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What’s Next: Big Issues in CRE

8/30/2019
Disruption. That one word characterizes the way we build, buy, sell, lease and manage real estate. The human need for connection, community and collaboration — bolstered by technology — and the relentless pursuit of innovation naturally propel us into an age where disruption is the new normal.

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Caitlin Simon shares her insights on the next big issues in CRE. Caitlin’s full comments were featured as the cover story article in BOMA Magazine’s July/August issue.

Here are some major trends that will impact building owners’ and managers’ working strategies.

The Age of Co-Everything

The boundaries of space and use are increasingly blurred in this co-everything world. Certain sectors in co-everything have reached maturation, meaning that growth is still likely, but disruption has largely run its course. Other sectors that are younger or have a longer growth trajectory may continue to upend traditional CRE offerings. What does the future look like for these sectors?

Coworking

Coworking has become a popular buzzword over the past few years, but the concept of flexible office solutions has been around for decades. Small companies and freelancers can find office space in locations where they may not be able to obtain a traditional lease due to costs or lack of credit. Larger organizations can leverage coworking to pursue open-source talent networks and collaboration with other tenants while managing unpredictable headcounts and fostering employee experience and community engagement. Thus, coworking is expected to become the new normal for many occupiers as well as landlords.

Co-living

Co-living, a community of tenants seeking socializing, convenience, flexibility and affordability, is a movement that is already reaching its tipping point. With affordability challenges and new renter demographics, co-living is now a fully fledged niche asset class. Over the next five years, significant capital will be deployed toward delivery of thousands of more beds across the world. As new generations enter the rental market, preference will be centered upon co-living brands that provide convenience, affordability and a vibrant community. As more companies seek to capture talent across a wider geographic area, more markets will become viable for co-living developments.

Industrial Warehouse & Distribution

Third-party logistics providers (3PLs) have long provided shared services and expertise needed to assist companies with their warehousing and distribution needs. New providers, such as FLEXE, have emerged over the past few years to provide different types of flexibility and cost savings for tenants in the e-commerce fulfillment, retail distribution, inventory and overflow space.

Server & Cloud Storage

The data center industry continues to use co-location as a model, in which companies can lease space and services for their computing needs alongside other enterprises with similar requirements. These arrangements reduce costs for clients while removing the hassle of managing the bulk of their IT services.

Pop-up Retail

In an increasingly digital world, pop-up retail stores are an avenue for online brands to dip into physical store space. It is a beneficial concept for small business operators hoping to build an in-person connection with new customers and for larger companies looking for temporary space in high-traffic locations. Additionally, pop-ups can help established brands test new concepts efficiently or build public relations buzz.

Tech Disruption Never Ends

Technology continues to mature at an astounding pace, and total real estate tech investment will reach an estimated $20 billion by 2020. Investors are more enlightened than ever and are steadily beginning to test and implement new technologies at their properties. Digital twins are a piece of the larger tech puzzle that have recently gained increased interest with respect to building both operational efficiencies and revenue streams.

Digital Twins

In commercial real estate, a digital twin is a virtual replica of a building, process or system, bridging the physical and digital worlds with sensors to collect real-time data about a physical item. Digital twins can have a huge impact on commercial real estate by allowing building operators to connect previously unconnected systems — from security and HVAC to wayfinding — to gain new insights, optimize workflows and monitor processes remotely.

Other practical uses of digital twins include construction monitoring and document inventory, space utilization and replication of the customer experience with a living schematic of how and where to deploy devices and sensors using the Internet of Things. Created with asset-level data, digital twins present a myriad of potential opportunities for asset performance management, operational efficiency and business optimization for building owners and managers.

The commercial real estate industry is being disrupted, and building owners and managers must meet these disruptions head on. Those who anticipate what’s next and can adapt quickly position themselves to capitalize on growth and revenue opportunities and enhance their portfolio value.

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