When it comes to real estate, every city and every property type are different. What might be happening in the market in San Francisco isn’t necessarily the same in Atlanta. The forces affecting office are not doing the same to the market for industrial. But there are some trends that are so large that they affect the entire industry, no matter what the market or property type. These kinds of “metatrends” are so impactful that they will likely change the property industry forever.
These large trends are forces of nature. And like nature, the complex interactions of which they are composed are not always easy to understand. “When one tugs at a single thing in nature, he finds it attached to the rest of the world,” John Muir once said.
But tug on these trends we must. That is why every year we task our writers with writing an essay asking hard questions about what we identify as the biggest, overarching trends. These questions, and the answers to them, have the ability to impact the entire industry and the rest of the world that is attached to it.
Decarbonization
Greenhouse gas-induced climate change is no longer a theory. We have already seen weather become more extreme as CO2 levels rise. But even though there is a general consensus from the world’s population about the need to reduce CO2, doing so proves to be incredibly complicated. One of the focuses of the world’s push to decarbonize is our buildings, which of course are some of the largest consumers of energy. Pressure by regulators, investors, and tenants has already started pushing buildings in a more sustainable direction but there is only so much that we can expect buildings owners and operators to do. After all, it’s not the building itself that consumes energy, it is the people inside of it.
To actually decarbonize our buildings will take a team effort between the property industry, governments, utilities, financiers, and occupiers. The task (and price tag) of reducing the world’s building’s carbon footprints to the level we need to prevent a climate catastrophe is monumental. There will be no path to our carbon goals without teamwork and sacrifice.
Accessibility
Creating a more inclusive environment is on everyone’s mind at the moment. From protests to boycotts to corporate mandates, the movement of inclusivity has seeped into every aspect of the business world. One aspect of inclusivity that building plays a critical role in is accessibility for those with disabilities. Disability rights might seem like a fringe idea until you learn that one in four Americans is diagnosed with a disability at some point in their lives. The Americans with Disabilities Act is nearly 35 years old but many say that it does not do enough. We will likely see a renewed push to make buildings accessible to people with disabilities.
Offices have found themselves at the forefront of the shift to a more accessible world. Getting people back to the office has proven tricky. Creating safe, accessible spaces will be paramount to the office’s comeback. What if offices could not just be accessible to people with disabilities, but be a champion for them? Offices of the future will need to be designed for everyone, no matter their physical or mental abilities.
Office conversions
The return to the office is upon us but even the most bullish on the role a physical workspace plays in our organizations will admit that we will likely see some offices struggle with vacancy. Empty offices do not help anyone. The investors and underwriters of the buildings stand to lose money. The areas surrounding them lose valuable foot traffic. The municipalities that govern them lose tax revenue.
Many have pitched converting offices into residences as a way to reverse the tide of eroding office occupancy. But these conversions are not as easy as many might think. Besides the obvious barriers like plumbing and HVAC, office buildings have larger floor plates and a lack of windows. We will certainly see a number of office buildings get converted to residential use, but it will not solve some of the bigger issues of unused space and empty downtowns.
Housing affordability
The cost of housing has risen in most American cities. On the surface that might seem like it would benefit the real estate industry; higher rents and property prices create value for property owners. But the reality is a lot more complicated than that. The strain that unaffordable housing is putting on our cities will cause long-term problems that will eventually erode the economies that real estate needs to be valuable.
So what is the relationship between the property industry and housing affordability? Is there an opportunity for the real estate owners and developers to ride the public sentiment about affordable housing to rebuild our cities for the better?
