The Urban Land Institute’s annual review of what will happening 2019 is actually not as surprising as many would consider, and focuses on the merging trends that have been hitting this sector for the last five years.
The bottom line of this year’s forecast is that the future is unpredictable, and rightly so. This is no longer a simple world of build and maintain; today there are two definitive consumer groups, the consumers want intelligent environments in smart homes and the consumers that want cheaper access to a home. Technology is not making living cheaper, it is just making it easier, but it raises the costs of delivery since all emerging technologies are expensive until they become mundane.
The joint review report that was presented by ULI and PricewaterhouseCoopers researcher division. Their report was based on 750 real estate professionals and provided the following 10 key points that will affect the USA property market in 2019.
Handling the ever-changing technology environment
The exponential number of new technologies hitting the construction and home living scene is leading to a complex uncertainty, and this is partially due to the changes in the fintech market where blockchain initiatives are leading to instant smart contracts that speed up financial transactions. Another key aspect of the rise in technologies impact on home buying is when buyers stopped buying during this year (2018) leading to an immediate slowdown. Observers believe this is due to the change in generation and the way they observe the home as a construct of technology, not just protection.
Supply and demand still rules
With a slower market, the onus will be on providing better solutions to a slower and smaller market. It seems that there are a deceleration of population growth, construction labor force availability and slow overall GDP growth.
When supply trickles down, and there is a surplus of product, prices will either go down for basic requirements, or property owners will start to listen to the market and beef up their “smart home” intelligence levels.
Another aspect of demand is that smaller cities are more competitive and attractive than larger ones, this actually is a byproduct of the “stay at home” worker, reducing the requirement for traveling to offices. As such, there is less of a demand to live in a city, and homeowners can enjoy a healthier environment in the suburbs or in smaller communities.
It’s quite appropriate to use this software term (what you see is what you get) now to the property sector. A major by-product of the reduction in demand is based on the smart home sector, and in this case, when landlords vie for customers to rent their condo’s or buy a condo in their building, they must offer a plethora of opportunities.
These opportunities are now beyond the basic gym and pool concept. Today consumers are spoiled for choice, and complexes must come with everything from a dog walking the track, an indoor coworking sector, smart homes and IoT appliances and more.
It’s a technology world
As you can see, there is a steady progression on all fronts that is based around one central core, technology. The emerging IoT market, smart materials, and the way space are being realized has led to a major upheaval in the architectural and construction industry.
According to CB Insights, venture capital in real estate technology initiatives will reach $5.2 billion in 2018. This is seen when considering the impact of companies including the Alphabet (Google) and the Fifth Wall that are now concentrating on this market sector.
AI; is it good?
Artificial intelligence is actually misleading; we are talking about algorithm-based software that can “learn” from observation and analysis of data. However, these programs are extremely efficient in meeting trends and habits of many and is also a major reason to why the design and usage of space are changing. WeWork, and smart buildings such as the Edge, are contributing to how the industries future is changing in the areas of security and logistics.
Logistics and transport
Another reason why there is a major uncertainty in trends is based on the effect that 3PL and Web-based retail is changing the market. Online working and e-commerce are becoming a major factor that is affecting not just home owning locations but also transportation and logistics. Where brick and mortar shops are now being culled for larger 3PL centers that provide accessibility for “the last mile” deliveries of online giants such as Amazon. Add to this the increase in ridesharing “gig economy” that has changed the food industry, and changes in the commercial real estate is felt already in the last year, and these changes are increasing with extreme unpredictability in both land demands as well as location demands.
The new retail
As mentioned in the last point, retail is being affected by the rise in online merchandising that requires large logistics centers as well as easy access to transportation routes. Land prices are changing, locational costs are fluctuating, and what was once considered to be a lucrative location is now becoming a ghost town. The world has not yet settled into its new smart home, IoT, online retail and online working status, there is no hiatus either. The new retail is fluctuating as systems grow and change.
Green building is all about sustainability and being constructive to nature and the environment as well as to the building and its occupants. This sector is seeing a lot of activity, and is also technology based as more and more ventures into green solutions are providing for affordable, healthier and cleaner environments.
Cost of living
The final issue, and as always, the most important one to the buyer; cost of living. This includes the cost of buying and maintain a property. At the moment, according to HUD, there are around 12 million American’s that spend over 50% of their income on housing costs. There is also an increase in rising mortgage rates and home affordability by 15% since 2015. The HUD report claims that the US needs an additional 4.6 million rental units by 2030.
To Sum up, cost of construction and demand for affordable homes is leading to a major upheaval that will hit the market sometime soon.