The last 30 years have brought extreme changes to the commercial real estate industry, and the next ten are sure to bring even more as new technologies are introduced, and a new generation enters the workforce. As these shifts occur, where should those in the industry expect to see the most change and how can they adapt to the changing face of commercial real estate?
These are some of the most prominent ways the industry has changed and will continue to shift.
Typically, the commercial real estate industry has been slow to evolve with changing technology, but that is slowly changing. In the first half of 2015 over $90 million was invested in CRE tech companies and the last 24 months have brought more change, as new CRE mobile apps hit the market.
There has always been a demand for data within the industry, and gathering that data has always been extremely tedious and time-consuming. This need, combined with the fact that agents and those in the industry are always on the move, in the field, or in meetings, has demanded that the industry catch up with technology. It’s clear that this need is being recognized if you look to where venture capitalists are investing their money. While it’s still in flux, over the next few years, technology will change the industry by offering better access to data, leasing and property management apps, and simple user experiences.
The Millennial Mindset
As clients and as agents, Millennials are playing a large part in the ways the CRE industry is changing.
Millennials who have grown up with the internet and cellphones have never known a world where they had to wait for information. Communication has always been at their fingertips, and as they enter the workforce and the CRE industry, they expect the same.
As clients, they demand more information about the properties in which they are interested before they take the time to see that property. They demand photos, video, reviews, and the ability to check out the surrounding community, all before they will even consider talking to an actual person about the property.
As agents, or those involved in the industry, their work environment needs to meet their needs for communication, collaboration, and mobility. Less likely to stay with companies that aren’t adapting the newest technologies, firms and agencies need to start considering this generation when designing their offices and cultivating their cultures.
New Funding Options
By combining that Millennial mindset with new technology, the investment opportunities in the industry are suddenly available to a new group of people who, in the past, may have been excluded. In a past economy, commercial real estate investments were only possible for those who knew the right people and had deep pockets (five or six figure pockets). But, the passage of the JOBS Act in 2012 lifted restrictions on the advertisement of securities to accredited investors. This opened up an opportunity for real estate crowdfunding, which allowed individual investors to invest for a few thousand dollars.
On a crowdfunding platform, investors can connect with private real estate deals online without hitting the obstacles that once existed. This opens up investments to a new group of people and agents should be aware of these platforms when seeking investments for projects.
The Way It’s Used
New construction may be slowing, but the growth of the industry is changing its focus to adapting and reusing existing buildings. Adaptive use is booming as the demand for urban living grows.
More people want to live in downtown areas, and many structures in these areas are perfect for reuse given that their original purpose is obsolete (mills, factories, etc.). This is a particularly lucrative approach for buildings that have been given “historical” status and cannot be torn down. By combining residential and retail spaces into one building, Mixed-Use buildings can offer tenants everything they desire, all right where they live. By getting creative, developers can turn crumbling landmarks, abandoned factories, and dangerous eyesores into hubs that attract young professionals and improve economic development within a city.
For the agent, these changes mean adapting to a swiftly changing environment. Those who are veterans in the industry should watch for new technologies that will help them attract millennial clients – a generation that is building businesses and renting, rather than buying, properties.
Newer agents should look to experienced agents in their firms on how to handle a possibly shifting markets. In general, as the market continues to adapt, being ready for any change is always the best approach.