Aspects of the real estate industry are “normalizing” and reverting to pre-covid patterns while others have permanently shifted to the “new normal” that was adopted with the pandemic, according to a new report from the Urban Land Institute (ULI).
Emerging Trends in Real Estate® 2023, an annual report from ULI and PwC US, highlights trends shaping the real estate industry. In its 44th edition, the report includes proprietary data and insights from more than 2,000 leading real estate industry experts, exploring shifts in the property sector since the pandemic, changing investor sentiment toward climate risks, the emergence of impact investing, and other real estate issues within the U.S. and Canada.
“As we enter 2023, the pandemic-driven factors that upended the global economy for more than two years are starting to fade,” said Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets. “At the same time, structural changes like the widespread adoption of remote work will likely continue to inform investor behavior. A series of long-term factors such as the rising cost of housing, increased climate risk, and declining socioeconomic mobility pose continued uncertainty for the private and public sectors alike. There are also opportunities – the increase in federal infrastructure spending provides the chance to create greener and more equitable communities that can adapt to these challenges.”
Key insights from the report include:
Companies are reassessing office space: As employers and employees settle on their work preferences, many firms are keeping their offices in case of potential future use or due to leasing contracts. While more firms are downsizing, terminating their leases at renewal, or turning to sublets as a temporary solution, a mass departure from office buildings is unlikely.
Unique spaces still attract people, and therefore companies need to reassess their spaces to determine they are relevant to their operational needs and play a role in securing and retaining talent.
Top Markets To Watch
- Nashville, TN
- Dallas/Fort Worth, TX
- Atlanta, GA
- Austin, TX
- Tampa/St. Petersburg, FL
- Raleigh/Durham, NC
- Miami, FL
- Boston, MA
- Phoenix, AZ
- Charlotte, NC
Addressing climate change impacts and ESG demands: The intensifying impact of climate change is altering the dynamics of where people want to live. The combination of rising temperatures and drought may soon limit where we can build, and some cities are already pausing new developments for this reason.
Stakeholders are actively seeking greater environmental, social, and governance (ESG) disclosures and given the investors’ market size and current capital demands, the industry cannot ignore ESG protocols. Investors and other stakeholders are calling for voluntary action, and the SEC has proposed regulations that would require greater disclosure, transparency, and enhanced consistency in reporting. The demand from investors is pushing the market toward establishing newer, greener, and more energy-efficient buildings and seeking ways to limit greenhouse gas emissions (GhG). The Inflation Reduction Act of 2022 also includes programs designed to reduce GhG and reverse or slow climate change.
Infrastructure spending to develop smarter, fairer cities: Initiatives such as the Bipartisan Infrastructure Law, the Reconnecting Communities Pilot, and the Inflation Reduction Act provide billions of dollars towards advancing economic and environmental justice in underserved communities. These initiatives address accessible transportation, broadband internet access, environmental remediation, and reconnecting black neighborhoods and other communities of color that were previously displaced by decades-old urban renewal programs. These programs are significant for increasing remote employment opportunities, enabling access to jobs, advancing economic opportunities, boosting social interactions, and rebuilding once-thriving communities.