The Digital Age’s rapid technological advancements continue to affect commercial real estate trends in wide-ranging ways for both tenants and commercial real estate companies in 2020. A digitized workforce, digital infrastructure and cautious buyers on the brink of a potential economic recession will lead the charge in commercial real estate industry trends this year.
Undergoing a Digital Revolution
The retail real estate industry is undergoing a huge evolution, as their approach is no longer based solely on a strategic location. With the rise of e-commerce, physical stores are no longer the only customer touchpoint. Brick-and-mortar locations are just one channel customers use to engage with a retail brand. Brands are encouraged to focus on repurposing their physical location’s space for enhanced in-person customer experience. Rather than fixating on prime location, retail tenants will invest in inexpensive real estate off the beaten path to undergo this consumer-driven transformation.
Additionally, tenant preferences are shifting due to the changing workforce that requires global and urban sourcing, flexible location and workspaces, as well as technological advancements. According to the Wall Street Journal, commercial real estate market trends suggest that tenants are looking for IoT-enabled smart buildings, cybersecurity, electric car charging points and even behavior data analysis capabilities.
Updating buildings to meet tenants’ and end-users’ needs has become a priority for commercial real estate companies, meaning they must make worthwhile technology investments to keep up with commercial development trends. Many commercial real estate companies are adding smart features to their buildings, such as lighting sensors, smart plugs, room temperature control modules, and other technologies to reduce energy, water and waste.
Preparing for an Economic Down Cycle
Commercial real estate market trends in 2019 indicated a continuous growth rate of 3% from 2018 in small market commercial sales transactions. More modest sustainable growth is expected for commercial real estate in 2020, as cautious consumers prepare for a potential economic downturn.
To attract more capital, commercial real estate buyers and investors are going to be more selective with their property assessment and tenant mix to diversify their portfolios. Non-traditional and mixed-use properties will be a hot commodity for commercial real estate buyers. Likewise, new millennial tenants and entrepreneurs are looking for unique spaces with amenities and leasing options that appeal to their specific needs and priorities while providing value.