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What’s next: Six disruptions in commercial real estate to watch

PMI Hudson - Thursday, September 19, 2019

Think about innovations that came about in the last 30 years for a minute. Do you remember life before the smartphone? Or wireless internet? What about online banking? Such novelties solved simple problems in the lives of everyday people, and almost nobody recognized that these problems needed to be solved. But once such innovations were widely embraced, they were considered needs. In other words, there’s simply no going back. 

But despite such disrupters, one element of our society has remained relatively unchanged: the office. Experts say real estate investors need to forgo the concept of “the office” and instead think in terms of “workplace.” Such a shift can help commercial property owners understand the trends that will turn the industry on its head in coming years and better cater to tenants. 

Rethinking design 
Our economy is increasingly knowledge-based, but office spaces are still stuck in the 20th century in a lot of ways. In general, the archaic setup catered to the assembly line model. In this paradigm, workflow was linear, corporate structures were hierarchical and productivity and efficiency were the key performance markers. But the nature of work has changed since Henry Ford’s days. No longer do work settings need to be designed to create physical proximity between people for the sake of workflow. The demand for domain knowledge has replaced physical endurance in a lot of ways. Technology now makes it possible to work closely without the need to be physically present. 

And the new purpose of the workplace is to attract, retain and inspire the best and brightest talent. Experts say the modern office will start to look and feel more like a college campus, where employees choose their work environment based on the task at hand. Think Google and Amazon’s campuses. They seemed to have cracked the code when it comes to curating a workplace vibe that appeals to white-collar talent. 

Re-thinking amenities 
For tenants looking to attract skilled workers, there’s a market demand for flexible and amenity-driven workplaces. Think buildings with healthy cafes, lunchtime fitness classes, lounge areas, flexible meeting spaces, etc. What talent wants is what tenants need. And landlords must be willing to deliver or risk becoming irrelevant. 

Industrial growth 
As major department stores shutter, the e-commerce market is booming. Industrial space, like warehouses, are at a premium. Aging facilities can’t meet the demands of growing e-commerce businesses. Tech companies like Amazon require setups that older facilities can’t supply, which means missed opportunity. Insiders say these changes will drive construction of new warehouses, and complete renovations of older warehouses to meet necessary standards. 

Brick-and-mortar retail, done differently 
Despite what you may have heard in the news, Amazon hasn’t killed physical retail for good. It’s just different. Big box stores are being replaced with locally owned boutiques and shops. Vacant big-box stores will be filled with smaller tenants breaking up the space, creating a huge opportunity for developers looking to fulfill this need. Companies small and large will continue to have a need for e-commerce distribution infrastructure and physical retail spaces. This means retail will remain a particularly lucrative sector, in term of construction and development. 

Changing roles 
Such trends mean the primary role of commercial real estate professionals is being challenged. Real estate is no longer a commodity to be negotiated solely on price. Instead, better workplace experiences (design, amenities, services and technology) ultimately create happier employees, happier customers and happier property owners. 

Big data has arrived 
Big data has infiltrated just about every industry. But what exactly is this nebulous term? Development Magazine describes big data in commercial real estate as spanning “everything from leasing, financial and demographic statistics, to building systems information, to tenant movements inside of buildings. It can also include things such as social media and news feed monitoring. Much of this information is being gathered by sensors and cameras connected to the internet of things (IoT), which is the embedding of internet connectivity into devices and objects.” 

But data, without its understanding or context, is just that. Among the biggest challenges facing property owners is how to turn the massive amounts of data coming from a variety of sources into action. The same goes for retailers, who are looking to make more informed decisions. 

Staying ahead of the curve can mean increased profitability. Keep these commercial real estate trends in mind as we move into 2020. In the meantime, garner more crucial insights by working together with the professionals at Property Management Inc..We’re here to help you make the best and most informed commercial real estate decisions and maximize profitability. 

Why work with us? Commercial properties are unique in so many ways and you need professional management on a “business-to-business” level. From lease negotiations to property maintenance, we are proud to be the best choice in your region! Give us a call to start the conversation: (385) 484-5010  

 By: danessa_i