Commercial Real Estate Trends for 2020

Important Commercial Real Estate Trends for 2020

A combination of burgeoning technology and necessary changes due to the outbreak of the CoronaVirus have made a notable impact on the commercial real estate industry as in all other walks of life.  Here’s a look at some of the most important trends we’re seeing begin to emerge in CRE and a glimpse at how they will affect the market.


Standard Office Buildings Leaving the Building

With the rather dramatic onset of the CoronaVirus, there has been a sudden and rapid insurgence of remote working employees.  Because people are being forced to work from home in many cases, there is naturally less of a demand for large, traditional style corporate buildings.  

Some sources, such as JCan Inc. Sod and Grass, predict there to be a certain amount of staying power to this trend, even beyond the eventual containment of the virus.  Any number of positions that remain operable from remote, home-based locations will leave office buildings less densely populated.  Of course this then reduces the need for expensive amenities and may see some major companies downsizing in one way or another over the short term.

Coworking Facilities Here to Stay

  As a relatively new concept, Coworking companies target free-lance and remote workers as well as SMEs who can benefit from shared services and a sense of community. 

From a Real Estate standpoint, the idea took off very quickly and has been a pretty hot trend.  In fact, between the years 2006 and 2015, the demand for such spaces nearly doubled.  Despite the failed IPO of the major coworking company WeWork and its immediate impact on the industry, there is a fairly positive outlook that the demand for such office space will continue.

In fact, we could very well see a combination of home based telecommuting and coworking as the world adapts to the Coronavirus.

Integrated Technology and Smart Buildings

With less people in office buildings at one time, there has been an increased need to keep overhead costs to a minimum in the buildings which are still being used on a daily basis.  Here is where Smart Building technology such as IoT and AI come into play and why they will become the norm.  

The ability to match occupancy patterns to energy use is a big reason as to why such technology is in demand.  This enables the building to require less energy usage when there are less people inside.  And this is just the beginning.  As technology continues to advance, built in infrastructures will become the norm, even connecting such smart buildings to the immediate environment or a surrounding “smart grid.”  This trend has fairly long-term implications. Even low-tech roofing companies and pool fence suppliers will be affected by this switch.


Last Mile Delivery is Hot

The technology giant Amazon is on the tongue of major commercial real estate publications for a number of reasons.  For one thing, the company is leading a trend toward increasing use of space for last mile delivery.  This service is defined as the movement of goods from a warehouse to its final destination and focuses on accomplishing this as quickly as possible.
  
Though there has been some demand for newer, larger, high-tech facilities of this type, there appears to be an even greater need for smaller, well located urban properties that can get products to consumers in rapid pace.  As people continue to rely on the internet more and more, we will see a steady growth in the business demand for such properties.

A Rise in Ghost Kitchens 

As a significant percentage of last mile delivery type facilities, there has been a recent rise in the number of Ghost Kitchens and need for food storage buildings.  This comes as an obvious response to the increased amount of food and beverage e-commerce.  People are ordering more groceries and meals online as a result of sheltering from Covid.  Many food chains and restaurants are in need of buildings that are designed to include a kitchen and cold storage without the need for onsite dining areas.
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Grocery stores are also jumping on board with “last mile’ distribution hubs in order to quickly fill online orders.  This has created a demand for a specific type of storage facility, which should continue to be on the rise in the years to come.

And What About Globalization

In the way that technology has connected the world for e-commerce, it has also opened up a door for offshoring of services and manufacturing as well as inviting wealthy international investment within the commercial real estate industry.  In the past several decades, we have seen more and more of this, making it a definite trend.  However, the current world political scene, the Trump regime, and the Coronavirus have all had a very dramatic effect on globalization in general in recent years.

There is much uncertainty surrounding the outlook of how this will affect the market in the years to come, which is why it is such a hot-button issue in the year 2020.  There is a general feeling that globalization cannot be stopped, but it certainly can be slowed down.  As far as any immediate impact on the CRE industry, we can only speculate at this time.


To summarize the current commercial real estate outlook, Technology is in the driver’s seat and the Coronavirus is directing traffic for the time being.  As the situation evolves, we’ll continue to see the industry adapt.