The commercial real estate world is evolving with the times.
What does that mean as we look 2020 in the face? DRK & Company believes that successful investors must rethink traditional models of real estate, stay up with technology and keep re-inventing how we appeal to the younger generations making their way into the professional world.
Breaking Down Walls
No longer are there clearly defined walls between office spaces, retail outlets and living units – they blend together now, sometimes under the same roof.
The coworking phenomenon has been growing in recent years, reflecting a changing perception of the work experience and what a company really needs to be successful. Smaller business can thrive in office buildings they share with others due to lower lease costs, while larger companies can benefit from coworking by collaborating and networking with other tenants.
Sharing workspace and promoting a free flow of ideas that benefits everyone is becoming the norm rather than the exception. Some estimates show that flexible working space is already accounting for nearly 9% of total office space – up a percentage point from 2018.
From a living perspective, the preference to rent continues to grow among younger generations, increasing the demands placed on apartment complexes. The nearly 80 million millennials and 74 million Gen Zs (born mid-1990s to early 2000s) are choosing to rent in droves. A record 65% of those under 35 years old are renting rather than buying.
Today’s renter isn’t content to live on the outskirts of town. Today’s renter values location, amenities and a blending of the two: convenient access to nightlife, restaurants, bars, entertainment venues and gyms is a requirement. If you can reduce commute time to popular work locations, all the better. Investors and developers must realize that a failure to provide this can mean you miss out on long-term income potential.
Even retail is shifting in the co-everything environment. Brick-and-mortar stores are less relied upon in the age of online retail and pop-up retail spots. Using the pop-up model, smaller retail businesses can have access to high-traffic areas for holidays or popular events.
Although it can be hard to predict how technology will shape commercial real estate moving forward, it’s not hard to know that it will in some way, shape or form.
The technological advances are endless: Payments using bitcoin. Marketing properties through drone footage. Security systems utilizing facial-recognition software. Using digital twins (virtual replica of a building) to optimize efficiencies between systems such as security and heating, ventilating and air conditioning. Digital signage and billboards.
It’s all changing the face of commercial real estate, and what it means to succeed. Those who are better able to understand, predict and adapt to these changes put themselves in the best position for future growth.