To say that commercial real estate has undergone significant disruption over the last year feels like an understatement, to say the least. With many companies using the Covid-19 pandemic as an opportunity to downsize their offices and transition to a more remote workforce, some real-estate companies have undeniably struggled.
On the other end of the spectrum, ever-increasing demand for apartment housing has helped fuel record-breaking real-estate investment volume in recent months.
All of this goes to show that 2021 is rife with both challenges and opportunities — and that the commercial real-estate industry is poised for even more disruption.
Here are four ways you can get in on this disruption.
1. Invest in co-working spaces
The way people work has changed dramatically over the last few years. While freelancing and the gig economy were already on the rise pre-pandemic, furloughs and layoffs fueled by the pandemic significantly increased the number of people doing this type of work.
At the same time, however, many individuals experienced firsthand that working from home wasn’t always ideal. Trying to get work done when you share a small apartment with your spouse, kids and pets makes it all too easy to get interrupted.
To alleviate this, many in the gig economy — and even in traditional business spaces — are turning to co-working arrangements. Though workers may be self-employed or work for different companies, they utilize the same shared office space — as well as its resources and expenses.
With demand for such spaces set to increase with a rising number of freelancers and more companies looking to downsize, commercial real-estate investors would be wise to facilitate co-working options to fill their properties.
2. Leverage data analytics
AI and machine learning have become commonplace in many industries, but commercial real estate tends to lag in these areas. This isn’t necessarily due to a lack of technology options. Rather, the industry as a whole is generally resistant to change.
While this can cause traditional real-estate investors to fall behind in our increasingly tech-driven world, this poses a significant opportunity for potential disruptors. Managing data in a way that allows you to extract powerful insights and generate accurate reports is key to identifying opportunities and threats to your business as a whole.
By taking advantage of the increasing number of software solutions specifically available for the commercial real-estate niche, you can automate much of the work and be better positioned to identify and act on key insights.
When you let data analytics tools and other tech streamline your back-end operations, you can focus more of your efforts on closing high-earning investment opportunities.
3. Understand the potential for both urban and suburban spaces
While the overall perception during the Covid-19 pandemic was that people were largely abandoning urban spaces, the numbers paint a different picture. New York City is seeing roughly twice as many new arrivals as it did in 2019, in large part fueled by younger workers who desire the active and diverse lifestyle offered by city environments.
These growth trends aren’t entirely one-sided, with many big-city suburbs seeing tremendous growth thanks to more affordable housing and the ability to work remotely. Of course, with suburban growth comes the need for more businesses to provide necessary services for residents of these areas.
Though this may not sound disruptive in and of itself, commercial real-estate investors in 2021 would be wise to diversify their portfolio with a mix of urban and suburban spaces. Both areas hold great promise, but there is no telling what further changes might be ahead.
Geographically diversifying your investments could be key to minimizing risk. As climate disasters like this year’s Texas freeze illustrate, you never know when something might happen to your properties.
4. Key in on industrial and distribution facilities
Global ecommerce saw a dramatic increase in its share of retail sales during the pandemic, hitting an impressive $26.7 trillion. While in-person shopping has recovered nicely as lockdowns and other measures have been lifted, ecommerce continues to experience higher demand in 2021.
With less business being done at traditional brick-and-mortar stores, commercial real-estate investors should make industrial and distribution facilities a key priority in their investment portfolio. Even big brands traditionally associated with brick-and-mortar sales are increasingly shifting to ecommerce.
The transition away from traditional brick-and-mortar retail to ecommerce distribution warehouses will dramatically upend business operations for many. Commercial real-estate investors who begin making these properties a priority now will be far better positioned for what will undoubtedly be an ever-evolving shift in how businesses deliver goods to their customers.
Will you be a disruptor or be disrupted?
The commercial real-estate market seems poised for a bigger transformation than ever before. Savvy entrepreneurs will look ahead to these disruptive forces and take advantage of them to increase the total value of their portfolios. By acting proactively now, you can ensure financial success both in 2021 and the years ahead.
Related: You are Your Best Real-Estate Asset