Each year, we take a look at the Emerging Trends in Real Estate report that’s released by PWC and the Urban Land Institute to see what changes to expect in the commercial real estate industry. The report for 2018 is out, and Crunkleton has a breakdown of the major highlights when it comes to office and retail.
Although these trends are presenting themselves nationwide, it’s important to note that many of the items found in Emerging Trends generally take a longer time to reach smaller markets—on average 5-7 years. This must be considered when examining Huntsville.
So what trends should you be watching in the years to come? Here are just a few:
A Focus On “Generation Z”
It’s true that while Millennials are still on everyone’s mind, the younger Generation Z is beginning to influence the future of office space, retail, and housing.
Generation Z falls between 1995-2001 and totals around 65 million to 75 million people within the United States. As the newest group to enter the workforce, businesses and building owners are carefully looking at the major transformations they could bring to the workplace.
According to Emerging Trends, this generation is likely to show the same initial preferences for urban-based work environments that Millennials did. However, there are some key differences that should be noted.
- Surveys suggest that potential for growth and stability are the two main factors Generation Z desires when searching for a job.
- The design of workspaces will need to adapt to accommodate the collaborative space-loving Millennials and the structure-seeking Generation Z. Emerging Trends reports that the new generation is trending toward more structured/personal office space.
While Generation Z is the next hot topic, one can’t forget that the workplace is multigenerational. Baby Boomers are staying in the workforce much longer than expected, and this greatly affects the preferences you’ll see in the modern work environment.
When it comes to retail, Generation Z is seeking more omni-channel experiences. Essentially, they want to be reached on a number of channels that make purchasing convenient and engaging.
Omni-Channel Retail Becoming The Norm
If you aren’t familiar with the concept of “omni-channel retail” here’s a quick breakdown of how it works. Retailers are reaching potential and current customers on several channels at once—online, mobile, email, apps, social media, and physical stores. It makes it increasingly easy to purchase an item on whatever channel suits the consumer.
Emerging Trends states, “even the largest online retailers are now acquiring brick-and-mortar locations and moving away from pure-play Internet distribution.” This allows retailers to reach customers from every angle and make their brand an experience.
There’s an increasing demand for the “eat, play, live” model that makes a shopping experience double as a social exchange. This means developers are called to become increasingly creative with how they implement new shopping destinations in the market.
An Evolving Office Landscape
Office job growth is strong and expanding 2.2 percent on average compared to 1.6 percent total job growth. Employers are competing for talent and are creating attractive, flexible office spaces to help draw in new employees.
Emerging Trends reports a demand for close-in suburb offices that provide central business district amenities. Millennials particularly are looking for the best of both worlds. Offices in suburban areas with reliable public transportation, walkability, high-quality real estate, and live/work amenities are important. Examples of these “new suburb” areas include Brooklyn in New York City and Belleview in Seattle.
The lines between working and playing are continually blurring, and many offices are attracting tenants with “transformational office amenities” like large public gathering spaces, food options, high-end fitness facilities, and rooftop spaces—just to name a few. This is further expanding to include daycare facilities, rest areas, and game rooms.
However, office owners are constantly working to develop spaces that not only offer open-space environments, but also plenty of flexibility for private spaces that reduce noise and increase focus.
And finally, technology is affecting the office real estate landscape. Spaces are evolving to become more energy efficient with conveniences like motion-activated lights and the most advanced audio/video setups that the market has to offer.
Deconstructing The Department Store Model
It has been decades in the making, but the deconstruction of the full-line department store business model is in its final phase. In the words of Emerging Trends, “department stores are closing operations at an increasing pace, threatening all but the best malls with extinction.” The report states that department store sales once totaled in the hundred billions of dollars annually, but only comes to around $70 billion today.
This means malls have to adapt in order to attract consumers—by adding more unique retailers and local goods. And most large department stores have decreased their product offerings over time and now only provide three primary categories of goods: apparel, housewares, and cosmetics/fragrances.
Other factors are affecting the retail real estate industry, as well. Some of them include changing consumer demographics and preferences. Baby Boomers are still the largest single U.S. consumer group but are entering a new stage of life where they will consume less, shed assets, and spend higher amounts on entertainment, dining out, and travel. Millennials are appearing to follow suit by spending less on apparel and housewares and more on entertainment and dining out. This is all the more reason to create retail centers that add a “social dimension.”
Old-fashioned human interaction cannot be computer-generated. And the outlook looks great for retailers who are able to harness the power of community and offer more than an exchange of cash for goods.
All information, opinions, and predictions presented in this article come from the Emerging Trends in Real Estate Report 2018.
Interested in reading the full report? CLICK HERE to download the document.
“Now in its 39th year, Emerging Trends in Real Estate is one of the oldest, most highly regarded annual industry outlook for the real estate and land use industry. The market outlooks included in each edition are based on an extensive survey, multiple interviews, and individual market focus groups. Readers’ interest in all markets continues to increase, so the 2018 edition provides a regionally based look at all 78 markets included in this year’s survey. Throughout the report, we’ll explore a variety of trends we’re seeing in the industry, as well as analyze the prospects for 78 metropolitan markets for the coming year.”
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CRUNKLETON COMMERCIAL REAL ESTATE GROUP