”
The market is also more affordable than many in retiree-inundated Florida, making it a good place to retire and representing opportunity for investors serving this population.
Niche Market #2
Airbnb “Refugees” are Turning to Mid-Term Rentals
Since its debut on the market in 2008, Airbnb has disrupted the short-term rental (STR) market in a variety of ways.
Criticized for alleged negative impacts on affordability and neighborhood quality of life, the company has also provided a life-changing opportunity for many real estate investors to diversify and grow their portfolios via vacation-rental strategies that would have been largely unheard of just a quarter of a century ago.
However, that prosperity and success has become a double-edged sword, with Airbnb “hosts” recounting nightmare scenarios in which the platform has banned their user profiles and properties, sometimes with little warning or recourse, and devastated their investment portfolios. For these investors and others who may balk at the increasingly high fees associated with using the Airbnb platform or the unreliable nature of many guests, the “mid-term rental” could be a solid alternative to STR.
“If you have a property on Airbnb that is a strong performer and is generating serious income, that property is likely generating far more revenue than it could as a long-term rental (LTR),” said Amanda Williams, founder of MTR Wealth Mastery and Traveling Realtors and CEO of Carolina Furnished Rentals. Williams, whose account was removed unexpectedly from the Airbnb platform in 2021 and not restored for “two long years,” recalled the loss of her STR income was “a devastating blow to my business and my identity.”
Ultimately, rather than seeking another STR platform, Williams opted to leap into “mid-term rentals,” fully furnished, month-to-month rentals. These assets, like STR assets, can easily generate double the going rates for LTR properties and tend to attract responsible residents who care for the property and value it.
Williams, whose home base is in North Carolina, explained that markets with a high volume of specialized professionals, such as the “Research Triangle” in Raleigh, Durham, and Chapel Hill, North Carolina, are particularly well-suited for this strategy because the incoming population tends to be relatively well-heeled, family oriented, and focused on stability.
“Many times, my residents will stay in the properties for several months while they get a good feel for the area and decide where they want to buy a property,” Williams explained. “They get a chance to know the area, really understand how the local school systems work, and pick a home that is right for them.”
Given that 82% of homeowners who purchased a home in the last 12 months report having regrets about their purchase, would-be buyers have more motivation than ever to take their time making a decision. However, Williams noted, this can only happen if they have a home base from which to operate in the new market.
“They want their kids to start school and to get to know the community before they buy,” she explained. “That is worth a great deal to this demographic.” Williams works primarily with Airbnb owners who wish to diversify their portfolios or exit the platform entirely, and she says that almost every market has room for this niche strategy.
“Not every market is like mine in that you have a lot of professionals and their families moving in, but most markets do have a population that is motivated by furnished, high quality, month-to-month housing,” she said. “The key is to establish your own brand and business model that appeals to people seeking these mid-term rentals.”
Niche Market #3
Class A Industrial Real Estate
When most residential real estate investors think about industrial real estate, they tend to think generally about manufacturing properties. They may envision sooty smokestacks or long assembly lines, and they are unlikely to think about different classes of industrial properties. However, industrial real estate, like other sectors, does have three distinct classes of building, and an interest in Class A industrial real estate is trending among wealthy real estate investors, said Salvatore Buscemi, CEO of Dandrew Partners Capital Management.
“The latest real estate crash exposed where the ‘desperate money’ was, and it was in the portfolios of the middle-class investors who invested in multifamily real estate syndications in 2020,” Buscemi said. “Investors who did not necessarily need to ‘get rich quick’ are prioritizing assets that do not require a lot of good things to happen in order to generate returns, and Class A industrial property is that kind of asset.”
Class A industrial real estate is, not surprisingly, new and high quality. These structures tend to have low vacancy rates and attract high-quality tenants, such as modern logistics facilities designed to support behemoth commerce operations or state-of-the-art food manufacturing facilities.
Class A industrial properties may not even look like what most people envision when they hear the term “industrial;” they often sport modern architecture, high-end interior finishes, and a vast array of amenities that place them far above comparable Class B properties that are, by nature of their age, inherently too outdated for many high-tech tenants.
Class A industrial tenants need access to power in order to run automation and AI resources, noted Peter Kolaczynski, a director at CommercialEdge, part of the Yardi universe of real estate software. He added, “The needs of tenants are shifting, and that is being met by developers and owners through what is provided at their properties.”
According to the CommercialEdge 2024 National Industrial Report, industrial transactions are booming in Dallas-Fort Worth, Texas, the Bay Area, and Chicago, Illinois. New construction in the Midwest, however, could indicate a growth opportunity in that region.
A “Sunny Forecast” for 2025
According to the RCN Capital and CJ Patrick Co. “Fall 2024 Investor Sentiment Index,” more than two-thirds of real estate investors view the current housing market as “better” or “much better” than it was a year prior. This is an improvement on the Summer 2024 survey, in which 60% responded that the market was better, and the number of investors expecting things to get worse has shrunk to just 9%.
“Investor sentiment is almost twice as positive today as it was in the third quarter of 2023,” RCN Capital CEO Jeffrey Tesch told Housing Wire in an October interview. He concluded, “They’re even more optimistic about the future.”
Whether you opt to continue with your current real estate investing strategies or diversify into new niches of the market, if you are feeling good about the New Year, you are not alone.
