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How Is Commercial Real Estate Preparing For The Future?

Re-Leased 01 October 2018

Commercial real estate (CRE) companies need to recognise that traditional business models must evolve as the world around them changes. These companies will benefit from rethinking their business strategies and considering new and innovative ways to achieve them.

Shape up or miss out, that’s the warning from Deloitte Centre for Financial Services in their latest report Innovations in commercial real estate | Preparing for the city of the future.

The future of mobility

Self-driving cars are down the road and with them so are major changes to the built environments of cities, streets and buildings. This change means property managers need to reconsider how they’ll use (and sell the value proposition) of spaces in the future. A lesser need for parking in central business districts, both on and off street, will free up huge areas of space.

Already in some cities in the world landlords are converting ground floor parking into commercial retail space to capitalise on street-level access and a falling demand for central city parking.

Deloitte is pointing to the rise of new kinds of space requirements as the automation revolution takes hold, whether that’s garages for driverless cars, or reconfiguring warehouses to effectively use automated loading machines.

They say CRE companies and commercial property owners should respond to these changes by evaluating the value of new mobility options on real estate, whether that’s redeveloping parking, or redesigning spaces to accommodate self-driving vehicles.

Occupier health and wellness

People have become more discerning about health and wellness and how that relates to the built environment around them. A global 2016 Deloitte Millennial survey revealed that Millennials continue to place significant importance on well-being at workplaces.

As a response, many companies are increasingly considering how to best respond and improve the health and wellness of their tenants and residents. CRE spaces that don’t cater to the modern tenant won’t get the modern tenants for business.

Having tenants that love a space means CRE companies can attract higher paying tenants, with less churn and fewer knock-on costs.

Deloitte suggests CRE owners should consider collaborating with tenants to understand what they want and “appropriately incorporate design elements that can help promote health and wellness”.

The rise of the Internet of things (IoT)

Technological innovation in buildings is all part of preparing for the future in CRE. Re-leased has previously taken a run at how businesses can adapt to improve their buildings and make their businesses smarter.

And Deloitte has identified the Internet of Things (IoT), or addition of smart proptech as a major consideration for CRE into the future.

They even warn that “tenants may soon come to expect IoT features” and that as a result “buildings lacking them may trade at a discount,” which could see CRE owners who miss the boat losing out big time.

3D printing technology is driving tenant personalisation and efficient construction

Builders, if they're so inclined, may soon be able to print entire floors in the pursuit of a quick and easy build. In China and Dubai, low rise CRE buildings have been developed with 3D printing, with construction time cut by up to 70% and construction cost by up to 80%.

3D printing has huge implications for construction, just as it does for manufacturing and design.

Deloitte identifies it as both a threat to warehousing, as less space will be required, as well as an opportunity for retail to respond on-demand.

They say it allows “for more customised and on-demand production and delivery” and an “opportunity to E&C companies to innovate current construction practices”.

Bottom line is this: it's important for CRE owners to consider the impact and usage of 3D printing by tenants and on tents when making developments and purchases.

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