According to a recent report by the NAR, the coronavirus pandemic has disrupted the way we live and work in a major way and caused a massive economic fallout that affected the entire world. Global industry leaders are still trying to understand the long-term impact to the real estate industry.
The coronavirus has accelerated many existing trends, including digitalization, remote working, and online shopping. It is hoped that this will lead to an economic recovery based on increased consumer spending that will feed into an uptick in real estate business in the second half of 2021. This, however, will depend on how well the vaccination proceeds and how soon the lockdown restrictions are eased.
The report states that the 4 major real estate trends that are emerging around the globe are, as follows:
- Real estate is still attracting investment: Around the world, the low interest rate environment is fueling interest in real estate investment. Income-producing real estate is drawing greater attraction this year than in pre-pandemic times. Given the beneficial supply-demand dynamics, allocation to residential assets have increased. This is a trend that has been speeded up by the pandemic.
- Future of office sector is still uncertain: The outlook for the office sector will continue to be unclear. Remote working, rising concern for employee health, and undesirability of long commutes are expected to negatively affect office leasing this year and next. Quite a few real estate market observers believe employees will want to return to the office, leading to a hybrid working style. In that regard, “flexible space” is one area of this sector that might show strong growth. Even then, only the modern and adaptable high-quality buildings will draw the most interest, while demand for outdated and inflexible buildings are expected to suffer a noticeable decline.
- ESG becoming top issues: Carbon emissions from the built environment is becoming a graver issue for a growing number of companies. Thus, companies are placing a greater emphasis on understanding the impact on environmental, social, and governance issues. Within the past 18 months these issues have migrated to the front and center of corporate thinking. Up to now, it was the financiers and the major tenants that were exerting pressure on building owners. Now, it is expected that governments will begin to pass regulation in near future. For this reason, building owners would most likely start addressing these concerns more actively.
- Retail sector is re-envisioned: The physical brick-and-mortar retail sector has been under increasing threat from online competitors for some time, but the coronavirus has worsened this situation. Despite this, given the softening prices in this sector, real estate investors have begun to look for new opportunities. In that regard, investors are acquiring retail assets to reconfigure them into more usable retail formats or re-create them into something completely different, such as for residential or in-city warehouse uses.
I believe that the same 4 trends are manifesting themselves in Japan’s real estate market as well. In a sense, can it not be said that the coronavirus pandemic has been the biggest single factor that has truly globalized the world’s real estate industry.