According to the 2020 Emerging Trends in Real Estate report published by PwC Canada and the Urban Land Institute (ULI), Canada’s real estate sector is carefully monitoring government policy changes, housing affordability and technology disruption.
The best bets for 2020 are mainly about “beds and sheds,” with a focus on mid-priced apartments, transit-oriented development, as well as warehousing and fulfillment.
Residential Real Estate
In the past year, the first results of the mortgage stress test have restrained activity in markets like Vancouver and Toronto.
Some homebuyers have been taken out of the market because traditional lending markets are closed to them, so an unregulated lending market has emerged, resulting in greater consumer and market risk.
Survey respondents rated construction, material and land costs, along with approval processes, as the top development issues in 2020. Many of these are supply-related issues where governments can play a role.
The report suggests that there is an opportunity to do more as governments and the real estate industry embrace the mutually-beneficial approaches to housing supply issues through transit-oriented development policies, and increased density allowances around transit hubs.
“Governments must recognize that increased supply can help address the affordability issue and be willing to embrace innovative ways of unlocking a supply-constrained market,” says Frank Magliocco, National Real Estate Leader, PwC Canada.
Rising customer expectations influences commercial real estate
Changing workplace practices, like remote and flexible working is creating an environment of Real Estate as a Service (REaaS).
The push for amenities and the need to make office environments as attractive as possible to attract and retain top talent is having a significant impact on shaping real estate.
Rising customer expectations for same-day e-commerce deliveries continue to spark demand for large-scale facilities close to population centres and transportation routes.
“The rise of e-commerce doesn’t necessarily mean the end of the brick-and-mortar presence, and in fact retail remains an important solution to last-mile delivery,” says Magliocco.
Proptech, which according to PwC Canada and ULI covers everything from new lending services to construction technology, is changing the way properties are bought, built, sold and managed.
The report states that Proptech investment is projected to reach a record $6.3 billion (US) across 382 deals in 2019. In 2018, the figures were $4.5 billion (US) and 399 deals.
With customers looking for digitally enabled and mobile-friendly spaces, the real estate industry is exploring new applications across the technology spectrum, with a focus on smart-buildings, energy efficiency and embedding IoT (Internet of Things)-powered sensors into their systems.
“Digitization, including the rising use of the Internet of Things-enabled sensors in buildings has created an added layer of vulnerability for many real estate players,” says Magliocco.
Cybersecurity is ranked fourth on the list of real estate disruptors for 2020, with many interviewees in the report having been victims of cyberattacks. We expect to see more training, hiring and embedding teams of cybersecurity professionals within the real estate industry.