
Navigating disruption and uncertainty is standard in a world continually facing economic and political challenges.
Investors and corporate occupiers have a lot on their minds, from hybrid workforce productivity and gaining an edge with artificial intelligence (AI), to deciding what to do with office buildings headed for obsolescence.
Join us in diving into some of the biggest issues facing the commercial real estate industry in 2024.
1. Is hybrid really working?
Years into the great hybrid work experiment, many firms worry it isn’t delivering the goods.
Boosting productivity is one of the top three reasons employers are encouraging people to work from the office, recent JLL research found. They feel it’s needed to maximize collaboration and innovation.
But there are conflicting issues from an employee standpoint. Almost half the workforce believes they’re more productive at home.
For instance, more than a quarter of workers cited office noise and inability to focus as a reason to work from home in JLL’s Is hybrid really working? research. Today’s workers are now more demanding of the levels of comfort they expect from their offices.
The answer, then, is more work is needed to bring expectations closer together. A big part of it will be creating offices that deliver what’s needed for a hybrid workforce. Office use data and human-centered design are key to cracking the performance code.
2. Will AI go from hype to habit?
AI, and the future it has come to represent, has taken the world by storm. It’s creating a job boom for related skills. Property industries such as data centers have expanded on the back of growth expectations.
But as the initial excitement wears off, organizations are grappling with how to fully harness the technology to fuel their future goals.
There’s no lack of conviction from investors, developers and occupiers, who agree it’s among the top three game-changing technologies for real estate in coming years, not least for decarbonizing real estate. Comercial real estate (CRE) professionals are leveraging the technology to make light work of complex data, whether financial, contractual or vast datasets generated by smart buildings.
However, as the use of AI becomes more common place, businesses should be mindful of the various AI regulations that continue to emerge across the world, concerning data quality, IP rights, privacy and data security.
3. Will there be enough net zero offices?
Demand is on the rise for real estate that helps organizations meet their net zero carbon (NZC) goals. But for now, there’s not enough space, particularly in the office sector, to accommodate everyone.
In the U.S., the supply of low-carbon workspaces will be 57 million square feet short by 2030.
“The gap between supply and demand is only set to widen,” says Guy Grainger, global head of sustainability services and ESG at JLL. “It’s creating opportunities for forward-thinking developers and investors to consider retrofitting existing office buildings with the prospect of higher rents in the short-term and protecting value in the long term.”
Grainger points out the commercial case for sustainable buildings has never been stronger.
“Mounting costs from climate risk, increased tenant demand, tougher regulation and restrictive finance all point to investment in decarbonization as the smart long-term strategy,” he says.
4. What next for real estate investment?
Commercial real estate investment is in the early stages of a significant reallocation of capital.
“Depending on location, it’s fair to say that diversification will take different forms,” says Sean Coghlan, global head of capital markets at JLL. “And even for those sectors which are currently out of favor, we still see a place for global, diversified portfolios.”
For new strategies, Coghlan says deployment will be a hurdle, given varied degrees of barriers to entry, competition and crowding-in strategies. “That really reinforces the need for investors to act with agility and have real-time market connectivity.”
As a clearer picture emerges, investors’ existing holdings will need to be assessed, he adds.
5. Will investors become conversion converts?
While office vacancy rates hit an all-time high, and housing shortages abound, investors and landlords are questioning what to do with buildings past their prime. Converting these spaces into apartments, life-science labs, luxury hotels, data centers and more are becoming increasingly attractive options.
With many buildings now out of date and others simply failing to generate sustainable yields, conversions are increasingly factored into the conversation.
Executing upon conversions is complex, though, and requires the collaboration of public entities and city leaders to allocate monetary funds and streamline the regulation of buildings being converted into new purposes.
The concept of work and the workplace have undergone a remarkable transformation since 2020 and businesses across the globe are grappling with a pivotal question: Is hybrid really working? Download JLL’s latest research piece to learn more.
JLL is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create
rewarding opportunities, amazing spaces and sustainable real estate solutions.
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