Outlook 2020 addresses the key challenges and opportunities that will define the future of European commercial real estate in 2020 and beyond.
Our EMEA Research & Insight team has looked beyond the traditional property sector report. Outlook 2020 includes a review of:
- climate risk and real estate impacts;
- the influence of social value on the spaces we use;
- what rising construction costs will mean;
- how both changing demographics and technology will influence the role of property.
All against an unsettled political backdrop.
Operating in an uncertain world
We now live in a world where change is constant, and the real estate market is no exception. Heading into 2020, global shifts and their effects are likely to accelerate – including the continuing economic slowdown, trade wars, the further polarisation of politics, and an ongoing talent shortage.
These global economic, political and societal trends will undoubtedly have an impact on real estate, either directly or indirectly. Ongoing political and economic uncertainty could well cause investors to become more risk-averse in the near-term, whilst over a longer horizon, societal and demographic changes will further shape the way we work, shop and play
Tech solutions to rising construction costs
The construction industry is not typically thought of as a driver of change – and its buildings are still assembled in largely the same way they were 50 years ago.
Today, however, the sector is under immense pressure to reinvent itself. Developers and contractors across Europe are facing increasing financial pressures due to the rising cost of qualified labour, construction materials and land. The construction industry also has a long-standing productivity problem – while reliance on foreign workers and new EU pay regulations may cause further issues in a time of rising borders.
2020 will see breakthroughs in several areas; building technologies, techniques and materials that will have a long lasting impact on the industry. Change will be driven by greater acceptance of technological solutions, as well as the redefinition of processes and the adoption, in time, of new ways of working.
Real estate has not kept up with changing demographics
Today, European demographics are shifting in a number of ways. The population aged 65+ has almost doubled in size over the last 40 years due to an increase in average lifespan, while the child population (0-14 years) has shrunk in relative size during the same period. 55% of people now live in cities – a proportion expected to increase to two-thirds by 2050 – and single-person households are increasingly standard.
Our Demographic Outlook 2020 report also looks at case studies that illustrate the possible future of real estate – as well as showing where gaps in the market still hold out opportunity.
Climate change is here – and the planet won’t wait
Climate change is a huge threat, and its impact on our daily life is now becoming a reality. Scientists say that limiting the global temperature increase to 1.5°C above pre-industrial levels would reduce the risk of irreversible changes – but the time available to do this is running out. Currently, buildings are responsible for 40% of energy consumption and 36% of CO2 emissions in the EU, so it is critical that the real estate sector plays its part in helping achieve climate goals.
For 2020, we have identified three key environmental trends for real estate: New legislation, investors are cautious- still waiting for occupiers to confirm a strong demand for ‘green’ properties, data is helping assess climate risk.
Investment: Who will be the risk-takers?
Although weak economic growth and historically low yields are likely to continue in 2020, there are still opportunities to seek higher returns – and an increasing number of investors are willing to try. However, any high-yield property asset will come with risks that need to be understood, so investment intelligence is more important than ever.
In our Investment Outlook Report, we take a look at the key trends in store for 2020, including: Private equity dominates high-yield, Which investments? Location is key.
Logistics: E-commerce, technology, and labour trends will dictate space requirements
2020’s headline news is that logistics real estate will continue to be driven by key trends in e-commerce, technology, and labour availability.
The logistics sector’s inherent flexibility means that it can more easily adapt to changing opportunities and needs – so we expect 2020’s outlook to be bright.
Mixed Use: New dimensions and multi-functional spaces
As we go into 2020, the whole concept of mixed use is undergoing a revolution. The mixed-use projects of yesteryear were groundbreaking, but the new generation of developments will be altogether different: genuine multi-functional spaces that increase flexibility, create experiences, and provide maximum connectivity.
To create such places, time is as important as the traditional dimensions of space and function. Tomorrow’s schemes will be able to transform throughout the day to offer different experiences – and the resulting 24/7 utilisation of space will also be a key driver in maximising real estate returns.
We have identified three key trends that play a significant role in how mixed use projects will look in the future and contribute to make these assets as effective as possible effective and exciting utilization of space and other resources; increasing customization; identifiable and usable public spaces.
Office. Redefining quality and future potential
In 2020, workplace strategies have become increasingly important for companies of all sizes – especially in an ever more competitive market for attracting and retaining top talent.
Employers are increasingly searching for workplaces that encourage collaboration, stimulate efficiency, increase satisfaction at work and contribute to work/life balance. This is leading to the growth of flexible office spaces, the intensification of tech use, and the gradual transformation of traditional office buildings into open and multi-purpose workplaces.
There will be less of a focus on ‘hardware’ such as desks, partitions and technical specification and more focus on ‘software’ such as cultural and social values of buildings.
Social Change: Adapting to tomorrow’s challenges
Mainstream adoption of the Internet and the rapid development of smart technology have both been pivotal in accelerating social change. New technologies offer a platform for individuals and groups to develop their own social infrastructure – and technological progress is having a profound impact on how society consumes goods, knowledge and space.
In our Social Change Outlook report for 2020, we look at the most important factors driving change in the new decade – not just for society in general, but also for the future of real estate.
Technology: What is the real estate sector scared of?
The real estate industry is now witnessing some fundamental changes. In the decades ahead, real estate stakeholders will look back on the early 21st Century as an often-out-dated marketplace. Many areas of the real estate industry have been transformed by the implementation of technology. From the construction of buildings to their asset and property management, we are seeing structural changes in the way occupiers, investors and real estate advisory companies do business across the board
In this report, we look at the key tech trends that will make the difference in 2020 –exploring how technology is evolving, how ethical values are related to the growth in data usage, and how you can plan for new technological strategies.
Retail: New mindsets will drive change
Today’s retail sector is undergoing major disruption, fuelled by a set of powerful technological, social, demographic and economic forces. The rise of the Internet has brought the ability to shop anytime, anywhere – and the UK is leading Europe with one-fifth of all retail sales online.
These changes have resulted in a shift of power towards consumers, who now expect a seamless omni-channel experience as standard. Retailers therefore face a major challenge – to evolve their understanding of consumer behavior, and adopt new approaches to survive.
In our Retail Outlook report, we look in depth at how the sector is changing and what impact new technologies are having.
Should we leave CBDs behind?
The Central Business District used to be the beating heart of a city. In recent years, however, changes in behaviour, technology and economic life have led to a greater spread of activity.
This has created opportunities, but also contributed to increasing traffic jams, uncontrolled urban sprawl and inconsistent access to a talented workforce. New generations seek a better work-life balance with more collaborations and different ways of working. As a result, should we start thinking about cities differently? And what will happen to CBDs in 2020?
Access whole What’s Next: Outlook 2020 report here: