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Commercial Real Estate Trends: the 2021 Guide

Commercial real estate trends are constantly evolving. Even before the COVID-19 pandemic hit the industry and sent millions of tenants and their employees scrambling to enable remote work environments, the rise of technology and data were transforming the industry and how owners and property teams thought about their assets. Let’s dive into the biggest changes we’ve seen to the commercial real estate market thus far, and what we predict are the emerging trends in the future of commercial real estate.

Recapping the Commercial Real Estate Forecast in 2020

The projected commercial real estate forecast for the year 2020 was much different than reality.  In The State of Tenant Experience in 2020 — HqO’s industry outlook for last year — we defined the tenant experience technologies that were just beginning to invade the market, alongside the core pillars of tenant experience that categorize what customers really care about. We also sought to prove why it was important for property teams to think of their building roadmap, and to prove the return on investment (ROI) for these new building innovations for any portfolio.

HqO’s previous report also touched upon how these technologies prompted a massive shift in the entire industry. Before the onset of the COVID-19 virus, the commercial real estate market was experiencing exponential growth and stability. Based on Deloitte’s 2019 Global Survey and Commercial Real Estate Outlook 2020, market fundamentals had boasted steady and significant increases across the board in the United States. Additionally, nearly three-fourths of the top CRE C-suite executives anticipated an increase in capital availability in 2020.

However, as the spread of COVID-19 reached global pandemic status, financial markets began to drastically decline. Developers, property owners, brokers, and tenants were all consequently forced to seek alternative solutions to not only stay afloat, but to stay connected.

Without a clear direction, the commercial real estate market faced confusion. In May 2020, Facebook made initial decisions to go fully remote, only to backtrack in more recent months by signing a large lease with Vornado Realty Trust for office space in one of the country’s most desirable locations. Other major companies also adopted partial or indefinite remote work models early on, and currently are seeking ways to determine a return on investment (ROI) for physical office space. 

Until now, the industry has always relied on the mere assumption that you need an office building in order to do work. Now we’ve learned that people can work anywhere, requiring new tactics to keep them informed, engaged, and productive. With so many digital alternatives forced upon the commercial real estate industry in 2020, commercial real estate trends have since completely transformed to keep up with its modernization.

Is Commercial Real Estate Going Down?

With so many changes occurring simultaneously, you may be asking yourself: Is commercial real estate going down and facing a decline? Fortunately, according to the latest commercial real estate news, commercial property values are quickly adapting to the shifts in the market.

Due to the new digital alternatives to physical office buildings, landlords cannot rely solely on the contractual obligation of a long-term lease in achieving customer retention. According to the latest commercial real estate statistics in the United States, they will need to win customer loyalty by providing excellent customer experiences. 

Many workplace cultures around the globe have already extended beyond their physical infrastructure to open up digital integrations, programming, and engagement possibilities for companies and their employees. Now, landlords need to meet the needs of leading employers with tech-enabled workplace solutions. Those that do will command high value and low capitalization rates, and those that don’t will see their commercial real estate prices dropping. 

Our main takeaway for modern industry success is simple: tenants are looking for partners that deliver spaces and experiences that drive productivity and employee satisfaction, no matter where they work.

An Updated Commercial Real Estate Market Analysis

Deloitte’s commercial real estate market predictions for the year 2021 indicate that digital transformation and tenant experience are now a business imperative for owners and property teams. Their new commercial real estate market statistics reveal that most respondents (56%) believe the pandemic has uncovered shortcomings in their company’s digital capabilities. Therefore, companies are planning to ramp up their digital transformation initiatives, with 53% of respondents including digital tenant experience as a core competency in these efforts. 

The survey also suggests that “companies should increase investment in technologies that can serve as building blocks of their digital transformation efforts […] About one-half (48%) of respondents who said their company is using digital technologies, such as interactive mobile apps, to increase communication with tenants or end-users, plan to increase investment on digital channels over the next year.”

In our updated industry report, The State of Tenant Experience in 2021, we dive deeper into the new trends and happenings we expect for the new year, while also discussing how adopting a data-driven approach alongside end-to-end workplace solutions will guarantee success despite any future disruptions and changes to the commercial real estate landscape.

In terms of the future of commercial real estate being more data-driven, companies now require various analytics tools to generate actionable insights and make more informed decisions about their building occupants and assets. In a recent EY Virtual Proptech Roundtable, data and analytics needs were ranked as the number one post-pandemic priority for real estate owners.

The Future of Commercial Real Estate

These new emerging trends in real estate have painted a technology-driven commercial real estate forecast for 2021 and beyond. With a complete digital revolution underway, the office sector can expect an increase in the need for technology partnerships to successfully enhance communications with their end-users and create technology-driven experiences. This is further supported by recent data that suggests that on average, 58% of REIT respondents have increased their intent to partner with proptech companies to fulfill this very need.

As the industry continues to become more digitized, commercial real estate trends in 2021 will follow suit and reflect more modern, tech-savvy office experiences.

Explore the biggest commercial real estate trend of 2021

The best tenant experiences are built with HqO

 

Create smart spaces
where people want to work

The pandemic has dramatically changed where, when, and how people work. Your properties need to be more than just a space, but a community that offers real value to the workforce. HqO helps landlords enhance physical spaces with digital experiences and provides the data they need to make informed decisions about their buildings.

Activate real connections between people and their properties

Like a universal remote for your property, the Tenant Experience Platform – comprised of the mobile app and web interface – powers every aspect of your tenant experience, while building engagement and loyalty.

  • Offer 24/7, on-demand access to programming, amenities, and retail
  • Centralize tenant experience initiatives
  • Facilitate safe and frictionless property experiences 
  • Communicate directly with tenants to create strong connections

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Enable data-driven decision making

Collect tenant behavior, amenities, and system data in the Digital Grid, an interoperable analytics offering that provides a full picture of how your assets are performing.

  • Collect data on buildings, amenities, and tenant behavior
  • Enable data-driven decision making 
  • Unlock tenant experience benchmarking

Accelerate the implementation of innovative asset strategies

The HqO Marketplace facilitates connections between CRE business leaders and best-in-class technology developers and vendors.

  • Navigate the crowded proptech landscape from one tool
  • Identify and connect with pre-vetted partners
  • Deploy innovative asset strategies
  • Reduce technical complexity
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