Now that 2020 is firmly in the past, it is time to look to the future with fresh resolve. Although we are far from clear of the pandemic, we can start to look forward to new beginnings.
Never before has real estate had to come to terms with such drastic change, so quickly, and innovation will be front and centre in the ‘new normal’ in 2021 and beyond.
Some asset classes have been far harder hit than others, with retail and hospitality suffering the worst losses. The high street was already struggling to survive before 2020 and with the surge in retail bankruptcies in recent months, it is unlikely to recover any time soon.
Although physical stores will always have a role to a degree, their business models must evolve for them to survive and many are already repositioning to an online-to-offline offering.
As for hotels, it will take a long time for global travel to go back to normal, and many will not survive until then. Once there is a post-vaccination rebound in travel, expect hotels to reopen with much more efficient software stacks in place.
Offices have not fared very well in the short term, and they are being reimagined for the long term as owners and occupiers come to terms with the need for flexible workplaces. ‘Flex’ was already a trend prior to the pandemic, and it is going from strength to strength in this new world.
Technology will increasingly play a key role, as it has become essential to increase safety, improve utilisation and efficiency, and meet sustainability goals.
The residential and multifamily space has fared well, with investments in the sector growing throughout 2020. This is unsurprising as the home has become central this past year, and investors looking for safe rental income favoured the space.
Cities will continue to play a central role in the future, though we can expect the focus to shift away from central locations in favour of more space with more travel time as many will not return to five-day working weeks. As a consequence, there will be an ever-growing need for effective physical and digital infrastructure.
Win for logistics
Lastly, the shift to ecommerce has made logistics the biggest winner of the pandemic. The boom in online spending has gone from midcycle to full cycle and the online-to-offline mix has shifted firmly online.
Although we can expect some physical retail traffic to resume post-pandemic, many newfound online shopping habits are here to stay and logistics (especially last-mile) will continue to be a market front-runner in 2021 and beyond.
So, what does this mean for tech? The funds deployed into proptech to date have been just a drop in the ocean. As we emerge from the hard stop to global activity, there will be an acceleration of investment in the space from venture, private equity and corporate players.
Tech will be deployed massively to support the office market transition, enable logistics and save what is left of the retail industry. This was already happening prior to the pandemic and the current crisis just served to accelerate it.
A key trend that will gain steam this year is sustainability, in both construction and real estate. Buildings and construction are responsible for 40% of CO2 emissions, and Covid has made it very clear that global risks can quickly become global disasters. Furthermore, sustainability is also beneficial to businesses’ bottom lines, as introducing greater efficiency will translate into cost savings.
Real estate technologies have by and large reacted countercyclically to the Covid crisis and are poised to grow exponentially from here.
Angelica Donati is chief executive of Donati Immobiliare Group