Emerging Real Estate Trends 2020: What You Need to Know
6 things developers can do to succeed in 2020
2019 was a year of uncertainty as we shifted away from the sellers’ market of the last few years. Sales numbers pointed towards an overall downturn across markets. As we move rapidly towards 2020, will these trends hold steady?
PwC and ULI’s joint Emerging Trends in Real Estate report is a benchmark research report that surveys professionals across the USA and Canada. That, plus data from a variety of sources, allows them to put together a very clear prediction of the year ahead.
We’ve gone through the report and identified the major trends for real estate in 2020: read on and find out what your team needs to know to stay on top of the drastically changed market.
Awareness of social issues — and a company’s stance on them — has a growing impact on purchase decisions.
As younger generations enter the home-buying demographic, widespread concerns around social responsibility, environmental impact, and governance, are having an effect on the purchasing decision.
More attention is being paid to the environmental, social, and governance (ESG) principles of a company. Issues include climate change, gender equality and harassment as publicized via the #MeToo movement, ethics issues in business, and concerns for health and well-being. These can play out in the logistics and design of buildings as well. Developers are building towards ‘gender mainstreaming’ or ‘fair-shared cities’ that creates housing and urban environments that meets women’s needs; and with rising temperatures resulting from climate change, tenant and consumer preferences have also changed.
Real estate is under scrutiny for these issues due to its enormous footprint on the environment, urban centers, and social lives. As these issues become more widely discussed in public arenas, scrutiny on how corporations address them will grow.
Real Estate Trend Takeaway:
Public awareness of social issues puts scrutiny on developers to address them in their practices and new project design.
Emphasis on shared spaces means a rise in multi-use living and reimagined buildings.
Industry experts expect that as more ‘non-traditional’ methods of working, such as remote workers or shared work spaces, become the norm, real estate development will have to adapt to match. Flexible spaces that can accommodate living, work, and play is increasingly a must as consumer lifestyles and preferences evolve.
This extends beyond the limits of residential units. As shared spaces continue to trend in the office sector, tenant and customer expectations continue to push towards accessible services and amenities. Proximity to restaurants and shops are part of it, but the intangible “community” aspect is also part of the consideration.
Plus, as online shopping and in-building services grow, elements such as more dedicated space for deliveries and cold storage for food delivery are emerging trends in multifamily residential. Some developers are looking to lessen kitchen space, eliminate appliances, and even push forward co-living, where residents have their own spaces with shared amenities and services.
Real Estate Trend Takeaway:
Developers need to reimagine how space is used as shared, flexible-use homes and offices become more desirable.
The rental market is being saturated in demand, and doesn’t have the supply to keep up.
New home development has increasingly shifted towards multifamily, for reasons around population growth, urban density, and consumer preference for shared amenities and services. At the same time, the rising cost of home ownership is pushing more and more people into the rental market.
But even there, conditions are challenging. As increased demand for rental housing is not met by adequate supply, affordability of renting becomes an issue. In many high-cost markets in particular, “co-living” or the “Golden Girls model” of rental home sharing has become more common.
Experts consider the “missing middle” — the lack of medium-density housing that fills both the affordability gap and market niche — to be a concern across major markets.Not only does this put added stress on urban populations, the conditions are also inhibiting employers who are unable to find adequate housing options for their workforce.
Real Estate Trend Takeaway
Lack of supply and high demand means there is a big opportunity for purpose-built rental housing.
Suburbs are attracting millennials with multi-use, transit-friendly, 24-hour communities.
As identified in 2018, millennials are moving out of urban centers and into the suburbs, albeit at a later stage than most anticipated. However, the suburbs that are most effective at attracting this demographic are the ones that are emulating the successful “24-hour city” model — ones where residents can live, work, and play.
Mixed-used environments become the anchor for communities, allowing residents to engage with neighbours, the local culture, and friends and family without sacrificing access to work, amenities, or services. Plus, as suburbs attract this ‘hip’, younger demographic, they’re able to maintain a talent pool of young workers than can bring employers into the area — allowing them to compete with inner city areas more effectively than before.
These “hipsturbias” tend to have excellent access to transit, strong walkability, and an abundance of retail, restaurants, and recreation. Many believe that this live/work/play formula can revive suburbs in much the same way as it revived inner cities a few decades ago.
Real Estate Trend Takeaway:
The suburbs that successful attract buyers are the ones that have a variety of practical and recreational options, emulating the “24-hour city”.
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Community becomes increasingly important to buyers and renters.
As real estate continues to trend towards shared spaces, there is growing demand for ‘community’; not only in the residential sector, but in offices as well.
Offices designed for the gig economy are especially aimed to promote a sense of community, using common areas to support networking and productive social opportunities. Not only does this help younger workers with costs, it also provides a place where they can meet peers with shared interests and concerns.
This trend is attributed to the growing isolation that technology creates, and the desire to overcome this is evident in modern residential and commercial practices, from co-living, to open office concepts, common areas, and shared amenities. The community around a new development is a major part of the purchasing decision.
Real Estate Trends Takeaway:
Creating opportunities for community, whether that’s supporting neighbourhood events, setting up resident associations, or get-togethers for remote workers, can attract buyers and renters to your build.
Timely, accurate, and quick decision-making is crucial to success, and that means more and better data across the board.
Over the last few years, and in 2019 especially, real estate has been advancing steeply on the technological front. Despite a reputation as a relatively slow adaptor, most sectors are being impacted by technology.
Alongside increased productivity and efficiency, digitization of information allows real estate to apply analytics and share data across the organization. There is growing interest across sectors, specifically for solutions that allow organizations to connect “various systems and tools to create intangible assets”, and allow companies to make faster, more informed decisions.
For companies to thrive, they have to get ahead of this change — and it’s already sweeping across sectors, starting with property and asset management. Whether that includes taking on staff with the necessary skills, on-boarding software to help track and manage data, or both, breaking down information silos and creating digital databases will provide access to data and analytics that deliver the insights necessary to drive growth.
Real Estate Trends Takeaway:
To respond to increased pressure from a softening market and rapidly changing consumer expectations, real estate is adopting better data practices help make faster, more informed decisions.
Conclusion
In this year’s Emerging Trends paper, we see some of the predictions of the previous year playing out.
As real estate moves into a period of “dramatically soft demand”, success depends on the ability to make purposeful, thoughtful decisions based on real data and forethought. Increasingly, timely and informed decision-making will be the difference in the success of new home development, whether for purchase or purpose-built rental. We’re seeing this taking hold of the sector, as the industry’s interest in consolidated systems and analytics-ready data grows.
Yet consumer demands for suitable product has not ceased. The ‘way things have always been’ can no longer be the reasoning behind real estate decisions. In order to succeed, real estate professionals — developers, brokers, managers, and more — need to pay mind to the solutions and staff that can take them into the community-minded, technologically supported future.
Looking for more on how developers are meeting the challenges of real estate with software the brings them the data they need? Download the case study below.
