Three Mega-Trends Shaping Real Estate
Factors ranging from the global economy to the outcome of the Presidential race undoubtedly will make an impact on commercial real estate in the foreseeable future.
Yet the true near-term impact on the sector will come from three mega-trends, say real estate executives surveyed by Akerman LLP as part of the law firm’s annual report on CRE.
These trends: generation-specific housing, co-urbanism and cyber risk in real estate. That specific generation, according to 34% of executives surveyed by Akerman, is seniors, whose numbers are reaching levels never seen before in US history.
“The ranks of those age 65 and older are swelling by the thousands each day, with the potential to reach 71 million by 2030,” according to Akerman’s report. Developers have responded with a significant increase in seniors housing, with a concomitant increase in transaction volume compared to the previous year.
With more senior housing construction underway, Akerman says, the ability to secure financing appears to be top of mind for these developers, particularly in certain sub-sectors that are challenged with navigating layers of complex regulations.
“Because of the specialized nature of assisted living and memory care, developers with a qualified track record will have the greatest success in this housing boom,” the report states. “But the number of lenders with experience in this space is fairly limited compared to other real estate sectors.”
Twenty-nine percent of executives say changing lifestyle preferences in a compact city center and society’s shift to a sharing economy will have a significant impact on real estate development in the near-term. Along similar lines, 14% believe office mobility and collaborative workplace design are key trends that will shape the next iteration of buildings and spaces.
“Macro changes in our society are shifting the pace of real estate development. Industrial is changing in tandem with population needs,” says Akerman’s Cecelia Bonifay, Orlando-based partner and chair of the firm’s land use & sustainable development practice. “Office development is driven by co-working trends. Retail is changing as the overall shopping experience is evolving. In particular, the rise of omni-channel marketing means retailers must combine all possible purchase channels for clients in one single solution at the intersection of physical and digital spaces.”
The survey notes that real estate will evolve to keep pace with the new norms, with technology playing a large part. Responses to the Akerman survey show that executives are seeing a shift.
“Connectivity expectations are evolving,” says one executive quoted in the survey. “In financing, we already see peer-to-peer lending through crowdfunding platforms,” says another.
For 15% of survey respondents, the effects of technology constitute one of the most important issues impacting real estate. Ransomeware and other attacks designed to manipulate systems or seize private information have brought attention to the industry’s exposure to cyber risk, as well as the need to develop a security and privacy framework as technology in the sector advances.
“Real estate companies need to develop a security and privacy framework as they embrace and adapt more technology,” according to the Akerman report. “From smart grids to intelligent office buildings and increasingly automated retail complexes, developers and property owners also need to think about the safety of the reams of data stored from customers, residents and tenants, and many others. As part of their risk mitigation strategies, the security maturity of a particular property, and potential for data loss, should also become a bigger priority when it comes to due diligence and deal-making.”