Over the past year and a half, the COVID-19 pandemic and shifting economy have impacted us all. Our communities, businesses, and daily habits have all experienced radical transformations. As 2021 comes to a close, we're reflecting upon the past year and looking forward to the future of commercial real estate and placemaking. Let's take a look at six trends impacting development into 2021 and beyond.
1. Market & Labor Constraints Continue
It's no secret that constraints on materials and labor are posing significant challenges to the construction industry. A shortage of raw materials is driving up the cost of goods, transportation bottlenecks are common, and a tight labor market presents significant barriers for many firms.
With the Great Resignation upon us, employers are both struggling to fill jobs and retain the workers they have. According to the Labor Department, 4.4 million U.S. workers quit their jobs in September, while Minnesota's unemployment rate remains low at 3.7 percent. Combined with increasing inflation, we expect to see continuing market and economic challenges in the coming year.
2. A Desire for Community
At a time when Americans are staying closer to home, creating community is now more meaningful than ever.
Howard Paster, president of Paster Properties, shares, "Part of what we've learned through the pandemic, is that people still have this huge need and desire to be around other people. The idea of community, seeing your neighbors, and being able to congregate without barriers has become so much more important as we've been in cars less and closer to home."
This emphasis on community creates an environment conducive to placemaking initiatives. "I think that's a very positive thing in general for society, and we're fortunate because it touches much of Paster's business model. We're all about creating better neighborhoods with retail and housing opportunities," adds Paster. "There is tremendous opportunity to break down barriers, so it is easier for people to connect and live richer, more meaningful lives."
3. Rapid Change Is the New Norm
Now, more than ever, we're living in a period where rapid change is becoming the new normal. Thanks to the pandemic, we've learned that our world can shift quickly, and businesses need to be able to adapt. Whether change comes from adopting new technologies, user demands, or environmental considerations, ever-evolving circumstances require adaptability and forward-thinking.
Paster states, "As a developer, we always have to think about flexibility and optionality, and not being so pinned into one direction or one type of solution for an opportunity. You need to be able to pivot."
4. Embracing Technology
In today's built environment, access to data and technology offers an opportunity to create beneficial solutions in commercial real estate projects. Multi-family housing projects, in particular, have been eager to implement new technologies.
"There's this continued push to run all things from your phone that is playing out in the apartment space: access to buildings, temperature controls, allowing package deliveries, guest entry, and communications with property management." shares Mike Sturdivant, vice president of development at Paster Properties. "We've made great strides as an industry to continue that integration, but we're at the early stages of what that's going to look like."
Commercial real estate projects are also seeing increased adoption of technology. Cameras, for instance, offer the ability to monitor and collect vehicle and pedestrian traffic flow data. These behaviors can be analyzed and used to appeal to potential tenants by demonstrating the vitality of an area. Findings can also aid in property management decisions like security, traffic considerations, and marketing initiatives.
In addition, small retailers have become more open to embracing technology in today's market. Paster shares, "There's been a seismic shift from where we are now versus two years ago in the number of retailers using tech as a vital part of their business."
5. The Future of the Office
With 45 percent of full-time U.S. employees working from home at least part of the time (Gallup), office utilization is down to the 20 to 30 percent range. Given the limited office exposure we've had since the pandemic, it's still too early to know what this landscape will look like in the coming years.
"It will be interesting to see what happens. Will people want more space moving forward? Maybe offset by sharing spaces or co-shared spaces? That is the million-dollar question that has the most divergence of thought. It is certainly a trend to watch," discusses Paster.
6. Evolving Design Considerations
With businesses pivoting their offerings during the pandemic, once temporary changes are now becoming permanent design considerations.
For restaurants in the Twin Cities, outdoor dining spaces are in high demand. Restauranteurs are attempting to procure exterior seating areas that can be utilized later into the fall and earlier in the spring for an extended outdoor dining season.
The current labor shortage and the rise of delivery services are also causing restaurants to rethink floor plans for more efficient layouts. Built-in spaces to accommodate to-go orders and third-party delivery services are increasingly popular.
Multi-family properties are also adapting to accommodate a rising volume of package deliveries. In addition, dedicated working and office spaces are a vital selling point for many residents. Both co-working spaces in common areas and dedicated space within units will continue to be critical design considerations.
