2017 has already brought with it a lot of change, and we’re just getting started. The New Year began with a new president, new policies and new regulations – and the full impact of all of this remains to be seen. As technology continues to advance at a rapid pace, the new ways in which we share and archive data is also impacting many industries, including commercial real estate (CRE).
This year has the potential to make significant changes to CRE. Some of these changes are good and some will cause us to adjust our business model and rethink the way we invest, build and lease. Take a look at the six things disrupting CRE in 2017.
- Technology that threatens to replace traditional brokerage
Thanks to technology, CRE data is more ubiquitous and transparent than ever before. This enables tenants to quickly and seamlessly lease space online in a cost-effective, real-time manner. While this seems like a win for the tenant and landlord, it potentially threatens traditional brokerage models – cutting them out of the process. Brokers would be smart to diversify and expand their services to include consulting, investing in data and technology and collaborating with startups.
- Shifting demographics
Right now we are seeing growing urbanization, baby boomers living longer, and millennials making lifestyle choices that differ from those of previous generations. Simply put, shifting demographics make it especially challenging to know the next best investment in CRE. While technology can be one of the biggest disrupters, in this instance it is an asset to helping CRE professionals stay on top of demographic trends. Software that accurately tracks and analyzes shifts in demographics is a valuable opportunity for CRE investors and developers to identify what type of space is in demand.
- Demand for shared and flexible work space
Speaking of demand, co-working spaces, flexible leases and pop-up office locations that businesses can rent for just a day or two are growing in popularity. What professionals are now referring to as “the sharing economy” is disrupting the way many organizations lease and use CRE. What this means to investors and property owners is they need to adjust their spaces and leasing models to keep up with their competitors. Startups want configurable spaces and flexible leases to meet the ebb and flow of business growth. CRE needs to rethink its approach to space design, lease administration and lease duration.
- A focus on “healthier” spaces
Advances in technology now provides the potential to promote occupant health and wellness in CRE spaces! Sensor data can be used to monitor ventilation levels, create a healthier environment, and as a result, boost occupants’ employee productivity. Properties that invest in implementing these technologies can add value, and a competitive edge, to their space as society increases its desire to live, work and place in “healthier” spaces.
- Mass closing of brick-and-mortar retail locations
2017 began with an onslaught of major retail locations closing the doors to stores across the nation. Central Pennsylvania is no exception. As many of these retailers try to “right the ship” and avoid bankruptcy, they are shifting their focus toward online retailing. Malls and shopping centers, who relied on these stores as their anchor, are also scrambling to find their footing or risk closing their doors as well. The good news is that many of the vacated locations are able to find another business wishing to move in. This also provides the opportunity for the redevelopment of retail locations. For better or worse, the disruption of online retailing is one that is here to stay.
- Evolution of distribution and logistics
In theme with the major movement toward online retailing, consumers have become accustomed to quick distribution and delivery of goods – in some cases, same day. As a result, this disruption increases the demand for large retail and industrial spaces that can function as two property types, such as retail properties that double as fulfillment centers. This could be a very good things for owners of industrial spaces who can potentially focus on smaller and more flexible spaces within cities to enable faster delivery.
Change is inevitable and this year is poised to bring a lot of change to commercial real estate. Nevertheless, much uncertainty remains as the government puts into place new policies and regulations. Additionally, it’s difficult to anticipate what new technologies could be released at any time and further impact CRE. With all that in mind, 2017 also brings with it a lot of opportunities for the industry. Being aware of these potential disruptions and closely monitoring their momentum can help you harness the power of work with – not against – these trends.
Is there another trend or disruption you feel should be added to this list? Share your insights by leaving a comment!