What Real Estate Trends to Expect in 2018
The real estate industry is dynamic and constantly undergoing change. We are expecting its major trends to develop in 2018. There are significant revolutions underway, covering digitalization, technology, demographics, cultural norms and other developments. Here are some of the trends that investors should be keeping an eye on, which will continue to affect the real estate market in the year to come.
Technology Startups and Alternative Capital Options
The rapid advances in technology and the substantial number of fintech startups in the real estate industry are providing lower cost solutions at a faster pace than the older, more established, institutions. These disruptive and innovative ventures are driven by the entrepreneurial spirit of our times and are focused on both fintech and operations-related technology startups.
While operations-orientated startups tend to focus on the core real estate issues such as property, facility, rental and tenant management, the fintech revolution is enabling alternative financing and democratizing investment. There is a wealth of platforms now available for online real estate options for both institutional and individual investors, which include digital lending, real estate transactions services and crowdsourcing finances for real estate projects. This revolution has diversified the lender base and provided access to previously unexposed individual investors.
Rise of the Smart Cities
Although we are still at the very beginning of this phenomenon, the smart city trend is on the rise with municipalities looking to provide improved public services, enablement of data collection on infrastructure and the general betterment of city residents’ lives. Forecasters following the unprecedented population migration to cities predict that, by 2050, 70% of the world’s population will be urban. The skyrocketing demand in urban centers for resources and improved services in all spheres of public life are on the rise.
As of 2017, few global cities have actually become “Smart Cities” with the adaptation of IoT (Internet of Things) solutions, and many are still in the initial phase of evaluating potential options. Smart city is no longer just a vague idea as many cities have started to address the matter with the utmost seriousness backed by large budgets. With the ongoing developments in the ecosystem, there are more companies entering the sphere to provide solutions to these current and, more importantly, future challenges. As the demand for real estate in these urban centers grows, those prominent cities that embrace a smart city and green environment roadmap will more likely see a growing demand and soaring housing prices in the long term.
As we have witnessed over the past few years, the trend of smart homes is in a phase of actualization with technology, automation and remote control capabilities within the home for lighting, heating and security. This is also a continued trend which real estate management companies should stay on the ball with, as there is growing mass appeal in this space.
Office Space Evolution
The growing trend of on-demand and shared office space has made its way to the mainstream. Companies like WeWork have not only disrupted the industry in terms of real estate, but also in terms of business efficiency and employer productivity. With companies, now more than ever, pushing employees to be productive, we are witnessing more companies looking to relocate to more favorable locations and working to create more worker-friendly environments that promote greater success. The resulting workplace trends include smart office space, green design and greater flexibility. This has a significant effect on developers and commercial property owners, who need to tailor their assets and business models in light of the changing workplace needs.
Ecommerce and the Effect on Commercial Real Estate
The retail transformation is well underway and growing at tremendous speed. There is no expected brick and mortar apocalypse in the horizon in 2018, as US retail sales continue to rise from year to year over and above the exponential rise in ecommerce. However, stores in certain sectors are finding a decline in foot traffic that is affecting business. Retail technology in the online space is improving at a staggering rate and there might need to be a change in plan for landlords and investors in the not so distant future.
There is a constant and growing need for affordable rentals for millennials, and now generation Z, across all markets, but especially in secondary markets. Another focus point on the demographic level is the aging population and their senior housing requirements. There is also a growing shortage of skilled workers in the real estate industry, which relies heavily on the baby boomer generation. Changing demographics impact the market significantly; while multifamily will continue to remain a strong investment, we are witnessing a growing shortage of mid-sized affordable family homes. The demographics factor is key for investors to follow in order to see what housing matters will certainly be addressed for the years to come. All in all, there is a wealth of opportunity for developers and investors who can see the requirements for the immediate future written on the wall.