Emerging Trends in Real Estate: Technology and sustainability will be key drivers of value

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Real estate is being reshaped by social, demographic and technological change. And as the industry leaders interviewed by PWC in a recent study make clear, they are not simply talking about, but acting upon, this challenge.

Changing human behavior, technology and the evolving needs of the built environment are driving a rethink of the world of real estate from four different perspectives: its nature as a product/service, as an investment asset class, as part of society’s critical infrastructure and as an industry sector.

From space-as-a-service to the growing use of data analytics, disruption is all around us. The changes are ushering in new business models and heightening complexity and risk. Although the end-state remains uncertain, new strategies and capabilities are needed now to compete, while laying the foundations for the future. So, what does it take to stay relevant in this fast-shifting real estate landscape?

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As social and technological disruptions gather pace, more and more businesses are using new tech-enabled capabilities and openings created by changes in customer behaviour to reach out beyond their traditional boundaries. Telecoms firms have evolved into entertainment businesses, and automotive companies are eyeing a future where they facilitate mobility, such as car or rail on demand.

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The study reveals that real estate is heading down the same road. While physical space and location are still the foundations around which value is created, shifts in customer expectations are changing what is required from the space and its surrounding environment. “A building is a building,” says one developer, but the sector is facing “a lot of complexity” and “we’re all on a learning curve”.

In 2017 report, PWC asked industry leaders what kind of sector landscape they expected to see within a 2030 timeframe. It is clear from this year’s survey that much of what they anticipated for 2030 is already happening, challenging long-held assumptions about the nature of real estate and how value is created within the sector. So, what are the key features of the new landscape, and what does it mean for strategies and operations?

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  • Blurred lines : What is evident now is renewed enthusiasm for mixed-use developments that combine residential, recreational, commercial and cultural uses.

  • Density intensifies : Smart densification and its impact are likely to remain fundamental and enduring strategic considerations for the real estate industry .

  • Higher profile : Cutting across all these trends is the realisation that real estate plays a critical role in meeting society’s changing needs and challenges.

  • Dealing with complexity : Now, tenants want shorter and more flexible terms, customer outcomes are the primary driver of value and real estate is becoming a service rather than a passive asset. Moreover, while the development cycle is still as long and capital-intensive as ever, the yield is riskier and more volatile.

Rethinking real estate

Changing human behavior, technology and the evolving needs of the built environment are driving a rethink of the world of real estate from four different perspectives: its nature as a product/service, as an investment asset class, as part of society’s critical infrastructure and as an industry sector.

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