Last week, the 30th edition of MIPIM and the third annual “City of Tomorrow” summit brought key players together to discuss how CRE is engaging the future. The two industry conferences covered topics like technology, shifts in human behavior and environmental changes. These are three leading factors driving the CRE landscape and decision making of industry professionals.
The news this week followed the conferences’ forward-thinking theme with headlines covering social and environmental factors that are changing the nature of commercial real estate. Here’s a roundup of some of those agents of change and the commercial real estate trends they’re sculpting:
#1 Millennials reshape traditional living arrangements
In our last CRE roundup, we mentioned WeWork landing the biggest CRE financing deal in Manhattan and listed some of the coworking companies that are finding success in U.S. cities. The boom of shared work spaces shows that today’s young professionals are not interested in cubicles and a stifled work environment, so it should be no surprise that young people are thinking outside of traditional ways of living too.
Coliving is a new trend where residents with common interests and values share a living space and are encouraged to interact and work together. Just this week, developer Property Markets Group landed a $30M loan to open another high-end coliving space in Chicago. In New York City, Tishman Speyer and Common launched a new family-focused coliving concept called Kin to attract young, upper-class families.
Why are shared accommodations on the rise? The values of Millennials. Millennials are attracted to coliving because they provide benefits that are important to them like sense of community, less financial burden and all-included amenities.
#2 Climate change increases demand for sustainable infrastructure
New York City’s Mayor Bill de Blasio announced plans to combat the effects of climate change on lower Manhattan. The Lower Manhattan Climate Resilience Study found that by 2050, 37 percent of properties in Lower Manhattan will be at risk from storm surge. The $10 billion plan will expand the section of the city that houses hundreds of thousands of residents into the East River. New development projects might be considered.
With the threat of climate change, urban areas will roll out more policies to go green and commercial real estate developers will build for sustainability and a resilient future.
#3 New consumer behavior redefines retail in urban areas
E-commerce has forever changed the way consumers shop. So far this year retailers shut down 23% more stores than they did at the start of 2018, according to Coresight Research, and this week, Forbes stated over 4,300 stores have been earmarked for closure in the U.S.
At last week’s “City of Tomorrow” summit, traditional players and disruptors in the CRE space came together to discuss the shift in consumer behavior and its effect on the retail sector. Disruptors like Appear Here and Showfield, believe that brick-and-mortar locations are still important, but companies will have to rethink their strategy around physical spaces.
Appear Here helps online brands secure pop-up leases to drive their web presence. After opening, these pop-ups generate an increase in web traffic of about 45 percent according to Appear Here’s Josh Yentob.
But what about traditional retailers? They’re transforming their stores into experiential spaces. Businesses like Rapha and Canada Goose are building in-store experiences that foster a sense of community (similar to coliving) and keep consumers in the store longer.
Even hospitality, a sector fundamentally grounded on creating experiences, is undergoing transformation to meet the demand for a better customer experience through amenities, technology and a community-centric focus.