Emerging Trends in Real Estate 2021 - ULI Knowledge Finder
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in Real Estate 2021
Virtual Regional Trends Event: ULI Indiana, Kansas City,
Michigan, and Pittsburgh
December 1, 2020
Dealing
with
Certain
Uncertainties
Despite uncertainty, comfortable making decisions
44%
% Response
40%
35% 34%
30%
26%
25% 23%
Of survey respondents feel 20%
comfortable making long-term
strategic decisions in today’s 15%
environment 10%
10%
5%
5%
2%
0%
Strongly Disagree Neither agree Agree Strongly agree Don't know
disagree nor disagree
Emerging Trends in Real Estate 2021
PwC / ULI 3
Market expectations reflect uncertainty
2021 US Profitability Outlook
80%
8.0% 10.7%
Survey respondents who expect
43.7% 37.6%
2021 profitability to be fair or good
compared to 2020
10.7% expect profitability to be poor,
exceeding those who expect it to be
excellent for the first time since 2012
Poor Fair Good Excellent
Emerging Trends in Real Estate 2021
PwC 4
The Economy Stumbles:
Real estate has the potential to hang on
What shape is the recovery?
The Economy 155,000 152,463
150,000 151,090
• Unprecedented mandated recession 152,212
impacted population and businesses 145,000
141,059
unevenly
140,000 141,720 142,373
• Federal Reserve monetary support 137,809 139,570
has put a floor under asset prices 135,000
133,028
• Recovery has been mixed, outlook 130,000
130,303
is for GDP and employment to be
125,000
back at 2019 levels by 2022
120,000
• Confidence will be needed for full
recovery 115,000
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
• Return to stable moderate growth in
Total Employment (000s)
2023
Sources: US Bureau of Labor Statistics
Emerging Trends in Real Estate 2021
PwC 5
Accelerated
trends or
fundamental
changes
Work from Home:
Attitudes are changing
What percent of your office employees do you
anticipate will work remotely at least one day a week?
Few (0 - 29%) Many (30 - 59%) Most (60 - 100%)
Work from home (WFH)
Before COVID-19
Work from home experiment has
changed attitudes toward remote 36% 25% 39%
working - “working is working no
matter where you are”
During COVID-19
In the short term has led to rising 2% 21% 77%
productivity, but as term extends is
engagement declining
After COVID-19 (projected)
Office is still going to be relevant,
but role may evolve to meet 11% 34% 55%
different needs
.
Source: PwC US Remote Work Survey, June 25, 2020
Emerging Trends in Real Estate 2021
PwC 7Great American Move:
Flexibility increases choices
Top Outflow & Inflow Markets 3rd Quarter 2021
The great American Move
Net Outflow # Households Year/Year Change
WFH has increased flexibility about New York City 25,584 23%
where employees can live
San Francisco 26,247 54%
Ongoing trend toward sunbelt 18- Los Angeles 12,405 21%
hour cities has accelerated during Washington DC 8,249 54%
the pandemic
Chicago 4,415 44%
Net Inflow # Households Year/Year Change
Permanent move to
retirement/vacation homes Sacramento 8,070 79%
Phoenix 4,997 21%
City to suburb dynamics have also Las Vegas 4,739 28%
changed with suburbs even more
attractive – “willing to commute Austin 4,617 54%
further, if you don’t have to do it Atlanta 4,207 19%
every day”
Source: Data provided by Redfin, a national real estate brokerage.
Emerging Trends in Real Estate 2021
PwC 8Gateway cities continue to send residents across the country Emerging Trends in Real Estate 2021 PwC 9
Tech company expansion shows up in relocations Emerging Trends in Real Estate 2021 PwC 10
Retail Transformation: Fast forward the evolution
Retail Transformation
Forced and voluntary closures of Ecommerce Sales as % of Total
retailers has accelerated retailer 18%
bankruptcies 16.1%
With stores closed and consumers 16%
concerned about the virus, online Now that is an acceleration
sales surged – But 84% of sales 14%
were from brick & mortar locations
12%
Many consumers who had never
11.8%
had groceries or food delivered di
10%
so for the first time
The move to experiential retail has 8%
slowed due to social distancing 7.9%
requirements 6%
Retail will likely have a smaller brick
& mortar footprint, what will be
done with excess space
Emerging Trends in Real Estate 2021
PwC 11
.Just-in-Time to Just-in-Case:
Industrial space gets a boost from supply chain concerns
% of respondents who feel the pandemic will
Just-in-Time to Just-in-Case accelerate focus on the global supply chain
Industrial has seen continued growth 50.0% 47.5%
due to rise in E-commerce activity, 45.0%
requiring both fulfilment and last mile 40.0%
locations 35.0%
34.4%
Disruption to existing supply chains 30.0%
due to trade war has been 25.0%
accelerated by the pandemic
20.0%
Greater inventory requirements and 15.0% 11.8%
growth in near shoring
10.0%
manufacturing operations could be a
5.0% 2.6% 3.5%
tailwind for warehouse 0.1%
0.0%
Political support due to view of near Strongly Disagree Neither agree Agree Strongly agree Don't know
shoring being a US job creator disagree nor disagree
Emerging Trends in Real Estate 2021
PwC 12Fiscal Challenge:
Cities will be challenged by pandemic related costs
Fiscal Challenge Share of Cities Less Able To Meet Fiscal Needs by
• States and cities faced with double Year and Tax Structure
impact of rising costs and falling
89%
revenue Property
67%
• Timing and severity of revenue
decline will depend revenue source Property + Income 87%
73%
• A lack of federal funds may lead to
immediate employee and service Property + Sales 88%
cuts 82%
• Real estate could be faced with 83%
Property, Sales, +Income
higher taxes and fees and 75%
municipalities look for revenue
Sales 92%
85%
2021 2020
Source: National League of Cities
Emerging Trends in Real Estate 2021
PwC 13COVID-19s Anticipated Effects on Municipal Budgets
Source: National League of Cities
Emerging Trends in Real Estate 2021
PwC 14Future use of technology
93%
% Response
60%
50%
50%
43%
40%
Believe that the pandemic will 30%
accelerate the use of technology in
their companies broader operations 20%
10%
4%
3%
0% 0%
0%
Strongly Disagree Neither agree Agree Strongly agree Don't know
disagree nor disagree
Emerging Trends in Real Estate 2021
PwC / ULI 15Location, Location, Safety:
Enhanced health safety may become the norm
Health concerns will be a more important factor across
all property types
Location, Location, Safety 2.9%
• Hesitancy of employees to return to
work/shopping/travel due to health 14.8%
concerns
• Cleaning protocols could become a “must
have” amenity
• Cleaning methods, tracking employee 82.3%
health and movement has opened new
markets for PropTech
Strongly Agree/Agree Unsure Strongly Disagree/Disagree
Emerging Trends in Real Estate 2021
PwC 16ESG: Focus increases on the “Social”
$16 T
Racial/Social Inequity
• Opportunity to go from “Moment to Movement”
• Focus on racial inequity was not caused by the
pandemic, but has been highlighted by the inequality of
the impact of the economic recession
Estimated economic cost to the US
economy of not addressing racial
gaps between blacks and whites • The real estate industry has acknowledged
over the past 20 years contributions to systemic racism, but now has an
opportunity to participate in the reform
Source: Citi GPS: Global Perspective & Solutions • Ultimately, changing demographics and a slower
economic growth will make it a significant business
issue
Emerging Trends in Real Estate 2021
PwC 17Real Estate and Systemic Racism
Personally Industry Industry Can Company has a
Understand Understands Influence Plan
80% 50% 47.5% 80% 60%
70.3%
68.2% 45%
70% 70% 49.0%
50%
40%
60% 60%
35%
40%
50% 50%
30% 27.7% 32.7%
24.7%
40% 25% 40% 30%
20%
30% 30%
20% 18.3%
20.9% 22.3%
15%
20% 20%
11.0% 10%
10%
10% 10% 7.4%
5%
0% 0% 0% 0%
Agree Don't Unsure Agree Don't Unsure Agree Don't Unsure Agree Don't Unsure
Agree Agree Agree Agree
Emerging Trends in Real Estate 2021
PwC 18This is a temporary Disruption, What markets will Lead going forward
Trends influence
Market Rankings
#1 Triangle Region, NC
#2 Austin, TX
#3 Nashville, TN
#9
#4 Dallas/Fort Worth, TX
#10
#5 Charlotte, NC #7
#8
#6 Tampa Bay/St. Petersburg, FL
#7 Salt Lake City #1
#3 #5
#8 Northern VA Suburbs
#9 Boston
#10 Long Island, NY #4
#2
#6
Emerging Trends in Real Estate 2021
PwC 202021 Emerging Trends in Real Estate Market Outlook
Heat map shows change in expectations by property type from 2020 to 2021
Change
Property Change Change Change
Detroit Indianapolis Kansas City Pittsburgh 2020 to
Sector 2020 to 2021 2020 to 2021 2020 to 2021
2021
Office 2.54 -4.2% 2.67 -16.3% 2.60 -12.1% 2.50 -27.2%
Retail 2.23 -12.6% 2.28 -23.0% 2.15 -27.1% 2.19 -31.4%
Industrial 3.81 20.6% 4.18 2.8% 4.05 20.4% 3.88 6.5%
Multifamily 3.30 9.0% 3.69 -4.6% 3.29 -8.2% 3.20 -12.8%
Hotel 2.08 -17.8% 1.61 -54.0% 1.95 -35.0% 1.85 -32.0%
Niche 3.18 1.2% 3.31 -13.1% 3.14 -5.7% 3.16 -8.6%
Single Family 3.25 8.3% 3.59 -4.2% 3.72 16.8% 3.28 1.7%
Feasibility 2.67 -14.0% 3.23 -16.1% 3.13 -14.3% 2.94 -11.7%
Emerging Trends in Real Estate 2021
PwC 21Conclusion Uncertainty will likely continue Change on the margin Confidence No rebuilding required
Questions?
Contact me at andrew.warren@pwc.com
Thank you
pwc.com
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