Emerging Real Estate Trends in North America in 2023
PwC in collaboration with Urban Land Institute have launched the annual ‘Emerging Trends in Real Estate’ paper for 2023. The publication provides an outlook on real estate investment and development trends. In this blog we look at some key takeaways for North American cities from their report. For the full report visit PwC website.
The report demonstrates that the majority of workers are still not in the office as much as they were before the pandemic – at least in major markets – this has led some large corporations to issue ultimatums to its workers. This clearly shows, that at least from the senior management point of view, the workforce is more productive, either due to more collaboration within the team or better relationships.
It is still too early to tell if further in the future such demands will translate into more in-person work than in the past few months. It seems that there is a shift in consumer behaviour as most office workers don’t want to commute more than occasionally.
This is having an impact on the real estate industry. Some insiders suggest that 10-20% of current real estate stock might have to be repurposed. In any case, there will be more pressure on landlords to deliver what tenants want. Many firms continue to hold onto their offices either as a precaution to increasing occupation of their offices, or because their lease is not expiring yet.
In summary, PwC predicts that we won’t see a mass departure from the office building going forward even under the most pessimistic scenarios. The office of the future is likely to look different, but will not disappear.
Climate change is set to adversely affect the commercial real estate sector if the industry doesn’t act on the impacts (and causes) of climate change.
43% percent of US adults have experienced severe weather, like floods or intense storms in the last year. The increasing impact of adverse weather on communities means that asset managers must undertake improvements to their building infrastructure to withstand extreme weather events. Further, insurance coverage costs are increasing in high-risk locations. Solely relying on insurance to protect buildings will be more expensive in the long term.
There is also greater pressure from different groups in society, such as governments, environmental organizations and individuals, to make buildings more sustainable. This might translate into more federal laws and regulations for commercial buildings. There is also a call for greater transparency in how developers are adapting to environmental, social and governance (ESG) protocols.
The report suggests that building owners should look to government incentives to help them hit the emerging climate goals and meet the increasingly challenging environmental regulations.
The report highlights positives in the government’s investment in infrastructure to make cities smarter and fairer. The proposed $550 billion bill will be invested in transportation – roads, rail, ports and airports – as well as broadband internet, power structures and environmental remediation.
The investment has significant potential to improve cities and help communities economically disadvantaged by poor infrastructure remove barriers to opportunities. As such, it has enormous potential to make cities more attractive and even encourage a return to the office.
The metaverse has some potential impact on CRE and business leaders are closely monitoring developments.
Metaverse promises a 3D digital world where one can – amongst other things – purchase and sell goods, sign contracts, recruit talent and interact with customers. Already, companies are looking to this technology to improve consumer experience, introduce virtual products, collect customer data support payments and finance.
Real-world activities that require real estate – in-person conferences, exhibitions, meetings and trade shows – could be enhanced with the metaverse. However, at the moment it is very unlikely that it will replace the.
One of the major areas of our lives metaverse could impact is the workplace. It can enhance collaboration and improve the workplace experience, especially as many workers are still demanding flexible work arrangements.
Nevertheless, as with any new technology metaverse poses risks, including potential data privacy breaches and cyber security risks. Businesses should complete thorough assessments in terms of the companies vulnerabilities to metaverse risks and vet potential partners.