1. What exactly does remote work mean for the office?
As the results of the 2020 great work-from-home experiment are rolling in, one thing is clear: more flexibility will remain.
Businesses and employees are still looking for the ideal balance between office and home. Working from home is great, for example, because it eliminates the daily commute. On the other hand, people have made it clear that they like the office to collaborate or receive support from their managers.
“Working from home is not a panacea for meeting all work needs and styles,” says Marie Puybaraud, director of global research at JLL.
This means that offices must be redesigned to accommodate new work patterns, while the concept of “office nearby” (satellite offices close to where people live) is also on the rise.
Read more about how new jobs are popping up to manage new ways of working , companies are helping workers juggle childcare, and why homeowners are competing to improve air quality in buildings .
2. Will urbanization stagnate ?
The influx of people into cities, now home to more than half of the world’s population, is one of the most important megatrends so far this century. Whether this mass migration could stall or even be reversed, it has become a hot topic.
The pandemic “struck the heart of cities: togetherness, connectivity, shared services and shared spaces,” says Jeremy Kelly, director of JLL Global Research.
However, urbanization will continue, he says. Large cities are expected to retain their power of attraction and continue to attract ambitious people for work and education.
But there are caveats for continued growth. For example, cities are likely to spread out into networks of suburbs and smaller cities, what Kelly calls “distributed urbanization.” Part of this relates to the rise of remote working and digitization, enabling such a change.
“Innovation will be critical to the resilience and success of the city,” says Kelly. “Real estate will continue to play a key role in bridging emerging and successful innovation hotspots with space that attracts talent, drives productivity and fosters collaboration.”
3. Where are investors looking?
How investors refocus during an economic downturn is always closely watched. In 2021, a cautious but confident approach is expected to continue , supporting the demand for premium office buildings in large cities.
There has also been a shift towards sectors that became increasingly important during the health crisis. Logistics assets, which are already one of the most popular sectors in recent years, will receive higher allocations amid the online shopping boom. Data centers, multi-family real estate, and biosciences are also increasingly in the sights of investors.
After a year in which investors stayed closer to home , cross-border investment could increase again in some markets. For example, “Although demand from foreign investors in China declined in 2020, we have already seen a return of interest in the second half of the year,” Sigrid Zhou, director of investment research, China, JLL. “If all goes well, we hope it continues.”
Non-bank lenders are increasing activity in commercial real estate markets as traditional banks step back amid economic uncertainty. Alternative lenders are helping investors to underwrite and properly assess risk in the face of leasing uncertainty, while benefiting from comparatively higher risk-adjusted returns than corporate bonds or stocks.
4. Will corporate sustainability efforts continue apace ?
When money is tight, initiatives that support the environment may be among the first to be sidelined. But despite the tough times ahead, companies and investors are expected to stay the course .
“A sustainable future is our only future, and companies that do not turn to carbon neutral investments now will take an even greater risk to their bottom line,” says Neil Murray, executive director of Corporate Solutions at JLL.
In real estate, assets with high ESG (environmental, social and corporate governance) ratings can achieve a 33 percent rental premium over comparable non-green buildings, according to JLL.
“Real estate must play a critical role in creating a decarbonized environment, helping society prepare, respond, re-enter, and ultimately reimagine a sustainable future,” says Murray.
Read more about how investment managers are increasing their green credentials and the real estate industry is protecting cities from climate change .
5. What role will technology play in real estate?
For years, technology has become increasingly intertwined with office buildings, shopping malls, and warehouses.
This will only accelerate in 2021.
Homeowners and tenants will increasingly adopt smart building tools and consequently better understand how safe and healthy their spaces are, as well as how workers use them.
Technology like the digital twin monitors utilization and optimizes maintenance. Meanwhile, virtual tours have gained momentum , while contactless technologies are becoming standard .
“Facial recognition and biometric scanning for access control are no longer on the wish list, but on the current expectation,” says Richard Fennell, Head of Strategy Development, Australia and Head of PAM – Australia.
Learn more about how new metrics are helping portfolio decision-making and retailers stepped up their digital efforts over the holiday season.