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12 Trends That Are Shaping Commercial Real Estate in 2020

National  + Weekender  | 

By Paul Bubny

Twelve different commercial real estate trends and 12 different voices to express each of them. NKF’s white paper on forces that will shape the industry this year and beyond calls on research managers from the firm’s offices across the U.S.

Tying the trend reports together is a common theme. Amid steady and strong CRE fundamentals, “investor challenges persist as well, brought about by generational changes, evolving occupier demands and increasing specialization of product types.”

Here’s a thumbnail description of each of the trends described in NKF’s white paper, “The Future of Commercial Real Estate: 12 Trends for 2020 and Beyond”:

• Technology is reshaping industrial estate. “New technologies such as artificial intelligence, machine learning, advanced manufacturing, robotics and drones are transforming every link in the supply chain,” writes Andrea Arata, director of research in San Francisco.

• Life sciences industry momentum will drive demand for specialized real estate. “While Boston and the Bay Area hold the country’s largest life sciences talent pools and lab inventory, the war for talent and a diversity of innovation occurring within the industry are causing other life sciences hubs to emerge,” according to research manager Lisa DeNight, who cites her home base of Philadelphia as one such emerging hub.

• Medical retail is a fast-growing market segment. Northern New Jersey-based research manager Mark Russo writes, “The primary driver of this trend is the desire to create a convenient experience for the patient/consumer as retail developments tend to offer high visibility, ample parking and central locations near residential populations.”

• The rise of coworking has contributed to a decline in traditional small office assets. “What this has meant for the traditional direct office market is that the volume of transactions from tenants smaller than 10,000 square feet has decreased as coworking has grown more popular,” writes Bethany Schneider, director, research in Washington, D.C. She adds, though, that the slowing growth of the coworking sector may mean new opportunities for office landlords.

• Faster deliveries blur the lines of industrial and retail. “Consumer expectations for swifter deliveries are prompting e-commerce operators, whether they are pure-play or traditional retailers, to adapt accordingly,” according to research director Dain Fedora in Los Angeles. “How an operator achieves this is contingent on its real estate portfolio.”

• Multifamily investors are gravitating toward secondary markets. “Over the past several years, the share of U.S. multifamily investment into secondary markets has grown significantly, topping 65% each year since 2016,” writes Sean Marmora, research analyst based in New York City.

• Rising construction costs correlate to increase in tenant improvement allowances. Writes Elizabeth Berthelette, research director in Boston, “Over the past few years, the combination of a shortage of qualified skilled laborers and restrictive trade policy has dramatically increased the cost to build.”

• Growth of food and beverage e-commerce is increasing demand for cold storage. “As e-commerce and online grocery sales accelerate, retailers and food distributors will need larger distribution hubs with enhanced cold storage functionality to scale up “last-mile delivery” capabilities for their customers,” according to South Florida-based research director Eric Messer.

• Baby boomers are enhancing demand for multifamily units. “According to property management software service TenantCloud, one third of current rental applications in urban areas are for renters over the age of 60,” writes research manager Amy Binstein in Chicago.

• The technology sector is driving creativity in office design. Denver-based director of research Lauren Douglas writes that “tech’s economic clout has initiated a shift, from office space as a static product to a dynamic, space-as-a-service (SPaaS) model, which aims to facilitate creativity, productivity and talent attraction and retention.”

• New hotel brands and concepts are emerging in a competitive market. “Some trends that have recently become commonplace include digital guest experiences, local guest experience opportunities, sustainability, augmented and virtual reality, and smart hotels,” writes Marianne Skorupski, director of research and marketing in Atlanta.

• Office and multifamily development are increasingly intertwined. Cleveland-based Matthew Orgovan, research and marketing manager, writes, “Since this symbiotic relationship is so intertwined, developers of both new office and new multifamily assets will need to look at each metropolitan area on a case-by-case basis.”

Pictured: A RightPick mobile robot at use in a warehouse.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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