5 Trends driving change in real estate industry

5 Trends driving change in real estate industry

It has been more than 18 months since COVID-19 outbreak in different parts of the world. We have witnessed multiple waves and scientists are not ruling-out few more waves of COVID-19 cases in coming quarters.

The COVID-19 outbreak has speeded up many trends and exposed things that were already under pressure. We cannot rule out the possibility that in five years' time. 2020 will be a trend reversal year in the history.

Here are the 5 trends that will change the real estate industry for good, in the coming years.

1. Well-being

The COVID-19 outbreak has taught us what is important:health, family & friends, and a stable, high-speed internet connection. Social and physical distance has a major impact on people's mental health. The greatest effects of this mental challenge, which started last year is yet to be seen. Health in the workplace was already on the map, but now it will be, one of the top priorities.

Health will remain a dominant issue in coming years and mental health will become an additional dimension of concern for businesses. Healthy, safe, and green (purifies air) offices are even higher on the priority list. The People & Culture department (popularly known as HR) will have a more dominant role in the decision-making of the organization and will be tasked with answering the question 'what does health mean in the 21st century?'

The real owners and companies need to pay attention in every aspect of building design, development and operation considering, the wellbeing of their space users.

2. Deepening of ESG

For years, ESG issues received little attention from investors. Today, institutional investors and pension funds have become too big to diversify and are overlooking systemic and transition risks. They need to consider the climate and social impact of their portfolios, because of their long-term financial importance.

The focus on E, S and G is evolving. Globally, the number of ESG indices - according to the annual benchmark study of the Index Industry Association in September 2020 - has increased by 40%. ESG factors are not only 'nice to have', but forces to perform better / lose less. Investing in social good is finally becoming profitable.

Despite ESG reporting, the biggest obstacle is the poor quality or availability of data in organizations for a deeper and broader implementation of SRI. Despite this, the obligation to report on ESG is increasing and so is the number of software solutions to facilitate reporting, allowing for deepening and broadening. As a result of the Covid-19 outbreak, issues such as working conditions, appreciation, loneliness, health and safety, value chain, data protection and privacy, customer satisfaction get more attention.

We expect that in coming years, it will become clear that sustainability raises much deeper questions about our socio-economic structure. The number of real estate companies that formulate a 'Statement of Purpose' will continue to grow. The efforts to increase the involvement of middle management and stakeholders will receive more attention. More investments are also being made in ESG software and 'Shareholder activism' will grow.

Globally, ClimateTech including eco-friendly is hot. ClimateTech solutions like Waste-water electricity generator, Thorium based fission, Biomimicry, Energy-harvesting materials, Carbon capture, Molten salt energy storage are emerging. In coming years, developing nations including India will adapt to this change across business fields.

3. Future of work: finding balance between physical space and digital space

2020 has led to many questions for companies. Some made already a ‘WFH statement’. Few firms announced that their employees can work from home ‘forever’; others have announced WFH till mid of 2021 or end of 2021. Few companies have started downsizing their office portfolio and some are strategizing on this aspect.

Many firms are looking for answers. How to ensure a flexible, healthy, and safe working environment for their working staff and partners? What does their organization of the future look like? How to organize the office so that it is in line with their 'Statement of Purpose'? How to facilitate innovation? This will be continued.

In coming years, we will work in a hybrid way. We are searching and experimenting with answers to the above questions. The WorkTech and immersive technology will grow, emerge, and acquired. The relationship between owners and tenants/ users will take a different turn, as many boards of management are looking at their office portfolio. We will continue to decode the work and the balance will be found after many rounds of experimentations.

4. Repurposing of properties

Many assets especially, in commercial sector – office, retail and hospitality will need to be repurposed across countries including India. COVID-19 outbreak has changed the fundamentals of demand of these assets. Therefore, we expect to witness upward trend in coming years on the subject. Currently, owners are under denial/ wait & see mode. But soon, they will realize that, some of these changes are permanent in nature. Then, they will change their strategy and adopt to the new reality.

Already news has started coming from different parts of the world – Korea, European countries where government/ private owners have started the process. Many countries are making regulation changes to support these phenomena.

5. PropTech on the rise

In recent years, 'What is PropTech' has been the most visited page on the website. PropTech is alive and kicking. There is a lot of dynamism in the market. Sidewalk Labs launched a Digital Twin and LEGO vision for a 25-story wooden building and put an end to the Waterfront Toronto project (approx.). Spacemaker, AI is acquired by Autodesk. Intel started to invest in PropTech. Tencent is going to develop a city as big as Midtown Manhattan in China.

In coming years, the necessary acquisitions will take place and players will disappear from the international market. Data quality, Digital Twin and ethics will be discussed many times in the coming year and immersive technologies will be ‘back on the road’. After 5 years of PropTech (the combination of property and technology) is increasingly becoming a strategic organizational topic and directors are looking for new visions, stories, and higher goals (for good) and implementation power. PropTech has found its purpose post outbreak of COVID-19, and in coming years its contribution to the Sustainable Development Goals will grow.

Conclusion

For 10 years we have lived in a positively disposed market, where operational excellence ruled. Innovation was not necessary. Rather, 'nice to have'. That is changing, because the demand for digital and sustainable is increasing rapidly. We are in the beginning of the great reset.

We are facing global challenges such as health & well-being, climate change, urbanization, etc. People & customers expect smart and sustainable products/services and business models. New players entering the market and growing in market share. Green and digital new laws, regulations and budgets are adopted and prepared. And the current socio-economic system is creaking and squeaking on all sides.

The only way to recover sustainably and digitally is by investing and innovating towards a digital and sustainable future. The changes are too complex and too big to deal with traditional tactics. New times ahead and call for new leaders.

In coming years, companies will emerge that put their money where their mouth is and invest in a digital and sustainable future. They will look for thought leadership, learning new skills, getting new insights, and ways to achieve their objectives and how to build a futureproof strategic agenda to build back better.


About the Author

Abilash Sudharsanan

Abilash Sudharsanan

Abilash has over 12 years of experience in Marketing & Sales. Prior to joining Meraqi, Abilash has worked with Idea, UKN and Vestian. Abilash is a B.Com from Calicut University, and has an MBA from CUSAT, Cochin.