The future of commercial real estate

“Commercial + real estate” is the simplest definition of commercial real estate. Commercial real estate can be viewed as a model that blends company operations management with real estate investment and development, based on its underlying paradigm.

In a nutshell, commercial real estate’s carrier body is real estate, and its core soul is commercial operation. The value-added of commercial real estate can be divided into three categories: the value-added of the property itself, the value-added of commercial circulation activities, and the brand value-added of commercial operation and real estate development.

There is no doubt that it is an epidemic

The epidemic has encouraged the commercial real estate industry to consider future changes in consumption and work patterns, as well as a better knowledge of demand transformation and market vulnerability in commercial real estate. This has compelled commercial real estate developers to expedite their transformation, with the best strategy to mitigate risks being to reduce heavy asset investment and increase light asset investment.

Impact of technology

Commercial real estate is changing all the time, thanks to the growing integration of technology at all levels of the sector and in all kinds of properties. The commercial real estate market is solid and cautious optimism remains more than a decade into a modest but steady cycle of expansion.

The market of commercial real estate has been gradually shifting in recent years as technology and innovation have advanced. The recent epidemic of COVID-19 has only accelerated these market patterns. The epidemic will have a long-term impact on commercial real estate, pushing owners to adjust and reconsider their business strategies.

Many people are still working remotely more than a year and a half after the outbreak began, so many organisations must assess if the expenditures of maintaining their office facilities are worthwhile.

Of course, investors face new hurdles as a result of generational shifts, changing occupants, and increasing product specialisation. In addition, several operators are looking to expand into other markets in order to address unique needs. The industrial landscape is being reshaped by technology.

New businesses aiming to better the supply chain will not only alter how other businesses acquire industrial space, but they will also begin to shape new markets as they grow.

We should expect a rise in demand for space in the market as these new companies aim to transform the industrial area and continue to expand.

Demand for speciality real estate will be driven by the life sciences sector’s momentum

The demand for a highly technical facility to allow research and development as well as production grows as the life science industry expands.

Alternative asset investors should expect larger returns than those generated by typical office buys.

Traditional small office leases have been declining due to the rise of coworking.

The number of small space tenants in the traditional office market has decreased as coworking has grown in popularity. Although the fall in the volume of smaller deals is a source of concern for investors, it may have reached a tipping point due to sluggish growth in the coworking and flexible office space sectors.

The market for small direct-to-owner leases could be revitalised as a result of this decline in activity.

The tech industry fosters innovation in office design

Tech firms are pursuing millennials by locating in central business districts and eschewing typical office towers in favour of more collaborative and well-equipped spaces. In certain countries, however, this is not the case. As an example, in Africa, these structures have grown extremely popular. Everything will be determined by the operators’ location.

Their high-growth nature entails the requirement for scalability and flexible lease durations. The building design has become a company’s most powerful recruitment and retention tool, both in terms of carefully picked sites and arranged space. The relationship between office asset categories has grown into a symbiotic one in which one is at least semi-dependent on the other. The development of new office space to satisfy the demands of enterprises desiring to expand their presence in cities where an urban core has been developed and maintained is a trend that is likely to continue in the years ahead, maybe even in the region.

Final Thoughts

The difference between early and late will be the era of huge asset management in the future. The asset stability of commercial real estate as a whole will be improved, and the sources of funding will be expanded, ensuring that commercial real estate will continue to have more development prospects in the future.