Innovation is essential in any industry, and it's growing ever more critical in commercial real estate (CRE). The COVID-19 pandemic has led to the development of new ideas and strategies for success in this industry.
Staying ahead of the competition is imperative, and having an innovative mindset will be essential when it comes to remaining successful long-term.
Thankfully, with its ability to transform and grow along with our changing times, this industry gives individuals plenty of opportunities to take advantage. Here are some innovation trends to note going forward:
The demand for sustainability in commercial real estate will continue to rise as the world prioritizes environmental protection. Both tenants and investors are seeking out properties and companies that have strong sustainability practices, as shown by this RICS study (done in 2020).
To remain successful, real estate professionals must stay current with new sustainable initiatives and technologies, as failure to do so may result in losing business to competitors.
Additionally, building sustainability requirements may become stricter in the future, as many states have implemented laws mandating commercial facilities to meet specific standards.
For example, California has passed a law that requires new buildings to be powered by solar energy—which could mean that older buildings without solar power will eventually struggle to compete with more recent solar-powered properties.
Furthermore, some sustainability initiatives carry penalties for non-compliance, which can significantly impact the profitability of an investment.
Therefore, as the world's sustainability goals become more ambitious, real estate professionals must strive to achieve these goals to remain competitive.
A JLL study that was also conducted in 2020 found that four major factors have the most significant impact on CRE evolution:
(1) the office,
(2) remote work,
(3) commuting patterns, and
(4) design technology.
Notably, most people now expect remote work to change the CRE business forever—well after the pandemic.
Office spaces will need to be optimized for video calls as companies adapt to more employees working remotely (at least some of the time). This will require more enclosed spaces and fewer open floor plans, as well as smaller offices to accommodate fewer on-site employees.
Additionally, there may be a shift in demand for office spaces in less centralized locations or rural areas because people have moved out of the cities during the pandemic.
Commercial real estate investors should keep these changes in mind and consider less centralized locations or new locations to benefit from the changing demands in the market.
Real estate professionals will need to be innovative and creative in designing buildings that can serve multiple purposes.
For example, coworking spaces are likely to be popular but to be successful, and they need to cater to the requirements of remote workers who want to be near others during the workday. This means that the space should be social but not distracting.
In the future, commercial real estate buildings will likely offer a mix of office space, retail stores, and other businesses such as yoga studios and salons. Some of these buildings may even include residential living.
As a result, CRE investors should consider focusing on properties where mixed-use is an option because these assets will likely be more profitable.
There is a clear trend towards increased use of technology in society—from smart buildings to machine learning. Forward-thinking CRE professionals are taking advantage of these advancements to transform how they operate their businesses.
This technology can also track patterns of use by occupants, which increases efficiency and integrates with building infrastructure such as variable frequency drives that control motors used in HVAC systems.
As a result, the need for on-site staff is decreasing, enabling companies to develop more significant logistics assets in more remote areas where land and operation costs are cheaper.
The report cites ABI Research's prediction that by 2025, some 4 million commercial robots will be in use in over 50,000 warehouses.
The Deloitte Global report, "Innovations in Commercial Real Estate - Preparing for the City of the Future" discusses how technology and changes in consumer behavior will together affect the CRE industry.
The report also explores how factors such as demographic changes, urbanization, aging population, and lifestyle preferences of different generations—as well as concerns about security, climate change, and resource scarcity—are driving the need for innovative approaches to managing commercial real estate. Here are some of its key findings:
There is also a growing trend towards biophilic architecture, which is an innovative way to integrate natural environments into CRE design with the aim of bringing humans closer to nature. Biophilic features essentially bring the outdoors in.
Common examples include skylights for natural light and green walls to bring life indoors. The presence of water also adds beauty and tranquility with elements like fountains or ponds.
By leveraging these five trends strategically and in a timely manner, CRE companies will be able to equip their buildings for the future.
Efficiency and dependability are always crucial in any commercial property, but they become even more critical as CRE operations adapt to the new realities post-pandemic and the need to do more with less.
Given the rapid changes and advancements in the industry, it is crucial for CRE professionals to understand emerging trends and pick out which ones they can leverage to stay ahead of the competition and protect their investments. Capital Investors Direct keep ourselves updated with latest CRE industry trends.
