What We Can Learn from Commercial Real Estate Market Statistics
Commercial real estate market statistics point to several new emerging trends that have painted a technology-driven forecast for the next several years. With a complete digital revolution underway, the office sector can expect an increase in the need for technology partnerships to successfully enhance communications with their end-users and create technology-driven experiences. This is further supported by recent data that suggests that on average, 58% of REIT respondents have increased their intent to partner with proptech companies to fulfill this very need. As the industry continues to become more digitized, commercial property data will follow suit and reflect more modern, tech-savvy office experiences.
Before we dive into the commercial real estate outlook 2021, we need to understand what the commercial real estate industry overview was like in 2020 and determine what we can learn from that information.
Commercial Real Estate Industry Trends 2020
The projected commercial real estate market trends in 2020 were much different than reality. At first glance (and before the onset of the pandemic), there seemed to be a rise in coworking spaces across the board, according to data aggregated by Newmark. Additionally, technology was seen as a “nice-to-have,” where its sole use-case was driving creativity in general office design.
Of course, in The State of Tenant Experience in 2020 — HqO’s industry outlook for last year — we anticipated a much broader usage for office technology, but didn’t know just how much of a necessity it would become. We first defined the tenant experience technologies that were just beginning to invade the market, alongside the core pillars of tenant experience that categorize what customers really care about. We also sought to prove why it was important for property teams to think of their building roadmap, and to prove the return on investment (ROI) for these new building innovations for any portfolio.
HqO’s previous report also touched upon how these technologies prompted a massive shift in the entire industry. Before the onset of the COVID-19 virus, the commercial real estate market was experiencing exponential growth and stability. Based on Deloitte’s 2019 Global Survey and Commercial Real Estate Outlook 2020, market fundamentals had boasted steady and significant increases across the board in the United States. Additionally, nearly three-fourths of the top CRE C-suite executives anticipated an increase in capital availability in 2020.
However, as the spread of COVID-19 reached global pandemic status, financial markets began to drastically decline. Developers, property owners, brokers, and tenants were all consequently forced to seek alternative solutions to not only stay afloat but to stay connected.
Without a clear direction, the commercial real estate market faced confusion. In May 2020, Facebook made initial decisions to go fully remote, only to backtrack in more recent months by signing a large lease with Vornado Realty Trust for office space in one of the country’s most desirable locations. Other major companies also adopted partial or indefinite remote work models early on, and currently are seeking ways to determine a return on investment (ROI) for physical office space.
Until now, the industry has always relied on the mere assumption that you need an office building in order to do work. As early CBRE market reports predicted, the rise of a more flexible office environment is taking hold of the workplace. Now that we’ve learned that people can work anywhere, the industry requires new tactics to keep the workforce informed, engaged, and productive. With so many digital alternatives forced upon the commercial real estate industry in 2020, commercial real estate data analytics and trends have since completely transformed to keep up with its modernization.
An Updated Commercial Real Estate Market Report
Deloitte’s commercial real estate market predictions for the year 2021 indicate that the biggest changes to the industry all involve technology. Now, digital transformation and tenant experience are a business imperative for owners and property teams. New commercial real estate market statistics reveal that most respondents (56%) believe the pandemic has uncovered shortcomings in their company’s digital capabilities. Therefore, companies are planning to ramp up their digital transformation initiatives, with 53% of respondents including digital tenant experience as a core competency in these efforts.
The survey also suggests that “companies should increase investment in technologies that can serve as building blocks of their digital transformation efforts […] About one-half (48%) of respondents who said their company is using digital technologies, such as interactive mobile apps, to increase communication with tenants or end-users, plan to increase investment on digital channels over the next year.”
In our updated industry report, The State of Tenant Experience in 2021, we dive deeper into the new trends and happenings we expect for the new year, while also discussing how adopting a data-driven approach alongside end-to-end workplace solutions will guarantee success despite any future disruptions and changes to the commercial real estate landscape.
In terms of the future of commercial real estate being more data-driven, companies now require various analytics tools to generate actionable insights and make more informed decisions about their building occupants and assets. In a recent EY Virtual Proptech Roundtable, data and analytics needs were ranked as the number one post-pandemic priority for real estate owners. These tools will contribute to several major emerging themes that came up with subject matter experts and nearly 300 HqO tenants for the future of commercial real estate in the United States and beyond. In the next section, we dive more into what CRE teams can expect to see.
Naturally, such digital changes to the industry also mean that cybersecurity and data privacy sufficiency are under scrutiny, since new potential threats come with the adoption of new technologies. Deloitte suggests that “companies should first assess whether current efforts are sufficient; if they aren’t, they should upgrade their cybersecurity programs to have greater control over both internal and external information flows.In particular, they should assess potential cyberthreats from using new cloud-based communication and collaboration tools. Companies should adopt a ‘security-by-design’ approach in which customized controls are built into new solutions.”
Likewise, additional data reveals a change to the value proposition of properties. Deloitte reveals that “more and more companies are rethinking how and when they use office spaces: Increasingly, offices will be reserved for face-to-face interactions and team-based activities, and enhancing collaboration and innovation, while employees would continue to work remotely for more individualized tasks and assignments.” Indubitably, technology will play a key role in increasing building occupancy in a post-pandemic world, and connected people to their workplace communities as the market determines the best solutions for modern needs.
Emerging Commercial Real Estate Market Trends
Besides technology aiding the return to office — which is discussed in a recent LoopNet feature entitled Proptech Aims to Help Manage Commercial Real Estate in Pandemic Era — we foresee three major trends generating value for a tenant population that has already adjusted to more tech-enabled and diversified workplace experiences:
- Streamlining Communications: Tenants and their employees placed a heavy emphasis on the importance of communication for their return to office strategies, as well as the need for more content within their tenant engagement apps that support this. According to our tenant survey, direct landlord-tenant informative pieces of content — such as spotlight sections highlighting building protocols and local updates — stood out as being the most useful “feature” of our Tenant Experience Platform.
Additionally, JLL research reports that COVID-19 has driven employees to rethink their priorities in terms of quality of life, human interaction, and personal values. Companies that strengthen connections and provide communications to establish a clear purpose for the workplace will be well-positioned to retain and attract talent.
- More Touchless Experiences: Last year, we predicted the rise of IoT and touchless technologies for the office. This year, we can verify that tenants are still looking for these capabilities due to new health and safety protocols. These concerns are directly tied to a fear of the unknown: people are still questioning their comfort and safety in the aftermath of a pandemic. A large part of the solution for this issue is adapting your portfolio to accommodate additional, tech-enabled features that will allow them to steer clear of congested areas and communal surfaces, while also creating frictionless experiences that make the workplace easy and enjoyable.
- Flex Space and a Campus Feel: According to data collected by the CBRE Research Client Survey in June of 2020, 70% of respondents claimed that more flexible work is expected. This has led tenant companies to explore new, creative office space models that afford employees the ability to choose where and when they work based on personal preferences. This topic of conversation has also come up with HqO customers, who are looking for more ways to offer flexibility to tenants while also establishing a campus-like feel through offering shared amenities and office space across their assets.
A CRE Operating System: Redefining the Commercial Real Estate Data Model
Though it’s possible to access third-party commercial real estate tools and resources to gain important property management insights and building data, we know it’s not always the more effective solution. Instead, placing commercial real estate market data directly into the hands of owners and property teams can streamline processes and create efficiencies in a given portfolio. Just imagine: You can have your very own commercial property owners database or commercial tenant database, without needing to outsource any information or process.
At HqO, we understand that digital transformation is fairly new to CRE, and that finding meaningful metrics about your building can be few and far between — and even more difficult to organize. Luckily, the HqOS™ end-to-end operating system provides CRE owners with a leap in the right direction. The three layers of HqOS — which include our Marketplace, Tenant Experience Platform, and the Digital Grid™ — work seamlessly together to produce compounding positive results for any portfolio.
Our growing Marketplace of best-in-class technology partners — which can be accessed through the Tenant Experience Platform — enables landlords to activate more of their building features, while simultaneously providing tenants with a better experience and property managers with a higher volume of rich data. The Digital Grid then takes these activations a step further, serving as a connected and streamlined analytics offering that can collect tenant behavior, amenities, technologies, and building data all in a single location. By centralizing and structuring data within our CRE-specific data model, it helps owners and operators uncover insights, take action to differentiate their assets, and make intelligent decisions across their portfolio. It can also help benchmark your building’s performance against others to accelerate best-in-class experiences for any tenant.
These new emerging trends in real estate have painted a technology-driven commercial real estate forecast for 2021 and beyond. With a complete digital revolution underway, the office sector can expect an increase in the need for technology partnerships to successfully enhance communications with their end-users and create technology-driven experiences. As the industry continues to become more digitized, commercial real estate trends in 2021 will follow suit and reflect more modern, tech-savvy office experiences. For more information on how HqO can help with these needs, schedule a demo today.
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