The Coronavirus pandemic presented a hitherto unseen and unprecedented challenge for the commercial real estate (CRE) industry. Commercial real estate trends gravitated towards digital transformation. The CRE industry had to recalibrate its roadmaps, adopt new workflows and overhaul operations to keep in line with the new trends in commercial real estate. CRE professionals had to embrace unfamiliar practices like remote working, virtual walkthroughs, and convincing people to buy property during these tough times.
Now, even with the vaccine in sight, the new normal that has been established by Covid-19 will continue to influence commercial real estate market trends in the short term, at least.
Let us look at 8 commercial real estate industry trends poised to shape 2024 and beyond.
CRE tech has witnessed an infusion of capital in the past few years. According to Deloitte, it is poised to grow to USD 10.9-17.2 billion worldwide by the end of 2024. Softwares for making physical signatures obsolete, asset valuation, projected cash flow calculations, monitoring smart buildings to keep them energy-efficient have become mainstream. Similarly, investing in diverse property technologies like compared in Roomonitor vs Noiseaware, has become vital for maintaining properties' noise levels and ensuring a peaceful environment. These technologies provide real-time noise monitoring, alerts, and detailed reports, helping property managers address noise issues proactively and maintain the quality of their properties.
Proptech might just be one of the dominant commercial real estate trends to emerge in 2024.
Skyrocketing construction costs have heralded the conversion of various building types into multi-family complexes for rent. Corporate buildings, hotels, malls, and small factories are being increasingly refactored into affordable concepts since they benefit from already being situated in core urban residential areas.
Twitter has instituted a policy whereby employees can work remotely forever, even after the pandemic dust settles. Work-from-home culture is here to stay, which means homes are being retrofitted into office settings, complete with standing desks, ergonomic chairs, beanbags, and more. Hybrid workers (coming to the office only 2-3 days a week instead of 5-6) are on the up. Co-working spaces and large business parks have felt the pinch of this paradigm shift in working styles.
The restaurant industry is perhaps the worst-hit industry post-Covid. People are skeptical about dining outdoors and are opting to order in instead. This has given rise to a new concept - cloud or ghost kitchens, which are professional kitchens set up to fulfill delivery-only meals. The lack of need for a proper dining space means restaurateurs can save a bomb on expensive fit-outs and long-term leases. They have also spurred innovation in the food space akin to the food truck revolution. The rise of ghost kitchens has also led to improvements in restaurant online ordering systems, making ordering easier for customers.
Like food ordering, another consumer trend that grew in popularity during the pandemic was online shopping. This prompted e-commerce companies to set up more and more fulfillment centers. These warehouses serve as the last pitstop for parcels before they get shipped off to the recipient’s address and are strategically located in high-density areas to quickly and efficiently reach the maximum number of people. Walmart, the world’s biggest retailer, has transformed many of its outlets to double up as last-mile hubs, thus extracting maximum value from their existing real estate holdings.
Corporate behemoths like Facebook have allowed a virtual workforce to continue, reducing their physical space requirements and saving a fortune on overhead costs like owning or leasing an office. Ergo, many subleases have popped up on the market, owing to sagging demand. Young, well-funded startups might gobble these up by striking a convenient deal, coming in on their own flexible terms.
Covid-19 has increased the burden on businesses to maintain properties regularly. Consumers who walk in expect hand sanitizer stations all around, as much as dustbins. Regular surface cleaning, disinfection, fumigation, and spotless floors are no longer a choice. Property maintenance has become a significant cost head all of a sudden, crucial to a good brand experience.
As is the case with any downturn, invested capital flows from risky sectors to commercial sectors are perceived to be safer with stable cash flows. One can expect competition and bets to increase in multi-family, healthcare, self-storage, and industrial sectors at the expense of corporate, hospitality, and retail.
CRE professionals have had to reinvent their methods to deal with the changing winds. For example, Excel-based financial models just do not cut it for analyzing the vast amounts of unstructured digital data generated from operations such as asset valuation, evaluating the financial viability of a lease, managing multi-tenant projects, and cash flow forecasts. You need a robust SaaS solution like Docsumo to automate these cumbersome tasks. Docsumo utilizes intelligent OCR technology to convert any kind of unstructured document into clean, actionable data. Save countless hours of manual data entry by uploading all your property documentation to Docsumo. Book a free demo here.
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