The real estate industry is changing and doing so in a hurry. The incredible growth trends we’ve monitored from 2020 and early 2021 are expected to continue to close out the year. Even amidst a pandemic and recession, real estate continues to sell at a breakneck pace.
According to Linchpin, the real estate industry is currently filled with optimism. With mortgage rates predicted to remain lower than five percent, the demand for housing is expected to continue. The following storylines are ones we will be paying close attention to as we enter the second half of 2021.
The Economy (and Real Estate Sector) Hang On
Though real estate capital markets have settled, most anticipate overall real estate prices to fall 5-10 percent as income is curtailed for several years. Industrial properties, data centers and single-family homes are expected to rise in value, while retail (i.e., traditional brick and mortar storefronts competing with Amazon) will see the largest decline.
Work From Home Accelerates Home Office Functionality; Office Space Will Reduce
The rapid shift to widespread remote work is considered the ultimate test of digital transformation in the workplace. Companies that invested in digital capabilities saw great success with work from home policies, and 94 percent of real estate professionals agree that companies will allow employees to work remotely at least part-time in the future. As a result, some businesses will shrink their footprints as a cost-savings measure. However, more than 60 percent of professionals agree that office tenants will expand spaces for new ways of collaboration and interaction while complying with social distancing measures.
Suburbs Will Grow
COVID-19 is accelerating suburban growth, especially in the Sunbelt markets. With a greater emphasis on health and safety, the need for lower-density environments and more space has only grown. Remote work along with higher taxes in large cities due to declining tourism and tax revenue both contribute to this shift.
Stores Still Matter
The next few years promise to be “retail’s great transition period,” as demand for larger retailers and department stores dwindles in favor of discount stores, fast fashion, and online retail. More than 80 percent of participants agreed that COVID-19 accelerated the shift in retail that likely would have occurred over the next few years. As a result, expect to see a much smaller physical retail presence and vast amounts of vacant space with lower rents. Top brands will take advantage of lower prices to upgrade their locations, while malls will leverage empty space to improve their tenant roster or convert to distribution centers for online retailers.
The rapidly changing Real Estate environment can be difficult to wrap your head around. However, RCM&D’s dedicated Real Estate Practice Group is here to help you understand critical changes, address new issues and develop strategies to help your organization thrive in the future. Talk to a trusted advisor today with any questions on these new and emerging trends.