“Accelerate” is the watchword in Emerging Trends in Real Estate® 2021, this year’s edition of the renowned trends and forecast report released by ULI and PwC during the 2020 ULI Virtual Fall Meeting. Real estate experts whose interviews inform the annual survey repeatedly pointed to how the COVID-19 pandemic has accelerated social and real estate trends already in the works. The pandemic provided “just that boost that these trends needed going forward,” said Andrew Warren, PwC’s director of real estate research, during a panel discussion marking the release.
Accelerated trends include working from home, the move from urban to suburban areas, and move to online commerce.
Warren noted that, a year ago, Emerging Trends was somewhat prescient regarding the pandemic that took hold early this year. In last year’s report, 12 percent of survey respondents said they thought that a pandemic or an epidemic would be of great importance in 2020. “They called it right,” Warren said.
A panel of real estate experts are discussing the latest findings in our latest report, co-published with @PwC ‘Emerging Trends in Real Estate® 2021’ at the ULI Virtual Fall Meeting this morning. Our highly regarded annual outlook is available to download later today.#ETRE2021 pic.twitter.com/XcESIT8mWN
— Urban Land Institute (@UrbanLandInst) October 14, 2020
Migration among Cities and Suburbs
Panelists were uncertain about the durability of the trend of population moving to suburbs, or to smaller cities, and away from gateway cities like New York, Los Angeles, and Washington, D.C. Sonny Kalsi, CEO of BentallGreenOak, said, “I don’t know how this is going to wind up.” Affordability has been one driver of this migration, accelerated by the limit on tax deductions for state and local taxes, which may be leading people to consider a move from high-tax communities.
“I would never bet against New York,” said Onay Payne, managing director of Clarion Partners. But she added that over the past five years, the rate of population growth in suburbs has been double that of cities. Suburbs that are walkable, have access to transit, and are filled with amenities will have increased appeal, she said.
Chris Lee, head of real estate, Americas, at KKR, dismissed the idea of an urban exodus. He expects 18-hour cities to grow and business-friendly cities that have good infrastructure, like airports and transit, and educational infrastructure, including universities, to attract talent. “For example, Atlanta—the tech companies are going there.”
Mitch Roschelle, managing partner of Macro Trends Advisors, said that cities such as Raleigh/Durham, North Carolina; Austin; and Salt Lake City are already drawing tech talent from expensive areas like Silicon Valley. But Kalsi said that the highest-paying, senior-level tech jobs are still going to the San Francisco Bay area and New York City. “That’s where the ecosystems are,” he said.
Racial and Social Equity
“The pandemic has highlighted disparities,” Warren noted, adding that real estate needs to look at what it can do to address those disparities. He said that equity emerged as a top theme in this year’s edition of Emerging Trends.
Payne said she was pleasantly surprised to see equity issues gain such priority. “It gave me a lot of optimism and hope,” she said. “So many of my majority colleagues—and by majority colleagues I mean white folks—said that it was occupying their consciousness, was welcome.” She said that too frequently, Black and Latinx investors have not been given equal access to capital, and that too few Black, Latinx, or women have occupied leadership roles. “I’m pleased with the amount of intentionality that our firms are beginning to take,” she said. But sacrifice will be required to advance the issue “from moment to movement.”
Return to Offices and Travel
Panelists did not see the work-from-home trend ending soon, though they did not regard it as the dominant paradigm for the future, either. Roschelle expects work from home to continue at least into 2021. Companies and employees will miss the benefits of casual workplace encounters. “Those casual encounters, in my view, are where innovation comes from,” he said.
Panel moderator Byron Carlock Jr., U.S. real estate practice leader for PwC, polled the group for their estimates of when most people would be likely to return to traveling or working in offices.
Roschelle predicted that things will be “somewhat back to normal” by early spring 2021.
Lee said that it is not likely until fall 2021, after children return to school.
Payne pointed to the latter part of 2021, after a vaccine is distributed to most of the U.S. population.
Kalsi, who lived in Asia during the SARS epidemic, addressed hotel profitability and took the longest view. It took three years for hotels in Asia to return to pre-epidemic levels of revenue per available room (RevPAR), and he said they had much better leadership and compliance than in the United States. “It’s going to take longer than three years to get RevPAR back.”
2020 ULI Virtual Fall Meeting registrants can access an on-demand version of this session.