From the start, it was clear that 2021 would not be like other years in recent memory. But exactly how the year unfolded wasn’t completely as imagined, either.
That’s the word from a recent JLL report about the biggest trends that shaped real estate during 2021. In essence, hybrid work moved firmly into the mainstream at a pace quicker than some anticipated (or even hoped). Sustainability became a dominant discussion point in boardrooms with more companies starting to formulate net-zero action plans. The real estate industry was forced to reckon with real, urgent needs to adopt new technologies.
Some of the ensuing changes were a long-time coming, such as the increased push toward a more sustainable, tech-infused world. Other shifts, such as evolving working habits, had been bubbling farther below the surface, accelerated by the ongoing pandemic.
Here is a summary of trends that JLL says left their mark on real estate in 2021.
Hybrid working takes off: As lockdowns gave way to hybrid working programs, people trickled back into the workplace. But JLL’s Workforce Preferences Barometer, which surveyed 3,000 office employees, found that a majority identify a work-life balance and the ability to work from either the home or office as more important than pay.
Sustainability risks got real: With the built environment accounting for up to 40 percent of the world’s carbon emissions, the pressure is on companies and investors to take action. In recent years, the focus had been on “green premiums” for buildings with certifications, which can boost asset values by more than 12 percent, according to JLL. But the conversation was reframed in 2021, with the real estate industry and governments increasingly focusing on the risks of a so-called “brown discount,” properties that demonstrate obsolescence or deferred maintenance risk that may require additional capital outlay for improvements.
Real estate moves deeper into the digital age: Analyzing sustainability performance is just one area where commercial real estate is turning more to technology. The industry, which in some ways has been slow to integrate technology in recent decades, has been showing signs of quickly catching up.
City centers have proved resilient: Bustling city centers famously went quiet at the start of the pandemic. But 2021 saw many central business districts show more signs of life. Jeremy Kelly, lead director of global cities research at JLL, observes, “Predictions that CBDs will go into terminal decline have proved to be wide of the mark. There’s a new energy to be found, most notably in the CBDs of major gateway cities, and where there are solid amenities and accessibility.”
No longer so alternative: 2021 raised questions around how long it will be until “alternative” real estate sectors shed their namesake and are fully embraced as part of the mainstream. Life sciences investment more than tripled in 2021. Data center investment rose 60 percent globally. The living sector (which includes build-to-rent multifamily, student housing, “age restricted” housing and single-family rentals) has seen increased demand, with transaction volumes climbing 80 percent during 2021.
Sean Coghlan, global director of capital markets research for JLL, added: “Investors are seeking to increase their exposure to growing, resilient asset types, which is exhibited by particularly strong net inflows for living, life sciences and data centers. We don’t see this longer-term focus on diversification slowing.”
This article was excerpted from a JLL report. Read the full report at this link: https://bit.ly/30LWD9g