ULI Baltimore Bulletin

Emerging Trends in Real Estate 2019 Recap

Written by: Ghadeer Mansour

Velvet red curtains draped the auditorium for the Urban Land Institute’s Emerging Trends in Real Estate 2019 event. Guests filled the red seats and speakers took the podium to discuss how the built environment is adapting to transformative times.

Anita Kramer presented an overview of the PwC and ULI Emerging Trends in Real Estate 2019 report. With the top four words describing the 2019 market being plateau, competitive, evolve, and cautious, she began by asking the audience, “How would you characterize the expected profitability of your real estate business in 2019?” The results were on par with the research: roughly 70% expect ‘good-exceptional’ profits, and 30% expect just ‘fair’ profits.

Anita highlighted the report’s findings via the following ten trends in real estate:

Intensifying Transformation refers to the real estate market’s evolving data analytics, transparency, efficiency, lower transaction time, sharper competition, more joint decision-making and more diversity in stakeholders in 2019.

Easing into the Future discusses the natural population change occurring in America and how real estate is adapting to changing consumer behaviors – like Amazon Go implementing a new buying approach and Robo-Mart bringing fresh produce selections to pick from at any doorstep, then rolling away as autonomous vehicles do.

 18-Hour Cities 3.0 is a trend that encourages smaller markets with lower cost of doing business, urban walkability, and a better quality of life. 17 out of the 20 top rated cities for doing business are smaller markets, exhibiting higher growth, less volatility, and the importance of economic diversity.

Amenities Gone Wild sheds light onto the tightened labor market and the use of amenities in all property types – even industrial – to attract workers. Office developers are prioritizing amenities as 81% of employers feel that the proper amenities are one of the top three things they can offer their employees.

Pivoting toward a New Horizon is the concept that the real estate industry has been slow to adapt, but this is changing as co-working space emerged from innovation, and investments in tech and tech firms have grown.

Get Smart: PI + AI shows artificial intelligence enhancing personalized intelligence across job functions. Automation’s impact on real estate is the need to re-imagine use of space, like obsolete banks.

Myth of Free Delivery unfolds with 30% of online purchases being returned on average. The unseen price of this new economic activity includes traffic congestion and infrastructure maintenance, which begs the questions, who is paying for it?

Retail Transforming to a New Equilibrium is despite retail sales remaining largely in stores at 88%, new brick & mortar buildings are replaced by more efficient uses of space; for instance, healthcare is moving to consumers.

Unlocked Capacity shows where partnerships can flourish, bearing in mind that locals give a higher average to their city than national outsiders looking in.

Responsible Investing is rooted in the principle of sustainability, simply and sincerely.

Following Anita’s presentation, a panel of practicing industry professionals took a deep dive into how real estate trends observed on-site are shaping the region. Panelists provided trends and insight into their respective realms of retail driven mixed-use development, REITs, architecture, and construction. Terri Harrington of MacKenzie Commercial Real Estate Services moderated the discussion, first pointing out the rising interest in Opportunity Zones and multi-family properties, cost of capital in terms of debt versus equity, and construction costs growing faster than rent.

Vaki Mawema of Gensler cited the importance of synthesizing data to position a project, and to identify opportunities. Assets with great location, density, foot traffic, historical context, transit, and connectivity can deliver the live-work-play model. Experiential environments can further curate the public realm, according to Vaki.

Tom Kelley of Corporate Office Properties Trust (COPT) similarly shared case studies that pointed to trends of curated ecosystems for start-ups, shrunken companies, temporary or coworking in commercial real estate. Experience-driven workplaces are created by amenities, and location matters for proximity to customers, mainland internet hubs and fiber. Tom also shared the industry trend of cyber-security, given the investments in property technology (PropTech) within the real estate industry, similar to financial technology (FinTech) in the financial sector.

Bryce Turner of BCT Architects illustrated lifestyle trends that the industry is adapting to. People-watching is being embraced in real estate, as we like watching others be active and being in places we aren’t supposed to be, like novelty alley bars. Society’s increasing informality is reflected in repurposed materials, revealed Bryce. Echoing Vaki and Tom’s sentiments, he says place-making is about creating an experience and retail is more about hospitality than just a point of sale.

Kelly Cantley of Bozzuto Construction indicates that costs are up 10%-12% but she expects relief and normalization in 2020. Construction cost influencers of 2019 are labor shortages, tax laws, tariffs, and subcontractor capacity. Kelly sees the construction industry increasing investments in innovation – drones, robotics, and video-imagery, while the integrated approach is reducing risks and modular off-site building is saving costs.

The sentiment of restrained enthusiasm and lessons learned in real estate are captured in the emerging trends of 2019. Panelists were asked deeper questions on these trends and how they apply to particular projects and case studies. Afterwards, discussions continued as trays of appetizers traveled among the networking guests of ULI. Cheers to all that 2019 brings to the world of real estate.

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