Ten Game Changers Shaping the Way We Will Live and Their Effects on the Real Estate World

Tuesday, March 6, 2018

Breakthroughs in technology, science and production have revolutionized the way we go about our daily routines. These breakthroughs are fueled through the drive to overcome current obstacles and/or are results from evolving global conditions. In a modern society, these progressions seem to occur exponentially. No industry will remain untouched by these changes, including the real estate industry. The following ten trends will emerge from now, up until 2030, and will transform the way we live our lives and shape the way we do business in real estate.

  1. Extended life spans through genetic testing: “DNA analysis of cancer cells is allowing for more effective treatments, without experimentation. The extension of life spans puts more strain on retirement and entitlement resources including medical care and pensions.” As the aging population grows older, the demand for senior homes and retirement centers will increase. We have also seen individuals that make up this age group move out of their homes and into apartments, establishing a stable demand for multifamily residential.

  2. Immigration and migration: “Countries that do not have significant immigration are stagnating, hampered by labor supply (i.e. Russia and Japan). The U.S. is now witnessing a significant slowdown in immigration that will lower the U.S. economic output in the high-skilled tech and temporary worker agricultural industry. Narrowing immigration policies and paths to residency will most likely harm U.S. economics, but may help other countries like Canada.” A country’s ownership regulations and lack of location knowledge for immigrants drive the rental market while also creating demand in the multifamily market.
  3. Batteries: “Research on batteries and the scaling up of production is creating strong global demand for lithium and cobalt. Analysis in this market suggests that within five years, batteries will last five times as long, be rechargeable and have almost no degradation. This development will affect cars, trucks, drones, pacemakers, phones, robotics and more. It will transform many economic processes and open up new worlds of automated tools for security, data mining and transport.” As gas guzzling automobiles become battery charged vehicles, the market for gasoline may become obsolete. The real estate that gas stations occupy throughout the world makes up some of the most prime locations. What will become of these spaces? Battery swap or charging stations may be one replacement for an outdated business model. 

  4. Robotics and Automation: “Robotics and automation will mean either a lessening of the individual workweek or a higher rate of permanently unemployed people. We will develop new uses for robots from monitoring child care to senior care to search and rescue missions. From truck and Uber drivers to factory workers and farmers, we will need less labor for the same output.” As automation becomes more common, certain companies in the business sector may require less, or a different kind of space within all real estate property types. Robotic run warehouse facilities do not need breakrooms or bathrooms. A.I. run call centers would need vast server rooms with large power capacities and the ability to control the temperature. 

  5. Bio-mimicry, composite materials and 3D printing: “Buildings and products, based on nature’s designs, are stronger and lighter, enabling better production and less waste. As well, higher floor to ceiling interiors that let in more natural light and control interior temperatures better; utilizing solar, geo and wind energy with passive solar designs. 3D printing allows more complex designs that will create a feasible production explosion never before possible.” The standardization and mass production of 3D printers may affect the demand for warehouse storage. If business owners are able to produce products for customers on the spot, the need for large backrooms becomes obsolete.

  6. Machine learning: “Machine learning will allow systems to continuously improve; from better elevator and HVAC systems, to better marketing and assistance on all sorts of tasks. Every field of work will eventually become enhanced with respect to decision making, with artificial learning from continuous data mining.” This sort of data collection requires large server buildings with temperature-controlled spaces. Demand for facilities in cold and remote areas would gain momentum in this industry.

  7. Climate change: “Farm land in Canada, Russia and northern climates will generally become more productive. Land in the southern U.S. will decline in value. Low lying land all over the world from Nauruto Bangladesh will be subject to more flooding, higher insurance costs, and become less valuable. Eventually, even the optimists in the Florida Keys will need to move away from low lying coasts. Coasts at risks will see declining price premiums as flood risks offset the view premiums.” The effects of climate change will transform the world’s coastlines, making some of today’s most populous cities uninhabitable. 

  8. Virtual reality (VR): “VRwill allow us to try on clothes, spare with attractive coaches and tour cities we could not otherwise afford. VR partners might be selected over real people, decreasing the value of social skills for introverts. It will eventually dominate the entertainment and exercise industries, affecting the design and use of recreation space.” The need for space in shopping centers and strip malls will diminish as in-person shopping moves online. TI costs will increase as tech friendly real estate normalizes and interactive LED walls and goggles replace brick and mortar stores. 

  9. Urban factory farming: Urban indoor controlled farms use one percent of the water in a closed system, with fish and produce balanced, eliminating the need for pesticides and reducing pressure on land farms to feed the world. Such productivity will allow the world’s population to double without straining resources. Some countries in the world have already implemented this technology (i.e. Israel).” As farming becomes more efficient, the need for remote farming communities may decrease. More than half of the world’s population lives in cities and this number will only continue to grow as life in the countryside becomes unsustainable.

  10. Deficit driven crisis and the decline of the U.S. economic share in the world: “Eventually, the U.S., like other countries, will have kicked the can down the road so far that the debt burden will no longer be sustainable. This will inevitably lead to a raise in taxes; inflating away some of the debt by printing money and buying bonds. These changes would dramatically affect interest rates and will plunge the U.S. into a prolonged recession; while politicians debate the realities of having borrowed so much for so long. This shift could occur within 15 to 20 years, if significant reductions in entitlements and military spending do not occur.” The global financial crisis of 2008 created disturbances in not only American real estate but, real estate and development holdings around the world. If a recession of the same or greater magnitude is to occur again, real estate won’t be the only industry to feel the burn.

These trends, some positive and some negative, will come with various impacts in the real estate world. Some shifts in the market that are here to stay, and see growth, are data storage space, senior living homes, experiential spaces, and collaborative work areas. While leaseholds may see a decrease in on-site parking, office space, and retail per capita. Companies that are able to understand how these changes will affect business operations will lead the pack in successful real estate decisions. 

About the Authors:
This list was developed by Norm Miller, Hahn Chair of Real Estate Finance at the University of San Diego School of Business and affiiated with the Burnham-Moores Center for Real Estate.  

Taylor Stack is a Master of Science in Real Estate student at the University of San Diego School of Business. Her background includes grocery retail operations and expansion and she is currently an Asset Manager at the Port of San Diego.