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As we enter the new year, the American consumer has proven to turn the tide on recent developments within the real estate industry. From one-click solutions that allow you to buy or sell a home within days to the recent growth of co-working space, these broader real estate trends have begun to define our current economy.
The Rise Of iBuyers
No one should be surprised; it was only a matter of time before the American homeowner would flip the switch and go online to execute real estate transactions. Using the internet to their advantage, they have altered the playing field.
A home is typically the largest asset most Americans own, and it is almost always shackled with a mortgage. This makes selling a real sticking point — if the owner follows the traditional path. Imperative action items include: giving the house a complete makeover to get it red-carpet ready, selecting a real estate agent, haggling over the asking price, waiting endlessly for potential buyers to appear and, finally, signing on the dotted line to close the deal. Instead of this occurring in rapid succession, each step seems to have all the speed of a glacier.
Traditional ways are devoid of delivering an excellent customer experience. Nowhere in the litany of tasks is the owner considered. With the advent of online real estate companies known as iBuyers, such as Opendoor, Zillow and Offerpad, much of the friction is removed. Homeowners can now avoid listing fees, receive cash offers in days and even close within weeks.
The great part about the iBuying experience is that it is not limited to just the American homeowner — investors are taking advantage, as well. In 2018, approximately 10% of the sales on Opendoor and Offerpad came from single-family home investors. While perhaps more challenging in the commercial real estate sector, the iBuyer movement is starting to expand beyond single-family homes with the launch of Offerd, an iBuyer for multifamily properties.
Retail Is Not Dead; It’s Just Changed
Once the e-commerce train rolled into the station, powered by the titan Amazon, foot traffic in brick-and-mortars declined sharply. People are still buying; they have just transitioned from offline to online. The merchandise on digital pages has even expanded to include groceries.
Today’s enclosed malls are graveyards of department stores and apparel retailers that resisted change, oblivious to the evolution of the customers’ desires. Economists predict that an additional 9,000-plus retail stores are headed to the chopping block in 2020.
When online shopping began to outpace in-store shopping, businesses learned some hard lessons. King of them all: be where the consumer wants you to be. Having an online presence is as essential to retailers as oxygen is to humans. However, retailers that are serious about winning their consumers’ loyalty are seeking ways to optimize their brick-and-mortar space to enhance the in-person shopper’s experience as well. The winners have seen the light and implemented omnichannel fulfillment services to improve business and get products into the hands of the customer more quickly while providing a better experience for the customer.
The Ever-Shifting Customers And Patients
After one real estate transformation wave, another one typically follows. The next trend on this horizon is the healthcare system. The movement is away from inpatient care, with a heightened focus on being where the consumer wants you to be.
Providers have seen the frightening results of not taking cues from customers; they don’t want to be the next property owners sweeping tumbleweeds down empty corridors. Thus, consumers can expect to see redesigned facilities popping up in more convenient locations. The Advisory Board determined that from 2006 to 2016, inpatient visits declined by 6% while outpatient visits increased by 20.4%. With 60% of new healthcare facility spending now being allocated toward outpatient care, healthcare CEOs are starting to catch on.
Real Estate As A Service (REaaS)
It started in the office sector appealing to an emerging worker profile. Self-employed, entrepreneur, freelancer — call it what you wish — but the gig economy is exploding, creating another revolutionary change for Americans. WeWork is one such innovative business model that is carving out shared workspaces. Despite its movie script-like drama, the company no doubt has shaken up the usual ways of operating an office building. Even office landlords have followed suit, embracing the “hotelization” of office space.
Data sifters speculate that about 57 million Americans are engaged in non-traditional work arrangements. These tenants want a more customized experience, a digitally secure location that is safe and flexible. It’s all part of a larger trend now being referred to as real estate as a service, or REaaS. Central themes to REaaS include a la carte layers of services and amenities with a focus on tenant, resident or customer experience.
And it doesn’t stop with office properties. The model of renting space on an as-needed basis is now commonly utilized in retail, whether that be through pop-up stores or by transforming entirely and serving as distribution hubs. We’re beginning to see REaaS find its way into multifamily with subscription-based living arrangements flexible enough to meet changing tenant needs. The underlying commonality is leveraging technology to monetize physical space while separating an element of service from property ownership. WeWork offers office space as a service; Airbnb offers short-term accommodation as a service.
These are just a few of the recent developments that have shifted the way companies and consumers are using real estate today. As technology becomes more advanced and consumers demand more, developments will continue to evolve. The bad news? The consumer may never be satisfied. The good news? This consumer hunger will drive innovation in an industry that is just now seeming to enter into the 21st century.
Full disclosure. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.