The days of office, industrial, retail, hotel and residential space being simply that — space — are gone, according to a panel of industry experts.
One of the hottest trends in North American real estate is “real estate as a service” (REaaS), a Vancouver audience was told at the Urban Land Institute’s November 26 launch of its 2020 Emerging Trends in Real Estate report, compiled by PwC.
Integral to this trend is putting tenant, customer and resident experience at the heart of real estate design.
This means commercial and residential real estate has evolved to offer customers and residents more than the space alone, adding on layers of experience and amenities that go beyond the physical floorplan.
In the office sector, this means work environments being ULI’s Emerging Trends report said, “Beyond good gyms, more tenants and their employees are looking for features such as proximity restaurants, and less tangible elements, such as a communal vibe.”
This “vibe” can be designed into a development at initial concept stage, said panellist Sid Landolt, president and co-founder of real estate design and marketing firm S&P. “We talk about creating community, but how do you land that plane? In the design of real estate, you must foster social interaction, through simply passing each other.”
Within residential real estate, this means moving away from having an underused common recreation room somewhere in a building, and instead designing in interior and exterior communal spaces that residents have to walk through on a daily basis. This creates natural interaction between neighbours that may not otherwise occur, said Landolt. “In residential real estate, for years, we’ve had amenities where you have to go into that amenity, experience it, and go out. Those are generally cold and quiet. We’ve been reading all these articles about loneliness in Vancouver and in my mind, it comes from a lack of planning and poor design.”
ULI’s report noted that, taking this concept a stage further, cohousing is also on the rise in Canada. Developments in which families live in small, private units but share common spaces such as large kitchens, dining and recreational spaces, and participate in group activities and shared chores, have started popping up in some areas (one example in Vancouver here).
Flexibility for changing needs
Another key aspect of REaaS is the simple concept of renting space on an as-needed basis, rather than having a traditional fixed amount of space in a long-term lease or purchase. This trend has seen a massive upswing with the rise of co-working companies such as WeWork, and short-term rental of spaces for pop-up stores and restaurants.
Wendy Waters, vice-president of research services and strategy at GWL Realty Advisors, who was also on the panel, said, “We think of the people who use our office space are our guests, and we try to provide a better experience for them. I think a lot of this switch to real estate as a service is a response to what consumers and businesses want, and what they need. You think about flexibility, the rise of co-working spaces and their huge success, and it’s because they offer space on a one-year lease, a three-month lease, whatever you need. And everything’s ready to go, it’s turn-key. It offers the experience you want, it’s all right there, given to you as a service. It’s not necessarily cheaper, but it’s simpler, and may offer better value in the long term.”
However, it’s not just office and retail space that could see a transformation from the temporary-use trend. ULI’s report noted that there is potential in the future for subscription-based housing programs, whereby people occupy different living environments based on their current needs and stage in life.
The report authors wrote, “Many people are focusing on monthly costs than total purchase price. While affordability is a factor, the REaaS trend also goes back to changing consumer behaviours as people look for more flexibility as their lifestyles and preferences evolve.”
Blurring property lines
Folding into all of this is the blurring of traditional boundaries between different types of real estate. Homes are now also hotels, with the rise of short-term rental platforms such as Airbnb. Retail spaces are increasingly becoming distribution hubs for products, with smaller retail footprints. Coffee shops, hotel conference rooms and homes are now also work spaces, with the rise of remote working due to technology. Restaurants and cafes offer retail elements, either for in-house branded products or in partnership with other brands. New residential developments offer retail and restaurant spaces at grade.
Panellist and keynote speaker Andrew Warren, PwC’s director of real estate research, said, “It’s all blurring. You used to be able to say, ‘I specialize in commercial real estate,’ or ‘I specialize in industrial.’ Now everybody’s doing something in somebody else’s space. The best example is retail and industrial, as e-commerce and online shopping are making distribution centres the new retail centres. Hotels are another, you used to have to rent a room in a hotel, now you rent a room in someone’s house. They’re all blurring together.”
Landolt added that new-build residential is also seeing this blurring of property types. He said, “Retail and other services are now being embedded right into condo developments, whether that’s a certain brand of bike-share or car-share as a service for the residents, whether it’s a branded fitness centre in the building, we’re now getting more and more brands engaging right at the home.”
Download the full Emerging Trends in Real Estate 2020 report here.