Capitalizing on Real Estate’s Surprising Resilience: Three Key Trends to Watch in 2022

February 3, 2022 • Caroline Pomilla

As we enter into the third year of the COVID-19 pandemic, a climate of both volatility and optimism pervades the commercial real estate industry. But, according to one report, property professionals should err on the side of hope. The widely anticipated Emerging Trends in Real Estate 2022 report, co-published by the Urban Land Institute and PwC, grapples with the continued uncertainties surrounding the pandemic and the economy, while also marveling at what it calls real estate’s “surprising resilience.” Drawing on insights from more than 1,700 leading real estate experts, this year’s report explores a number of trends for the year ahead, including three outlined below:

• Trend: An Office Reset in the Face of Flexibility
  According to the report, “By forcing people to work and live differently, the pandemic revealed hitherto unknown reservoirs of flexibility in how the property sectors could function—and changed expectations of how people will use properties in the future.” The rapid shift to widespread remote work for white-collar professionals due to COVID-19 has led to a reimagining of the traditional office workplace, challenging employers and the broader office sector to accommodate worker demands for flexibility.

Key Takeaway: The sudden and widespread shift to remote work has shown that many companies can be productive in a virtual environment, but the value of in-person interactions remains a clear benefit of the in-person workplace. The consensus among most experts is that the majority of employers will adopt a hybrid blend of remote and traditional work settings moving forward. However, the long-term impact of this trend on office demand is unclear and will vary by market. And, at least in the short term, an increase in remote work will lead to less space being leased: The extra space needed for new hires and social distancing protocols are unlikely to fill the vacancies resulting from more companies moving to fully remote workplaces. What is certain is that a reimagining of the workplace ecosystem will involve changes related to office design, density, amenities and location—some of which have already begun to materialize.

• Trend: The Great Relocation?
  Early pandemic forecasts predicted that the growing adoption of remote work would “untether” traditional office workers from the need to make housing decisions based on their office location. So far, the migration has been relatively limited, and many workers have held off on any relocation as they waited for their employers to finalize return-to-office plans. “But,” as the report explains, “these moves can be expected to rise as firms again delay the return to work or formally make remote work a permanent option.”

Key Takeaway: White-collar workers might be adding some distance between their home base and the office, but relocation radiuses are limited by the fact that most employees are still coming into the office a few days a week as part of a hybrid workplace approach. If hybrid work environments prevail as the preferred model, more workers could embrace slightly longer commutes and move to more distant suburbs or smaller, less expensive markets within the area. However, a mass adoption of full-time remote work would be necessary to spur a more significant worker migration. Either way, a more suburban-leaning future could be imminent for commercial real estate.

• Trend: A Post-COVID Acceleration of Proptech
  A rapidly evolving commercial real estate landscape as a result of COVID-19 has provided new opportunities—and a new sense of urgency—for technology adoption. According to the report, proptech can now do more than just help a property team efficiently operate and manage an asset; it can also help tenants more effectively use their leased space.

Key Takeaway: The most proactive commercial real estate firms are continually seeking out and adopting the latest proptech innovations, which the report describes as “ a continual process for all companies as the number and nature of property technologies continue to evolve.” Moving forward, property professionals will be especially receptive to solutions that help them assess, understand and operate their assets. For instance, the report suggests software that determines the required level of cooling or heating based on building occupancy might be well-received by today’s tenants, especially if the initial investment can be tied to cost savings over time. And, of course, proptech solutions like touchless technologies will continue to play a critical role in facilitating the return to the office and giving buildings the competitive advantage they need to rebound from the pandemic.

For more insights into the top trends for the year ahead, read the complete Emerging Trends in Real Estate 2022 report.