WHITE PAPER: Top 10 Trends To Watch For 20216 Jan 2021
By: James Nelson
Happy New Year to you all! There is no doubt that 2020 was a challenging year for all, so I am ready to begin 2021 with optimism and a sense of energy to get off on the right foot. Let’s push forward, stay safe and make this year one of the best yet. On that note, here are some fresh ideas summarized from a recent interview I did with our Global Director of Research, Dr. Nick Axford, on our top 10 trends for 2021.
For his first trend, “De-Globalization 2.0,” Nick shares that the disruption of supply chains has been one of the biggest effects of the COVID-19 Pandemic. Supply chains located around the globe and in China were significantly impacted in 2020. Organizations are looking to de-risk their supply chains and instead of thinking about cost effectiveness, they’re now focusing on the ease of distribution. The result is they’re bringing their operations closer to home so as to manage the potential risk if something similar to COVID-19 happens in the future.
“No Place Like Home,” is trend number two. Nick examines the work from home phenomenon that has taken place during the recent shutdowns. Increasingly, employees are often times opting out of traveling into cities and places of work for fear of contracting the virus, mainly because many commute by public transportation such as trains and buses. Although work from home has been productive for many, Nick believes that it won’t last and employees will eventually return to the workplace. He shares that there’s no substitute for collaboration in a work environment, as well as the training that occurs while in an office.
The third trend is “Workplace EXperience.” In the United States, office occupancy is at 27 percent, as low as 13.4 percent in San Francisco and 15.9 percent in New York. This trend points to the fact that many people now are only going back to the office periodically for specific reasons rather than going in for a full day to work. People will begin to re-think the function of the office as a place where people will meet and brainstorm, rather than a desk where people make calls and complete admin work or other tasks as we see it now.
Moving on, the fourth trend is “Portfolio Metamorphosis,” in which Nick explains that we may see a reduction in the footprint of a lot of organizations in large HQ’s in the middle of big cities. He goes on to say that as employees continue to enjoy flexibility, many of these larger organizations are going to re-think their space needs and may partner with flex-space companies, which will allow their employees to collaborate as needed. Portfolios are going to adjust and become much more dynamic, as well as the terms that come along with them. They will allow tenants to take terms for a few months rather than locking into multiple years.
At the halfway mark, we have the fifth trend, “Managing Expectations.” What this dives into largely, is the relationship between the landlord and an occupier. Long gone are the days of a battle between the two parties, but rather a symbiotic relationship in which each party works alongside the other to put together a favorable package beneficial to both. Specifically, during the pandemic, property managers have engaged with occupiers and created better relationships in which tenants feel safe, supported and comfortable with their landlords during such an uncertain time.
The sixth trend “Hyperlocal,” takes a look at the pressure that retailers are facing with the immediate rise in online sales due to the pandemic. What we’re potentially seeing is the re-thinking of the store. Nick explains that if you want to get products into the hands of people quickly, you have to have a distribution network. In the past, many retailers had large distribution centers in the middle of United States. Today facing fierce competition and the speed with which goods are getting to consumers, many brick-and-mortar shops are having to re-think their distribution networks. They will need to evolve with the times get items to people as quickly as possible, which means re-locating their distribution centers to more local areas around their stores.
For our seventh trend, “Love Thy Neighborhood,” Nick discusses the impact that COVID-19 has had on neighborhoods and the areas surrounding larger cities. He brings up a term he calls, “the fifteen-minute neighborhood” meaning if you look at places or neighborhoods that are successful, they tend to have a combination of residential space, commercial space, retail space, etc. People will begin to want to work in a place that is closer to home and does not require taking public transportation or spending hours a week commuting to and from the office.
The eighth trend for 2021 is “Risky Business” and this trend discusses the impact of climate change and how that ultimately affects the business of real estate. Last year this was also a major topic and Nick outlines that it also takes a center stage role this year because real estate is now facing the challenge of getting through COVID-19 on top of dealing with a larger carbon footprint when new development takes up more space.
The second to last trend is “Building A Recovery.” We’ve seen massive amounts of stimulus spent around the world to subsidize the effects of COVID-19. This brings up a large question of how investors will spend capital and invest going forward. The “New Normal” is a phrase that everyone has heard relentlessly the past few months, but how does that take shape in terms of investing? Nick says that real estate will always be considered an attractive investment, but investors will be more concerned now with the effects it will have for future generations.
The tenth and final trend, “Measure for Measure,” discusses the fact that the metric many use to measure success is GDP (Gross Domestic Product). GDP captures the amount of growth that’s happening, but not the quality of that growth. Nick explains that there are metrics that can track the growth of our economy in terms of the environmental impact, the impact on social issues and many other metrics. This trend is one that will ultimately affect real estate as we enter 2021 because the goods and services we produce should have a positive impact on more than just the economic growth it provides. Future investing should invite people of all backgrounds and positively affect the surrounding area.
Surely there are more trends that we will see this year as the country and world battle the COVID-19 Pandemic to return to normalcy. As we still feel the effects of 2020 and the ongoing pandemic, let’s take these trends into account and move forward together to make a positive impact for future generations. If you have any questions on the Top 10 Trends for 2021, please feel free to reach out to myself or Dr. Nick Axford.