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Capital One/MIT Study Highlights Key Trends Transforming Commercial Real Estate

October 19, 2017, 08:00 AM
Filed Under: Economic Reports

Buildings will become nodes on the Internet of Things. Affordable housing will become an incubator for innovation. Immigration will emerge as one of the driving forces behind housing growth. These are some of the trends spotlighted in a new report that Capital One commissioned from MIT’s Center for Real Estate. Real Trends: The Future of Real Estate in the United States describes the way changes in technology, demographics, and policy will come together to fundamentally alter the way industry professionals—from investors and developers to builders and site managers—conduct business. The report also details how long-held assumptions about real estate will be disrupted, creating both opportunity and risk.

“This report provides members of the real estate community with a framework they can use to identify trends emerging in their markets, assess their implications, and change course accordingly,” said Rick Lyon, Executive Vice President and Head of Commercial Real Estate at Capital One. “Many of the trends our MIT partners uncovered defy conventional wisdom, while others highlight evolving market conditions that were hiding in plain sight. All open the door to new opportunities.”

Real Trends: The Future of Real Estate in the United States goes beyond bricks and mortar in examining the real estate market. It shows how the future of the nation’s apartments, offices, malls, and hotels will be determined by changes in the way people live, work, and play; by the policies governments enact; and by data-driven technologies that will change the way real estate professionals make decisions.

“In compiling the report, our researchers cast their nets widely,” said Albert Saiz, Director of the MIT Center for Real Estate. “Our goal was to capture innovations and trends from a wide range of geographical areas.”

The report highlights developments in three areas: demographic shifts, affordable housing, and technological change. MIT researchers found that real estate professionals could count on strong population growth, with cities in the heartland continuing to gain residents. But they also uncovered fundamental shifts in this growth.

For instance, with births by native-born mothers slowing over the next few decades, immigration will start to drive housing growth, with the biggest impact in destination cities. They also noted that with single-parent households constituting an ever-larger market for housing, developers will begin to develop communities that feature integrated childcare services and other services.

The report also highlights adaptive reuse and other innovative approaches to address the crisis in affordable housing. By repurposing older and underutilized properties, in some cases retrofitting industrial buildings, developers can reinvigorate declining neighborhoods and help strengthen their social fabric. “We need to supplement our traditional tools with innovative techniques to increase the stock of affordable housing,” said Laura Bailey, Senior Vice President of Capital One Community Finance. “Adaptive reuse is just one of the creative ways to meet this critical need.”

In addition, the MIT researchers spotlight technological change, noting that a combination of powerful technological forces—big data and predictive analytics, artificial intelligence and machine learning, massively parallel and mobile computing—will disrupt the real estate industry. “Big data and automated valuation models will increase transparency and help investors and lenders work together more efficiently,” said Jeff Lee, President of Capital One Multifamily Finance. “Advanced technology will improve our predictive capabilities and allow us to make smarter decisions.”

The Internet of Things is already making an impact; smart buildings reduce energy costs by automatically adjusting HVAC and lighting systems to reflect weather and occupancy. In the future, smart building networks might be applied to improving employee productivity, for instance by directing workers to an open parking space, locating a workspace, and adjusting light and temperature to their preferences.  

Taken as a whole, Real Trends: The Future of Real Estate in the United States makes abundantly clear that a series of interrelated demographic, economic, and technological trends will challenge established business models and open opportunities for industry professionals with the foresight to envision a future that breaks in significant ways with the present. For a copy of the full report and additional information about this study, please click here.


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