Future Space Demand, User Behavior and the Psychology of Real Estate

Summer 2013
Gene Reilly

Real estate is shifting from a founder-based to successor-based business, with 60 percent of today’s CEOs gone by 2020 and 30 percent fewer practicing firms. This is just one of the intriguing facts shared by Chris Lee, CEO of CEL & Associates, Inc. at the recent National Forums Symposium.

Chris shared his fascinating future outlook, and I’d like to share with you a few of the notes I took about our industry and where we’re headed.

Market trends to monitor are the Energy “V” region — Colorado south through Oklahoma to Texas and north to the Dakotas; and growth in the traditional high tech areas and secondary and tertiary markets.

He identified 2013 through 2018 as the “Age of Consequence and Restructuring,” naming growth from recapitalization, generational shifts, global restructuring, green technologies, education, public infrastructure, knowledge-based industries, data storage, energy, healthcare, and rental-based societies as the primary drivers of the cycle.

Shifts in population will propel development decisions. Between 2010 and 2020, the nation will add more than 31 million new residents and up to 13.8 million new households. The top five states for growth — California, Texas, Florida, Illinois, and Ohio — will comprise 35 percent of population and minorities will constitute 71 to 73 percent of household growth. For the first time in history, more than 50 percent of the population lives in the Sunbelt states.

The industry is facing a talent crunch, with an expected shortage of 15,000 professionals by 2015. As a result, compensation and succession are top priorities.

Chris closed with his predictions into our industry’s future:

Office: Space per worker could shrink to 50 to 75 square feet, and office buildings will shift to 24/7 activity centers. Space will be leased by units of consumption rather than square footage.

Industrial: Industrial will look like Amazon and operate like FedEx, with greater use of radio-frequency identification (RFID). Industrial facilities will employ more technology specialists than laborers, with improved robotics accelerating on-shoring. Manufacturing is back!

Apartments: Units will be smaller (400 square feet), common area amenities and green features will dominate design and development, with the ability for custom interior finishes and features. Cohabitation will increase by up to 45 percent, and buildings will be “celebrity branded” or identify with a local charity.

Retail: Grocery stores will become a “community resource” for healthcare meetings, learning, banking, and personal services, and U.S. consumers will become digital or device shoppers. Organic and “buy local” initiatives will abound. Amazon will become the #1 grocer in America. With the emergence of a new “Rewards” currency, will money be relevant?

With Chris’ insights, I think you’ll agree with me that the future holds more change than we could ever imagine. I’m confident that NAIOP will be on the cutting-edge of this knowledge and will be a guiding force for our companies as they adapt to this revolutionized industry.

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