Technology is changing the world and how businesses conduct transactions on a daily basis, and these changes could impact the commercial real estate industry over the next decade-plus.
Those changes may bring massive gains and losses for commercial real estate firms, according to Los Angeles-based CEL & Associates’ Christopher Lee, who delivered the keynote address at the Alabama Center for Real Estate’s Alabama Commercial Real Estate Conference & Expo (ACREcon) in Birmingham last month.
On top of the changing technological landscape, Lee said that based on past real estate cycles, firms should be preparing for a downturn in the future.
“Real estate for the last 50 years, the past five decades, has had a predictable cycle,” Lee said. “In each of those cycles in the last 50 years, the cycle has started on a three and ended on an eight. That has implications doesn’t it? 2018 is right around the corner … We’re getting to that period where you have some peaking going on.”
Lee emphasized that a downturn doesn’t necessarily spell gloom and doom for everyone in the industry, but that firms need to adapt and change to survive a downturn and beyond.
“We’re getting to a place where we have to be careful,” Lee said. “That doesn’t mean you’re not going to be successful … but you have to make sure that you’re relevant and contemporary and have systems and processes in place to be successful … I don’t know when it will end. None of us do, but I do know that over the past 50 years, it has been predictable. We have to be careful in what we do, and we have to be careful in how we do it.”
Lee’s presentation included over two dozen predictions that could impact CRE over the next two decades. Here’s a look at some of Lee’s predictions:
- The U.S. is moving closer to a cashless society, and Lee believes the impact is going to be significant. Ninety percent of transactions in Sweden are without cash. You’ll be paying by your iWatch, you’ll be paying by your cellphone. You’re not going to be paying with cash.
- By 2025, 25 percent to 30 percent of real estate firms in existence today will be gone. Why? Because many of the founders of these real estate firms are in their 60s or 70s, and they’re going to exit. A number of these people are selling or consolidating.
- We’re going to see online retail sales, which are about 8 percent or 9 percent today, move up to about 19 percent, which is going to render many retail centers obsolete.
- Between 60 percent and 70 percent of training for real estate professionals will be online or led remotely. Training will be more “on-demand” based on gamesmanship, one-upmanship and brinksmanship.
- Watch for the emergence of the “certified underwriter.” Within a decade, 50 percent of today’s real estate brokers will be out of the business.
- Driverless cars will be commonplace by 2025. There will be some incredible real estate opportunities involving the adaptive re-use of parking lots and garages.
- By 2025, 10 million or more jobs will be lost to robotics. Do not be surprised to see many office buildings less than 250,000 square feet in size being managed remotely.
- Homeownership will drop into the high-50 percentages (currently around 63 percent) as America shifts to a renter-based society.
- Watch for rapid adoption of taxes and fines for all commercial and residential buildings unable to meet energy efficiency standards.
- There will be multiple cyber attacks on real estate firms over the next decade.
- Crowd funding for real estate ventures could grow to between $50 billion and $75 billion by 2025.
- An increasing number of millennials will move out of the central business district and be replaced by baby boomers moving back to the city for the walkable amenities, services and entertainment in a “Big Swap” of residents.
- The real estate industry will be faced with a potential shortage of 15,000-25,000 “qualified” workers per year through 2025.
- Watch for legislation requiring all property and community managers to be “licensed and certified.”