Society is on the brink of a new era that will be shaped by major advances in technology and lasting demographic transformations. Over the next 20 years, changes in consumer models and behavior as well as the environment will affect how we do business, the value of property investments and even the global real estate market as we know it.
The following list shows the megatrends we can expect in upcoming years.
Megatrends of the future:
- Population growth and urbanization
- Aging demographics
- Environmental laws
- E-commerce advances
- Smart home technology
- Telecommuting
- Distance learning
- Independent travel
1. The rise of the megacity
The world’s urban population will reach 6.3 billion by 2050 according to the United Nations, from 3.9 billion currently.
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Two-thirds of the world will live in towns and cities, compared to 54 percent today, and there will be more megacities (population over 10 million) than ever before. The UN estimates that by 2030 the globe will be home to 41 megacities from just 28 in 2015.
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For the real estate market, this means higher prices per square meter and shrinking living areas in city centers — a trend already present in Asian cities such as Hong Kong and Tokyo. Average Japanese flats are now 14 percent smaller than 10 years ago, currently just 60 square meters, according to The Economist.
Other megacities are gradually following this trend, too. In New York, pilot complex Carmel Place is now selling micro-units from from 260 to 360 square feet. At the same time, the global construction output will grow from $8.7 trillion in 2012 to $15 trillion by 2025, according to PwC.
By 2025, housing supply in big cities will be under more pressure, which will make buy-to-let residential property a good long-term investment. Living in downtown areas will be even less affordable and will force people into ever-growing suburbs.
2. The golden years of humanity
Humanity is getting older, and according to UN estimates, 56 percent of the world population will be over 60 by 2030, a number that will reach 1.4 billion in total compared to 901 million today. Developed countries will be most affected. In Germany, 36.1 percent of the nation will be over 60 by then while life expectancy in Europe should exceed 80 by 2050.
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In terms of property, Europe will need tens of thousands of retirement homes, care and medical facilities.
New developments will increasingly cater to senior citizens and existing buildings will be redesigned to accommodate seniors and differently abled people with wider doorways, entrance ramps, etc.
3. The future is green
Global warming, depleted fossil energy sources and conservation will take center stage as countries actively develop energy efficiency and environmental standards for housing construction.
In real estate, environment-friendly construction will increase. In the U.S., green material market is to grow $69 billion by 2019 from $49 billion in 2014, according to BCC Research.
The U.S. Green Building Council expects, using 2014 research from McGraw Hill Construction the green construction market to gain 15 percent per year on average with over one-third of the construction market should be green by 2018. It is highly likely that buildings from the 1980s to 1990s and others that don’t meet green standards in developed countries will either be demolished or renovated.
Maintenance costs for owners will go down, especially as smart technology works its way further into homes and monitors carbon dioxide emissions and controls energy usage, lights, water supply and heating.
4. The age of e-commerce
Buying online has transformed the retail industry and will not doubt change real estate too. In Europe, the number of Internet users has doubled in a decade and risen to two-thirds of the population — 60 percent of which buy online — according to Savills.
E-retail is growing 22 percent a year on average and should reach 20 to 25 percent of the total turnover in most retail sectors by 2025.
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For the retail property segment, it means a future with less brick-and-mortar shops, which will be gradually replaced by e-stores selling household appliances, furniture, clothes, etc. Street retail will mainly cater to services that require the buyers presence like grocery shops, restaurants, takeaways and gyms.
“Our client decided against buying a shopping centre because he believes that household appliances will be sold in online stores soon and brick-and-mortar shops will be for display only, actually turning into shop windows.” -George Kachmazov, managing partner and founder of Tranio
Conversely, logistic hubs and warehousing facilities will be more in demand as the hub-to-door model of e-store commerce improves and reduces delivery time by getting ever closer to the consumer.
5. The dawn of smart technology
Smart technology is looming fast on the horizon and will soon be in each household. According to a 2015 survey by Coldwell Banker, two out of three Realtors agree that buyers want smart home features they can control from their phone or tablet. Research by IT experts at Gartner Consultancy echoes this leap forward and affirms that the complete smart home experience could be available to homeowners by 2022.
A potential implications for the real estate market and particularly the commercial property segment might be a reducing number of supermarkets, as home fridges will automatically order foods based on the owner’s consumption and logistic operators will be handling deliveries.
6. The telecommuting generation
Technology advances have launched a new way to work: telecommuting, an asset-light business model. Meetings are being increasingly substituted with video conferences and paper with electronic documents.
Estimates by Techcast, a Washington-based think tank, say up to 30 percent of workers in industrialized countries will be telecommuting by 2019, as reported by HR Daily Advisor.
In this scenario, demand for office spaces will undoubtedly fall. Already, the wave of freelance workers and telecommuters has given rise to new office models such as co-working spaces, desk and room-sharing. Germany now has less square meters of office space than workers (3:5 ratio), according to Bayerische Landesbank.
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Work stations of the future will look more like Silicon Valley’s tech company campuses, with open spaces and sports facilities, massage rooms and cafes — all aimed at enhancing productivity by organic means.
7. The ascension of e-learning
Education is not exempt from these changes: Global Industry Analysts Inc. estimated the global e-learning market was worth $107 billion in 2015. This dynamic industry infiltrates all means of education and training with universities offering more and more distance courses and blended formats that include virtual classrooms and teleconferencing.
According to an IDEAL survey (Impact of Distance Education on Adult Learning), 57 percent of respondents in Europe believe that the students enrolled in e-learning courses will increase by at least 20 percent over the next five years while one-fifth say it will double. There are over 21 million students taking e-learning courses in the developed countries now.
The need for purpose-built student accommodation (PBSA) will surely wane over the coming decades, making it necessary to partially or fully reconvert the premise.
8. The freedom of independent travel
Cheap travel and the advent of a global collaborative economy has revolutionized how people travel. The short-term rental website for travelers, Airbnb, posted over 1.5 million listings in over 190 countries last year, which is more that total room count for the Hilton Hotel chain worldwide.
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The Internet has opened a new Pandora’s box for legislators as people look for cheaper ways to travel and highlighted grey areas in taxation and employment law everywhere.
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Research by the Boston University School of Management, revised in 2015, showed that the budget hotel segment in Texas (where the online portal is particularly popular) reported a 5 percent revenue cut over a two-year period (2011–2013) due to Airbnb. The researchers also expect Airbnb to take 10 percent of the budget accommodation segment by 2016.
Further expansion of the private apartment and home rental market is expected, but forthcoming changes to the law and taxation will better define its impact. The main risk is to small family-run hotels. Four- and five-star hotels of large international chains will remain popular as long as excellent service is maintained.
Advice for long-term property investments
“Mitigate the risks posed by the current trends by choosing reliable and clear markets like the USA, the UK and Germany,” said George Kachmazov, managing partner and founder of Tranio. “When studying investment opportunities, keep in mind the possibility of adapting it to future needs and possibly changing its function.
“Choose property in good locations with good growth potential over the next coming 10 to 15 years. Yields may be lower, but price growth should compensate for the smaller annual revenue. For bigger budgets, retirement homes and warehousing facilities are a good bet thanks to growing demand and higher yields than most market segments.
“Investors with up to $1 million should consider residential property because everybody needs a home, especially in the age of the Internet.”
Yulia Kozhevnikova is a real estate expert and journalist at Tranio. You can follow Yulia on Google+.
