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Report Summary:
Report Summary: : Surprising Resilience, Booming Economy, Worrying Risks: The theme that emerged more than any other during the Emerging Trends interviews with industry leaders was the surprising resilience of the economy and of property markets generally since the pandemic hit, inspiring greater confidence in the industry’s collective capacity to adapt to changing market conditions and future unknown risks.
Key Trends:
Flexibility and Convenience Drive the Next Decade: By forcing people to work and live differently, the pandemic revealed hitherto unknown reservoirs of flexibility in how the property sectors could function—and changed expectations of how people will use properties in the future. A renewed emphasis on work/life balance and the importance of convenience and productivity in how people manage time will require physical changes to properties to better align with how they will be used.
Work Anywhere: An Office Reset: A broad range of industry perspectives exists about how Work From Home (WFH) will affect office demand, but under almost any conceivable scenario, firms will be leasing less space in the future. New hires and added space required for social distancing are unlikely to fill the resulting vacancies. Office tenants will look to redesign the space they have and do more with less to provide new ways of working, and an evolving talent model that marries hybrid and flexible work environments with company cultures. Demand will focus on newer construction with well-integrated ventilation and technologies.
Proptech: Changing the Way Real Estate is Done: The property technology (proptech) industry has reached a level of acceptance usually reserved for a more mature sector. The use of technology to better understand and manage properties has accelerated sharply. Even more, technology can help tenants efficiently use their leased space as the way people work continues to evolve. A new generation of data analytics seems especially promising, allowing companies to use artificial intelligence to proactively identify opportunities rather than sift through deals one by one.
Climate Risks Are on Us:The increasing frequency of natural disasters and more convincing research connecting these to human-induced climate change, is raising the alarm for greater action. Despite industry participation in environmental accreditation programs and broader ESG initiatives, investors have been slow to incorporate environmental risks into underwriting. However, the growing risks of climate-related property damage may induce more investors to follow the example of leading institutional investors in factoring market-level climate risk into decision-making. While businesses need to consider how decisions will impact investors, it’s equally important that they should be in the business of contributing to society and helping others thrive.
Housing Crisis Redux: Housing affordability worsened during the pandemic as home prices and rents barely paused during the brief recession and then quickly accelerated as the economy reopened. Costs of both for-sale and rental housing are rising much faster in secondary and tertiary markets as people fleeing pricey gateway markets bid up residential prices in the smaller destination markets. With housing production falling far short of new household formations, affordability will continue to deteriorate in the absence of significant private-sector and government intervention.
New Age of Uncertainty: The predictability of property markets over the past decade ended decisively with the pandemic and ensuing recession, heralding the beginning of a new era of heightened uncertainty.
Plus: Work Anywhere, Live Anywhere; Retrofitting Cityscapes; One Pandemic, Divergent Outlooks; Everyone Wants In.
Report Summary: Surprising Resilience, Booming Economy, Worrying Risks: The theme that emerged more than any other during the Emerging Trends interviews with industry leaders was the surprising resilience of the economy and of property markets generally since the pandemic hit, inspiring greater confidence in the industry’s collective capacity to adapt to changing market conditions and future unknown risks.
Key Trends:
Flexibility and Convenience Drive the Next Decade: By forcing people to work and live differently, the pandemic revealed hitherto unknown reservoirs of flexibility in how the property sectors could function—and changed expectations of how people will use properties in the future. A renewed emphasis on work/life balance and the importance of convenience and productivity in how people manage time will require physical changes to properties to better align with how they will be used.
Work Anywhere: An Office Reset: A broad range of industry perspectives exists about how Work From Home (WFH) will affect office demand, but under almost any conceivable scenario, firms will be leasing less space in the future. New hires and added space required for social distancing are unlikely to fill the resulting vacancies. Office tenants will look to redesign the space they have and do more with less to provide new ways of working, and an evolving talent model that marries hybrid and flexible work environments with company cultures. Demand will focus on newer construction with well-integrated ventilation and technologies.
Proptech: Changing the Way Real Estate is Done: The property technology (proptech) industry has reached a level of acceptance usually reserved for a more mature sector. The use of technology to better understand and manage properties has accelerated sharply. Even more, technology can help tenants efficiently use their leased space as the way people work continues to evolve. A new generation of data analytics seems especially promising, allowing companies to use artificial intelligence to proactively identify opportunities rather than sift through deals one by one.
Climate Risks Are on Us:The increasing frequency of natural disasters and more convincing research connecting these to human-induced climate change, is raising the alarm for greater action. Despite industry participation in environmental accreditation programs and broader ESG initiatives, investors have been slow to incorporate environmental risks into underwriting. However, the growing risks of climate-related property damage may induce more investors to follow the example of leading institutional investors in factoring market-level climate risk into decision-making. While businesses need to consider how decisions will impact investors, it’s equally important that they should be in the business of contributing to society and helping others thrive.
Housing Crisis Redux: Housing affordability worsened during the pandemic as home prices and rents barely paused during the brief recession and then quickly accelerated as the economy reopened. Costs of both for-sale and rental housing are rising much faster in secondary and tertiary markets as people fleeing pricey gateway markets bid up residential prices in the smaller destination markets. With housing production falling far short of new household formations, affordability will continue to deteriorate in the absence of significant private-sector and government intervention.
New Age of Uncertainty: The predictability of property markets over the past decade ended decisively with the pandemic and ensuing recession, heralding the beginning of a new era of heightened uncertainty.
Plus: Work Anywhere, Live Anywhere; Retrofitting Cityscapes; One Pandemic, Divergent Outlooks; Everyone Wants In.
Markets to Watch
| Overall Real Estate Prospects, 2022 | |
| Rank (2021) | City |
| 1 (3) | Nashville |
| 2 (10) | Raleigh/Durham |
| 3 (15) | Phoenix |
| 4 (2) | Austin |
| 5 (6) | Tampa/St. Petersburg |
| 6 (5) | Charlotte |
| 7 (4) | Dallas/Fort Worth |
| 8 (11) | Atlanta |
| 9 (34) | Seattle |
| 10 (9) | Boston |
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Topics
Market Trends
Real Estate Trends Emerging Trends New and Disruptive Technology
Sustainable Development
Industry Sectors
Housing – Affordable and Workforce
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