The pandemic left hardly any business or industry untouched, but real estate was front and center for many of the biggest shifts.
The offices where we work, warehouses facilitating the boom in online-shopping, hotels and malls that went quiet during travel restrictions and lockdowns: these sectors became a cornerstone of idle chats well beyond commercial real estate circles.
But other parts of life and business have continued apace. Sustainability initiatives are forging ahead. Interest rates are low, and demand for commercial real estate continues to rise. Offices will change, but workers are eager to head back.
As the world looks ahead into 2021, it’s worth looking back at a year that changed real estate, and crucially at trends that have largely stayed the course.
E-commerce accelerated massively in 2020 as shoppers stuck at home flocked online.
“What we’ve seen is a permanent shift in consumer habits,” says Michael Ignatiadis, Head of Supply Chain Consultancy, Asia Pacific, at JLL. “And this means that e-commerce and logistics needs to transform at an incredible pace to keep up.”
Compared to traditional logistics operations, e-commerce is more labor intensive, and requires three times more warehouse space. That’s part of the reason behind increased investor demand for industrial real estate across the world.
Demand in particular rose for urban properties that can fulfill consumers’ insatiable thirst for same-day delivery. Most cities weren’t designed for this, so the sector has had to pivot. For example, stores have become distribution hubs.
“Retailers, primarily grocers, are becoming large vending machines,” Ignatiadis says. “They’re looking for much needed space to accommodate e-fulfilment operations at the back of store.”
From business trips to tourism, 2020 saw a dramatic decline in travel. For instance, U.S. airline traffic was down 62% in October from the year earlier, according to the country’s Department of Transportation. And that was the smallest decrease since March.
This made for a difficult year in the hospitality industry. While there is little doubt that travel will come back strong, in the meantime operators have had to get creative, for instance by looping themselves into the remote-working culture.
Another change is set to be the size of rooms, says Geraldine Guichardo, Director of Research, Hotels, at JLL. Over the last decade average room sizes shrunk 31 percent, according to JLL data. But now, as guest preferences change, spaces are likely to expand.
Bigger rooms “can provide a flexible environment for telecommuting, room for exercise and space for longer-term stays,” she says. “This will form a new guest-experience paradigm of ‘work, stay and play’.”
A year of mass lockdowns that forced people to work from home showed many roles can be done remotely, spurring companies to adopt new, hybrid working models.
The shift was already underway at many businesses, but like so many things, it accelerated due to COVID-19.
“Companies of all kinds are seizing a once-in-a-lifetime opportunity to change the office model and lean into workforce preferences,” says Marie Puybaraud, director of global research at JLL.
What’s more of the same?
At the end of the day, many aspects of work won’t change. People will still need to collaborate, innovate, and liaise with managers on projects and their careers. These are some of the reasons why people missed the office, and it’s why for many offices will retain a central role in corporate life.
A survey of 2,000 office workers in 10 countries showed nearly three quarters of respondents still want the ability to come into an office, while 70 percent consider the office as the best place for team building and connecting with management.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 93,000 as of December 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.