Technology drives new opportunities in real estate
Disruptive technologies, such as the internet and advanced industries, are driving new opportunities in commercial real estate investment.
At the same time, commercial real estate (CRE) investors will need to face a new set of challenges coming from the speed of change and the struggle of existing infrastructure (virtual and built) to keep pace.
Following this, large-scale opportunities may emerge from higher out-migration from big cities due to affordability and liveability, the urbanization of premier and emerging suburbs, the growing popularity of mixed-used properties with more recreation, shifting supply chain logistics bringing warehouse property to major population centres, and more frequent use of hotels for business and leisure travel in top employment hubs and at destination resorts, the firm said.
According to Clarion Partners, the key trends that would change the nature of commercial real estate investments would be:
- Sharing economy platforms: the “sharing economy” encompasses the peer-to-peer (P2P) based activity of obtaining, giving, or sharing access to goods and services
- E-commerce and omnichannel retail
- Robotics and artificial intelligence: Automation would lead the fourth industrial revolution globally while labour-saving technologies, together with globalization, have led to the loss of millions of manufacturing and agriculture jobs over the last two decades, and major transformations lie ahead in additional industries
- Self-driving or autonomous vehicles (AVS)
- Fintech, including mobile banking and blockchain
- Cloud computing and big data which would increase demand for data centre facilities which are specialized buildings housing IT infrastructure. Tech giants Amazon, Google, IBM, and Microsoft lead in cloud business
- The future of the supply chain (drone delivery and 3D printing)
Tim Wang and Julia Laumont at Legg Mason’s property investment manager affiliate, Clarion Partners, said in their recent paper: “New innovations will encompass virtually every aspect of our lives, including the way we reside, commute, work, shop, and manufacture. These changes will inevitably alter the way we use CRE, as well as overall demand and—we believe—lead to the highest and best use of properties.
“Rapidly evolving innovations that capitalize on market inefficiencies will create both challenges and opportunities for CRE investors.”
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