Four significant trends in commercial real estate

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In its recent commercial real estate outlook, Deloitte Center for Financial Services has identified four key trends, that each and every commercial real estate investor should keep their eye on.

Like Uber and Lyft are changing people’s perception of public transport and the need for private car ownership, sharing economy is having is impact on foundations of commercial real estate.

For example, the rapid growth of Airbnb is directly affecting the lower-level hotel business, reducing their average occupancy rates by about 10%. WeWork and Regus are offering the same service in the office space market, satisfying the needs for short-term corporate offices and meeting facilities on daily or even hourly basis. Liquidspace has replaced the long-term unbreakable lease contracts with short-term ones allowing tenants to flexibly up- or downsize their office space.

New technology and big data are bringing real estate owners and potential tenants together and making traditional commercial lease brokering business obsolete. Future lease decisions are supported by big data and region-specific information with actual lease prices and agreement terms.

The progressive ageing of population and shortage of skilled labor is taking the war for talents to a new level in coming 10 years. Particularly this affects the new generation of young people who are used to working anytime and anywhere. The war for talent will lead to mixing of traditional residential, office, commercial and leisure real estate. Ülemiste City is a nice example from Tallinn, where the former industrial region is reborn as a mixed office, residential, shopping and service district.

The last mile concerns all the owners of retail space, who have enjoyed significantly above average growth rates so far, but who are threatened by changing consumer habits, 3D printing and delivery of purchases. Drones and robots are changing “next day delivery” policy to “delivered in 1 hour” policy. All this will result in blurring the lines between traditional warehouses and modern retail space. Approximately 50% of the US shopping centers are expected to close their doors in coming 15 years and and the local smaller shops turning into parcel delivery centers.

The full report can be downloaded here!

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