The real estate industry will need to become increasingly adaptable as tenant expectations and building configurations evolve, according to research findings presented on Friday.
Distinctions between categories of real estate are blurring as developers increase amenities in their buildings, PwC’s Andrew Warren said at the Toronto launch of a trends report by the consulting firm and the Urban Lands Institute.
“We’ve seen what used to be very distinct silos for office, industrial, retail, residential, and we see things kind of coming together,” said Warren, who is PwC’s director of real estate research.
The report says mixed developments will become even more common and start to integrate more features such as dedicated short-term rental space and package receiving rooms.
Overall, the industry is also shifting more towards real estate as a service as land costs and other barriers to building push some developers into more long-term holdings.
Pauline Alimchandani, chief financial officer and executive vice president at Dream Unlimited Corp., said the developer is shifting what would have been condo developments to purpose-built rental apartment buildings in Toronto.
“We’re seeing so many of our land positions, and our real estate, becoming irreplaceable because it’s so much harder to acquire new land, and because it’s so much harder to get the zoning and the approvals than it was before,” Alimchandani said during a panel discussion.
Being a long-term land holder means Dream Unlimited is increasingly having to think about what consumers will want in 20 or 30 years and is already integrating co-living and affordable housing options into developments, she said.
Co-living blends features of apartments, dorm rooms and hotels to offer residents the opportunity to have their own space within common living areas at a more affordable price.
Andrea DelZotto, director and executive vice-president at the Tridel Group, said the push for co-living and other alternative models is a result of the high housing costs.
“The concepts of co-living, fractional ownerships, and the subscription models, they all really speak to that large topic of affordability.”
As developers look to accommodate consumer expectations, there is an amenity creep that is adding costs some won’t want to pay, she said.
DelZotto also expressed concern about the cybersecurity risks of integrating more technology into buildings, pointing to a case in Finland where hackers took over building controls in the winter and demanded a ransom.
“It’s adding a layer of vulnerability, but it’s also adding a layer of opportunity.”
The 2020 trends report also found a rising unease in the industry because of high asset prices and rising costs for land and labour that could leave many in the industry holding back in the year ahead.