What tech trends are impacting commercial real estate and how can owners and developers harness these trends to maximize value?
From developing new properties to renovating existing buildings, owners and developers of commercial real estate across all sectors must consider which tech trends impact their portfolios. Harnessing these trends is the key to maximizing value.
Parking Lot Savings
Many companies encourage employees to telecommute, requiring only periodic visits to the office, where they work on laptops carried with them. This means less space is required for day-to-day operations inside the building, and out.
With fewer employees commuting each morning by car, building owners and developers can plan for parking lots with smaller footprints. The result: decreased investments in land, paving and maintenance. When the on-site workforce comprises large numbers of Gen X and Y—the generations that prefer walkability or public transportation over car ownership—the parking space requirements drop even further.
Autonomous Vehicles Driving Down More Costs
Autonomous cars and trucks represent another tech trend looming for parking space requirements. Instead of searching for a parking space, residents or employees and visitors arriving in their autonomous cars can simply be dropped off at the entrance, with the car then going off to park itself in specially designed lots or ramps. Boston architectural firm Arrowstreet calculates that self-driving cars require less space for drivers and passengers who don’t need to enter and exit—about four inches on either side. That adds up to 21 total square feet for each spot that could be saved.
Developers of multi-unit residential complexes also have the potential to share in parking cost savings delivered by autonomous vehicles. Real estate services firm CBRE estimates each parking space increases the cost of development per unit by 25%—investment that in the near future can be directed towards other amenities.
According to Andy Cohen, CEO of architecture firm Gensler, driverless cars could mean the end of parking lots as we now know them. “Buildings we’re designing today…have to be designed for the era of driverless cars with major drop-off and pickup areas,” he says. “We are literally designing garages with higher ceilings, flat garages, with a skin that can be made to look like an office building so that you can convert it later on.”
Autonomous trucks also hold the potential for impacting manufacturing and logistics operations. In a study by CBRE entitled Transformation of the Global Supply Chain, researchers predict that “lower transport costs (provided by autonomous technology) means “…a supply chain will need fewer warehouses” and “…all warehouses will need a courtyard that allows automatic maneuvering.” They also will need battery loading stations to accommodate city delivery vehicles as last-mile delivery shifts from diesel to electric.
Office Design: Less Space, More Tech
While space requirements may be dropping as employee mobility takes hold, office infrastructure requirements are also evolving. According to James Kerrigan, president of the International Interior Design Association, “Wi-Fi, video conferencing, charging stations and power sources are essentials that must be integrated into an (office) design plan from the beginning of a project.”
Contributors to Real Estate Weekly agree: “Increasingly, commercial properties are being judged on their performance in allowing for unfettered Wi-Fi and cellular communications.” But to deliver that infrastructure, many buildings must install or retrofit still more technology to meet the challenges presented by building enclosure systems that include glass, metal, interior walls, landscaping and water features. A Distributed Antennae System—or DAS—can be a feature of a building’s design. “The system established a network of spatially separated nodes connected to a common source, creating a bubble of coverage… from different carriers,” say the publication’s industry observers.
Healthcare and medical office developers are also increasingly integrating technology into their new projects and redevelopment footprints in order to meet these needs. More and more waiting rooms today are packed with patients filling out their medical histories on iPads and other touchscreen devices. Major hospital systems and small doctor groups alike are coming to rely on internet-connected laptops to help diagnose, record-keep, provide after-visit summaries to patients and fill prescriptions. The result is stronger, more mindful care and less all-in face time with patients—which boosts overall participation and leads to greater profitability for health systems.
A Tech Retailer as Valuable Anchor
A new flagship Apple store in Chicago’s Magnificent Mile shopping district opened last year and has become a retail destination and tourist attraction, boosting business for the area’s other retail owners and operators. That should come as no surprise. In malls, where Apple stores do a brisk business, they also attract traffic that benefits their neighbors, a role formerly played by department stores. A study of 1,400 properties by Green Street Advisors found that average sales for 220 malls with Apple stores came to $710 per square foot. Malls without an Apple presence brought in just $630 per square foot.
Retail Shopping: Tech Gets Personal
Much has been written about the impact of e-commerce on brick-and-mortar retail, but the industry is quickly adapting technology to counter that trend. Earlier this year, the National Retail Federation’s annual meeting focused on which tech trends hold the most promise for retailers. The technology application high on the lists of expert speakers: personalization. Nicole Leinbach Reyhle, founder of the retail industry website Retail Minded, says that “…more retailers are empowering their sales associates to develop digital presence or landing pages online,” to stay connected to customers after they leave the store. She adds that “mobile apps, chat tools and personalization pages allow associates to more deeply engage with customers.”
The Wall Street Journal reports that, along with sales, retail rents are being impacted: “Malls in smaller cities have been suffering for years from store closures as retailers adjust their store footprints to changing consumption habits and rising online sales.” Furthermore, retail rents “…in some of the priciest cities in the U.S. are falling back to earth after years of strong growth, as the retail reckoning spreads to properties once considered immune.” Commercial real estate information analysis company CoStar Group reports that for Chicago, retail rents remain steady, while New York, Washington and Boston have seen declines between 0.4% and 1.4%.
Blockchain is Next
For buyers and sellers of real estate, including commercial properties, transactions are becoming more transparent and less costly, thanks to blockchain. That is technology defined by IBM’s Blockchain for Dummies as “a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. Virtually anything of value can be tracked and traded on a blockchain network.”
A recent Forbes magazine forecast of technology’s impact on real estate included the key role Chicago is playing in the research to assess blockchain potential. “Earlier this year, Velox RE and the Cook County Recorder of Deeds took part in a pilot project exploring how blockchain technology could be used to store property records in the 5.2 million-resident county, which includes Chicago,” says Forbes. The benefit most likely: “Advocates of the technology say it can revolutionize real estate deals and record-keeping costs.”
The pace of technological change is accelerating. The World Economic Forum estimates that “65% of children entering primary school today will likely work in roles that don’t currently exist.” For commercial real estate owners, managers and developers, that means constant vigilance over general technology developments specific to their business sectors. The results can be wise investments and strategic advantage.