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If 2020 taught us anything, it is that trends can be created, evolve, or halt on a dime. Businesses had to adapt quickly due to the COVID-19 pandemic causing widespread change last year.

This week, we are taking a look at the annual report released by PwC and the Urban Land Institute to see what leaders in the commercial real estate industry are observing. The document covers all areas of real estate with information gathered from experts worldwide. It specifically focuses on trends that are affecting larger markets such as New York City and Los Angeles. While the following trends may already be widespread in those areas, they typically take longer to reach smaller markets like Huntsville.

According to Emerging Trends In Real Estate 2021, the pandemic and its effects—for the most part—“did not create new trends but accelerated those that were already underway.” It also led various property types in new directions and caused the temporary stop of certain retail themes. (Namely, in-person experiential retail.) But these changes are temporary and the industry believes that once consumers feel safe to resume normal activities things will return to pre-pandemic conditions.

Here are some notable trends we think are worth mentioning. If you want to read the full report, CLICK HERE.

Adapting Food & Beverage Experiences

Innovation was the key ingredient for sustainability in the retail and hospitality industries throughout 2020. When searching for space, potential restaurant tenants placed importance on features like outdoor dining areas, drive-thrus, curbside pick-up parking, and other functional elements that made the increased takeout and online ordering model possible.

Most experts believe that once people feel safe to venture out in public again things will more or less return to pre-COVID conditions. But it is likely the demand for takeout ordering and pickup options will remain viable in the future.

In many cities, including Huntsville, restaurants got creative by moving tables and service to the streets. Between June 2020 and October 2020, parts of Holmes Avenue in downtown were blocked off during set hours to allow dining in the street, which created additional seating at a safe distance. This idea was echoed in larger markets like New York where they implemented a program that allowed restaurants to use streets, sidewalks, and public spaces for additional seating.

Changing Office Needs – Space & Flexibility

2020 was the year the “Work From Home” model was forced into the limelight. And while this solution worked well enough for some companies, it did not come without challenges or setbacks.

Companies are searching for ways to increase the flexibility of its workforce. Tools like Zoom have made communication in a strictly virtual environment effective so far and allowed businesses to maintain social distancing. But the pandemic also exposed many of WFH’s weak spots.

For instance, many workers view the physical office space as crucial to the fostering of company culture, talent retention, training, and mentorship programs. This is especially true for younger employees who are less likely to know what is expected of them and feel a disconnection from the company and its organizational goals when working exclusively at home. “People can’t rise in an organization in a remote-only setting,” said one CEO. Furthermore, the WFH model relies on access to technology and connectivity at home—something that varies greatly by income level and geography.

Current trends are also affecting the requirements of physical offices when it comes to the amount of space needed, available technology, and safety/health procedures.

When polled, “sixty-three percent of professionals surveyed felt that office tenants will require more square feet per worker than what was required pre-COVID.” Facebook, for example, leased 730,000 square feet of office space in New York in August 2020 even while acknowledging that it will allow many employees to remain working from home.

Increase In Property Technology & Outdoor Access 

“A greater emphasis on safety and wellness will change the way that buildings are designed and operated,” stated one Emerging Trends representative.

Developers and employers may be looking to add additional property technology (proptech) features like improved air filtering and UV lights in HVAC systems, touchless controls on sinks/doors/elevators, motion sensor lights, voice commands, new cleanliness guidelines, and other items that favor a healthy work environment.

Managing indoor safety is at the top of everyone’s list and companies are searching for ways to improve communications with employees and customers about ongoing health protocols. Some are calling these safety additions the “must-have differentiators” when it comes to attracting business or tenants.

Additionally, communal spaces are placing an increased value on outdoor areas, fresh air, oversized windows, and natural light. Gathering in confined spaces is currently not the safest option and having access to outdoor patios or green space is a sought-after amenity.

Changes In Shopping Patterns & Retail Space Uses

Retail is consistently reinventing itself to serve the trends of today. According to Emerging Trends, “people still purchase the vast majority of their retail products and services in stores, and some current setbacks will prove to be only temporary once it is safe to shop, socialize, and recreate.”

When it comes to shopping patterns, households are showing a heightened interest in shopping locally. This could be due to a decreased ability to travel as well as a desire to support the community.

Finally, the report paid attention to the future of the nation’s malls. The enclosed mall model of retail was steadily declining before the pandemic and the conditions only accelerated this existing trend. Class-A malls will likely avoid most of the fallout from shrinking department stores and Class-C & D malls will have to convert to other uses. “Amazon reportedly is considering taking over Sears and JC Penny stores for use as distribution hubs,” says the report.

Class-B malls—those still open but declining in sales—have “perhaps the most interesting opportunities to upgrade through selective conversion of vacant or obsolete space to create more sustainable mixed-used centers.”

For more interesting insights and an in-depth look at predicted commercial real estate trends, read the full Emerging Trends in Real Estate 2021 report.

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