The growing availability of data on all aspects of real estate, combined with the tech-enabled shift toward viewing it as a service rather than an asset for ownership, are two upcoming trends that investors need to understand, says Gareth Lewis, PwC real estate director.
Commenting after the release Wednesday of the Emerging Trends in Real Estate Europe 2018 report published jointly by the Urban Land Institute and PwC, Lewis told BIE that important changes include not only the impact of data available but also those which can be captured and used in the future. “On the Big Data side, as well as the poor management of basic real estate/financial current data and data systems such as spreadsheets/multiple owners, it’s the data coming down the line that are relevant to really understanding real estate performance as a service.”
This could be anything from data from buildings, component parts, the people employed within the buildings and the manner of the interactions between them. “That’s why I think the change in valuation methodologies and profession is an interesting area – as this is all about interpreting performance data,” he said in an emailed note. WeWork and the multitude of other workspace rental concepts are also changing perceptions of office ownership and operation.
The Emerging Trends 2018 report, under the headline ‘Space as a service – a new direction for occupiers’, says: “Respondents believe that space optimisation will be the key focus of occupiers in the year ahead. Occupiers will continue to demand more flexibility and are becoming more willing to pay for that flexibility. The workplace environment will have the biggest impact on occupiers/investors real estate strategy, with over 80% seeing this as having a significant impact over the next 3-5 years.” While physical space and location are still the foundations around which value is created, shifts in customer expectations are blurring boundaries between sectors and changing how value is delivered. New skills are needed to meet evolving customer expectations.
“The other interesting shift .. is the tech-enabled change towards viewing real estate as something you access rather than something you need to own,” Lewis said. “This adds momentum to the view of real estate as a service, and is likely to contribute to the rise of flexible offices/co-working… Some dismiss the rise of WeWork as overblown. But the real change is in our expectations of what real estate offers – and there, the impact on the traditional office sector will be the most interesting.”
He added: “If I rent out my car through an app from my insurance company, what impact does this have on car values and rental prices, especiall if most people on my street start doing the same thing? This could be similar for offices in a world where we can work from lots more places. What happens therefore when every coffee shop, restaurant, pub, even home can become places where you can sensibly work from or easily rent out?”
“Technology a big factor here but also changing social aspects – whereby people are exercising more independence and personal choice around how they work, and where and how they integrate this into their personal lives… This is driven also perhaps by a realisation that they will be working for a lot longer in low growth environments, with less ability to save for retirement or to own a home, for example.”