What trends will shape the future of the real estate market in the coming decades?

The impact of technology and demographic changes on the real estate market

Recently, technological transformations and changes in the demographic structure have had a significant impact on society, especially in the real estate sector. Research by the company "Tranio" shows that Russian-speaking clients are increasingly interested in long-term investments. While the average holding period for income-generating real estate was about 2-3 years in 2013, by 2015 this figure had doubled to 5-10 years.

More than half of the respondents (53%) reported their intention to pass on their investment properties as inheritance. In this regard, "Tranio" shares useful tips on what types of real estate to consider for investment now in order to benefit in the future over the next 10-20 years.

Key trends in the future real estate market

The future of the real estate market is directly influenced by changes in consumer preferences and lifestyles expected in the coming years. Researchers have identified eight important trends that will impact the global real estate market in the near future:

• Population growth and urbanization;
• Aging of the demographic group;
• Increased attention to environmental issues;
• Development of online commerce;
• Implementation of smart home technologies;
• Increase in the number of remote workers;
• Increase in the number of students studying remotely;
• Increase in the number of independent travelers.

Urbanization and its consequences

According to UN data, the urban population of the planet will increase from 3.9 billion in 2014 to 6.3 billion by 2050, which will account for about 66% of the total number of inhabitants on Earth. This acceleration of the urbanization process will lead to a rise in the number of megacities with populations exceeding 10 million people. The UN forecasts that the number of such large cities will grow from the current 28 to 41 by 2030.

The increase in population will lead to denser construction in city centers and smaller apartment sizes. This will result in changes in the real estate market: construction projects in the central part of the city will become larger in scale, and the cost per square meter will continue to rise, leading to the development of compact housing.

An example of reduced living space can be seen in megacities like Hong Kong and Tokyo, where such phenomena are already observed. For instance, in November 2015, rental of studios began in the experimental complex Carmel Place in New York, which houses 55 studios, each ranging from 24 to 33 square meters, while the standard size of a studio in New York is about 50 square meters.

Prospects for investors

With the growth of urban populations, there is an increasing demand for housing, which makes investments in apartment buildings particularly promising. This opens up new opportunities for the urban construction sector.Investors can expect stable interest in real estate.especially in those areas where active urban development is taking place.

The existing trends highlight the importance of considering modern realities that influence housing choices and investment strategies, creating a foundation for future changes in the market. In the context of rapid transformation of the urban environment, the ability to adapt to new circumstances will become critically important for success in the real estate sector.

Growth of the global construction sector

According to data from PwC, it is expected that by 2025, the volume of production in the international construction sector will increase from $8.7 trillion in 2012 to $15 trillion. This significant change will make housing in central cities less affordable, prompting people to move to the suburbs, which will gradually begin to integrate into the urban infrastructure.

Such trends can already be observed in a number of large cities. The real estate market will increasingly focus on areas suitable for families with children, which will contribute to a growing interest in townhouses and similar types of housing.

Increase in the number of elderly people

According to forecasts from the United Nations, the number of people over 60 years old on Earth is expected to grow by an impressive 56% from 2015 to 2030 — from 901 million to 1.4 billion. This phenomenon will be particularly noticeable in developed countries.

For example, in Germany, the percentage of citizens over 60 years old will increase from 27.6% in 2015 to 36.1% by 2030. Forecasts also indicate that by 2050, the average life expectancy in Europe will exceed 80 years. These changes have a significant impact on the residential real estate market, which is beginning to adapt to the needs of elderly citizens.

The need for specialized housing

In Europe, there is a growing demand for nursing homes and specialized medical facilities. Research conducted by HPS Research shows that in Germany alone, the real estate segment related to elderly care will grow by 50% from 2007 to 2020, and will double again from 2020 to 2050.

• The demand for barrier-free housing will continue to grow.
• In the coming years, the number of new housing complexes designed for the needs of elderly people will significantly increase.
• Existing real estate will be adapted for the convenience of elderly citizens and people with disabilities.

Entrances to buildings will be equipped with ramps, and doorways will be made wider to ensure accessibility for everyone.

Environmental issues and "green" construction

There is also a growing attention to environmental issues such as global warming, increasing greenhouse gas emissions, and the threat of depleting energy resources. These issues have been discussed in society for quite some time now.

In response to the aforementioned issues, many countries have begun to implement new regulations aimed at increasing energy efficiency in residential construction. This will lead to a growth in the volume of "green" building in the market.

• According to BCC Research, the market for eco-friendly building materials in the U.S. is expected to grow from $49 billion in 2014 to $69 billion in 2019.
• Environmental issues are becoming an integral part of the development of the construction sector.
• This opens up new opportunities for investment and innovation in this field.

The future of green building

According to the expectations of the U.S. Green Building Council, the "green" building sector is projected to show an average annual growth rate of 15%. Forecasts indicate that by 2018, over 33% of new constructions in the United States will meet environmental standards.

A lot of attention will be given to projects aimed at creating zero-energy homes, as well as "active" housing that utilizes renewable energy sources. By 2020, it is expected that all real estate in developed countries will receive the appropriate certifications confirming their compliance with eco-standards.

Old buildings constructed in the 1980s and 1990s that cannot meet new requirements will be subject to demolition, while the others will be modernized according to current energy efficiency standards. This will also enhance operational comfort and reduce costs for owners.

Smart home technologies

The future of "smart" homes will significantly change our usual perceptions of living spaces. These homes will be equipped with sensors that allow for monitoring carbon dioxide levels, as well as automatically adjusting the ventilation system.

Thanks to modern technology, they will be able to control the lighting, heating system, and water supply based on current conditions, ensuring maximum comfort and safety for residents.

Changes in the field of e-commerce

As for the field of e-commerce, the experience of various companies shows that the process of transforming purchasing is already in an active stage. For example, Georgy Kachmazov, managing partner of the company "Tranio," mentions that one client chose to forgo investments in a shopping center, believing that all household appliances will be offered online, while physical stores will give way to showrooms.

Growth of e-commerce in Europe

The Savills report notes that the share of internet users in Europe increased from 31% in 2006 to 65% by 2014. Approximately 60% of internet users in European Union countries regularly make purchases online. The e-commerce sector is showing steady growth, averaging 22% per year.

Although the share of online retail in Europe is relatively low at the moment (8.4% across the EU in 2015, 11.6% in Germany, and 15.2% in the UK), a significant increase is expected in the future. It is forecasted that by 2025, the share of online stores in the total turnover of the EU could reach 20-25%.

Trends in the USA

Similar trends are observed in the United States. According to estimates from FTI Consulting, online sales in the U.S. are expected to grow from $380 billion in 2016 to $550 billion by 2020.

It is expected that their share of total sales in the country will reach 17% by 2020 and 20% by 2025. The specifics of the shift to online trading will impact the real estate market:

• Although most purchases will still take place in physical stores, online platforms will begin to take up an increasingly significant share.
• Household appliances, furniture, clothing, and travel packages will only be available online.
• In the street trading segment, grocery supermarkets, restaurants (including delivery formats), cafes, and fitness clubs will be actively operating.
• At the same time, the number of banks in this segment will decrease, as many of their functions will be taken over by large online giants like Google.

The future of banking services

In the future, the banking system will undergo significant changes, and they will only perform narrow specialized functions, without the need for physical branches.

The overall state of remote work

According to data provided by the British organization CBI, there have been significant changes in the number of employers offering remote work options to their employees. In 2006, only 13% of companies provided this opportunity, but by 2011, this figure had risen dramatically to 59%.

Similar changes are also reflected in the statistics of Britons working fully or partially from home: from 2001 to 2011, the number of such workers increased from 2.1 to 2.8 million. This accounts for nearly 10% of the entire workforce in the country.

The state of remote work in the USA

In the United States, 24% of the population is currently able to work from home for at least a few hours a week. Forecasts promise that over the next 10-20 years, the number of people working remotely will continue to rise, which will have a significant impact on the commercial real estate sector.

In particular, a decrease in the demand for traditional office spaces can be expected.

New formats of office space

The growth of freelancers and remote employees has already led to the emergence of new forms of office spaces, such as coworking spaces. These spaces offer various work options, including:

• Desk sharing— shared workspace;
• Room sharing— shared offices.

Thus, there is a trend towards a decrease in the amount of office space per employee. An example of this can be seen in Germany, where, according to statistics from the Bavarian State Bank, the number of available workspaces already falls short of the number of employees (with a ratio of 3:5).

Requirements for modern offices

Modern offices have new requirements, and the work environment increasingly resembles the contemporary campuses of tech giants like those in Silicon Valley. In such offices, the focus is on:

• Open spaces;
• Sports areas;
• Massage rooms;
• Cafe.

This is becoming the new standard.

Distance learning

There is also a noted increase in the number of students studying in a distance learning format. In a study conducted by the Pew Research Center in 2012, 60% of respondents suggested that by 2020, the higher education system would undergo significant changes due to the implementation of video conferencing technologies, making educational programs more personalized and eliminating the need for group classes.

Distance learning allows students to not worry about finding housing near educational institutions.

Statistics on distance learning in Europe

According to a study conducted by the International Council for Open and Distance Education in collaboration with the UNESCO Institute for Lifelong Learning, 57% of respondents in Europe believe that the number of students studying remotely will increase by at least 20% between 2015 and 2020.

Currently, more than 21 million students in developed countries are participating in distance education programs, indicating a significant increase in interest in this format of learning.

With the growing popularity of distance learning among students, there is a high likelihood that in the foreseeable future, housing for students — including dormitories, specialized complexes, and apartments near universities — will be partially or completely transformed into rental residential complexes. The rental housing market is also undergoing changes against the backdrop of increasing interest in independent travel.

According to data published in September 2015 on one of the rental platforms for drivers, such as Airbnb, the number of listings exceeded 1.5 million from property owners in 190 countries. This is an impressive figure because there is more accommodation available on this platform than in the entire Hilton Worldwide hotel network. Property owners are increasingly taking an active role in managing their properties, while travelers are more frequently rejecting the services of traditional travel agencies in favor of renting private accommodations.

Prospects of the rental market

Experts predict further growth in the sector of private residential rentals and apartments. While luxury hotels continue to maintain their appeal due to high service standards, small family-run hotels are finding it increasingly difficult to compete in such conditions.

• For example, a study conducted by Boston University showed that from 2008 to 2014, hotel revenues in Austin, Texas, decreased by 8-10% due to the growing popularity of Airbnb.
• Similar trends are observed in other regions as well.

The impact of global trends on the real estate market

Global trends have a significant impact on the real estate market. The increasing population leads to the need for more multi-family residential complexes, which means that living spaces in central areas are becoming less accessible, while there is a growing interest in homes in the suburbs.

Moreover, with the increasing number of elderly people, there is a growing need for specialized nursing homes and medical centers, as well as infrastructure that takes into accountbarrier-free access.

Environmental issues and modern challenges

Environmental challenges are becoming increasingly important, which strengthens the trend towards"green" constructionThe introduction of strict building quality standards and the reduction of operating costs for property maintenance. The development of online commerce also affects the market, decreasing the number of traditional stores and increasing the demand for warehouse real estate.

With the introduction of smart technologies, there is a further decline in the number of traditional retail outlets. Remote work is becoming a common practice, which reduces the need for office spaces; however, the requirements for modern office environments have significantly increased.

Changes in demand for student housing

With the increasing number of students opting for distance learning, there is a growing decline in demand for housing in student dormitories and apartments located near universities, which necessitates the adaptation of student properties for residential rental. However, the trend towards independent travel is contributing to the rise in the number of private apartments and houses available for rent, while the need for traditional hotels is decreasing.

These changes are shaping a new perspective on the rental real estate market and leading to significant transformations across its various segments.

Introduction

In summary, I understand that changes in new technologies and demographic situations affect every aspect of our lives, and the real estate market is no exception. Research shows that Russian-speaking investors are increasingly viewing real estate as a long-term asset, indicating a growing confidence in this market.

The increase in the time spent owning income-generating real estate among buyers in recent years clearly indicates a shift in investment approaches. The observed trend of passing real estate properties down through inheritance reflects a serious interest in stable and profitable investments.

Key trends in the future real estate market

Today I want to reflect on the future of the real estate market, considering eight key trends that are shaping the demand for residential and commercial properties:

• Population growth and urbanizationThe increase in urban population and ongoing urbanization are leading to dense development in the central areas of megacities.
• Aging populationBy 2050, the proportion of elderly people will significantly increase, which will require a rethought architecture of residential complexes focused on the needs of this group.
• Environmental issues- Developers are starting to implement energy efficiency standards and "green" technologies.

Trend analysis

The demand for barrier-free housing and specialized institutions will grow, offering new opportunities for developers. Additionally, environmental issues are becoming increasingly relevant. The market for "green" building materials is expanding, confirming that ecology and economy can and should coexist for sustainable development.

Conclusion

Thus, by observing changes and adapting to new realities, I have come to the conclusion that investing in real estate requires a deep understanding of trends and societal needs. Only in this way can one stay a step ahead, capitalizing on future opportunities in the market.

In conclusion, I want to emphasize that a conscious and adaptive approach to real estate investment can serve as a solid foundation for future wealth.