Smart City - Illustrative photo.
(photo credit: INGIMAGE)
Major trends are expected to develop in 2018. There are significant revolutions under way, involving 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 coming year.
The rise of 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 residents' lives. Forecasters following the unprecedented population migration to cities predict that by 2050, some 70% of the world's population will be urban. In urban centers, demand for resources and improved services in all spheres of public life is on the rise.
As of 2017, a few global cities have actually become "smart cities" with the adaptation of IoT (Internet of Things) solutions, and many are in the initial phase of evaluating potential options. The smart city is no longer just a vague idea, as many cities have begun to address the matter very seriously, 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 trend that real estate management companies should stay on the ball with, as there is growing mass appeal in this sphere.Office space evolution
The growing trend of on-demand and shared office space has made its way to the mainstream. Companies like WeWork have disrupted the industry in terms of not only real estate but also 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 under way and growing at a rapid rate. There is no expected brick and mortar apocalypse on the horizon in 2018, as US retail sales continue to increase 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 near future. Changing demographics
There is a constant and growing need for affordable rentals for millennials, and now generation Z, across all markets, especially in secondary markets. Another focal point on the demographic level is the senior population and their housing requirements. There is also an increasing 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, there is 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 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.Technology start-ups and alternative capital options
The rapid advances in technology and the substantial number of fintech start-ups 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 start-ups.
While operations-orientated start-ups 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 to 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.
Social investment networks, where real estate investors aggregate opinions and make investments, have become a well-developed and trendy industry. Technology, the democratization of the Internet and an ease in regulations have opened the doors for a surge of new investors to enter the real estate market like never before. The evolution of the real estate investment market online started as a phenomenon that attracted only the tech-savvy but now has become a mainstay which industry experts predict will continue to thrive, and we will continue to see exponential growth and greater innovation in the years to come.
One of these growing technological trends is the social investment platform, where online real estate investments take place with ease, security, speed and professionalism like never before. For example, iintoo is a social investment platform that helps accredited investors acquire ownership shares in commercial-grade real estate while simplifying the entire process of choosing, entering and managing investments. At iintoo, you can choose your real estate deals according to asset class and locality, and acquire equity from $25,000.
The author is head of acquisitions at the iintoo real estate fund.