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10 trends that will change the real estate industry in 2023

Updated: Jan 24

Last year, I wrote that 2022 is part of a transition period. In this transition period, real estate companies are forced to make choices between the red pill and the blue pill. The world-historical challenges require not only traditional but, more importantly, transformative solutions. I have experienced the past year as a vibrational year with different frequencies. These frequencies represent a level of consciousness 1) business-as-usual - protecting the status quo 2) Pursuing digital transformation and sustainability - doing less harm and 3) Regeneration - building capacity for self-sustaining abundance of life (humans doing things as Nature). For me, it feels in the ratio 85/14/01.

2023 promises to be a challenging journey for stakeholders in the built environment worldwide, and there are always opportunities in a volatile market. 2023 promises to be a challenging journey for stakeholders in the built environment worldwide, and there are always opportunities in a volatile market. Below you can read 10 trends that will change the real estate industry in 2023.

1. Existing real estate systems begin to crumble

The trend blog 2022 describes that we are at the beginning of the great collective awakening and creaking systems. We are currently living in the fourth turning because it is a time of great change and social upheaval. It is a time of crisis when old institutions and norms are being challenged. The economic property system, and all its subsystems often cause more problems than they solve. Despite this, most people in the real estate industry are still clinging to the old familiar system, which is crumbling in the face of numerous economic, social, and environmental challenges. Growing awareness and creaking systems are giving new initiatives more room to grow and people are searching for meaning. More and more people are awakening when it comes to the future of humanity, society and planet Earth and are searching for meaning. This allows many slow-moving positive initiatives to develop, transformative technologies to be ready to scale up, and new trends to reach the tipping point. This perspective focuses not on degradation, but on rebirth.

In 2023, system evolution continues, and we reach a point where we can see what is happening, and what is coming soon, through the lens of the future. The visions and intentions are probably there, but the community is not yet. In 2023, Minimum Viable Communities - MVC is the smallest action you can take to bring people and/or organisations together and experiment with the foundations: value, relationships, and trust - are going to manifest more emphatically. In 2023, traditional relationships transform, and new (surprising) partnerships emerge between real estate and technology companies and cross-industry companies such as, for example, with the gaming industry, farmers, and even Indigenous tribes.

2. Shifts in the early PropTech market

Last year, private investment firms worldwide raised a record $697bn in new funds (overall), figures from data collector Preqin show. This year, the counter remains stuck at $537bn, the lowest level since 2015. According to Creti, VC-backed proptech companies raised $19.8bn in 2022, down 38% from (record year) 2021. According to Metaprop, PropTech industry confidence was at an all-time low in 2022. Monetary policy has dramatically increased the opportunity cost of capital and the threshold for investment. To weather economic headwinds, entrepreneurs are focusing on demonstrability/ transparency, measurement of results/ impact (quantified ROI) and solid path to profitability.

In 2023, the initiated slowdown in PropTech continues in Western countries and PropTech grows in emerging countries (such as India, Nigeria, Mexico, Indonesia, Saudi Arabia). If interest rates continue to rise, then the present value on future cash flow falls which is going to affect valuation and funding volume. Nevertheless, investors still have plenty of dry powder to invest. By 2023, tourism VCs (those who did a bit of it on the side thanks to the bull market) are disappearing from the market. Investments in modular (wood) construction, microgrids, batteries, HVCA optimisation, Space-as-a-Service (mix and multi-use), Multifamily smart home solutions will be popular in 2023. In short, impact-related solutions will be the winners of 2023. There is also an extra focus on generative AI (e.g. ChatGPT embedded) and blockchain solutions. In 2023, the chaff will be separated from the wheat, which will benefit the quality of technology companies invested in which ultimately results in more 'fit for purpose' real estate companies. By 2023, the PropTech market is visibly consolidating (e.g. Lessen x SMS Assist, a $2bn merger), as the market moves away from specific solutions/ functions towards platforms/ integrated solutions. The image of 'smart city' comes under further pressure, as more and more people question whether smart does not stand for 'control'. It prompts thinking about our relationship with digital technology. In short, there are going to be shifts in the early PropTech market.

3. PropTech narrative is changing

Driving digital transformation of the real estate industry has been the PropTech narrative since 2016. This first phase of the PropTech movement is characterised by digitalisation and the digitisation of existing processes. Linked to this are also the buzzword 'disruptive', the quote 'the winner takes all', and the technology push from an Industry 4.0 mindset. Since 2021, the narrative has been visibly shifting towards 'driving the sustainable transformation of the global real estate industry'. This new phase has emerged from increasing pressure to contribute positively to social issues and is being driven by new laws/regulations, social engagement of employees and new talent, new market players, and changing customer demands. This is also creating growing collective awareness and a new influx and growth of impact-driven startups/ scale-ups. By 2022, this sustainability movement within the real estate industry has manifested itself emphatically.

By 2023, the international real estate industry is visibly becoming more involved in solving those future challenges, such as environmentalism, affordable housing and the materials transition, and the call for systemic change is growing. International real estate companies see that 'solutioneering' - buying a ready-made (digital) product/service - is not the solution to solving the world's most pressing issues. By 2023, the new PropTech narrative - driving the sustainable transformation of the global real estate industry - is gaining momentum. The new PropTech narrative reinforces the question "what if impact is our purpose and real estate and technology are our tools?". This means that a growing group of pioneers in 2023 will be looking for a new Return (on Investment), which is going to generate exciting dialogues on with the GDP-driven real estate industry and investors/ VCs.

4. Redefining value

Gross Domestic Product (GDP) is the total monetary or market value of all final goods and services produced within a country's borders during a given period. As a broad measure of total domestic output, it acts as a comprehensive scorecard for a country's economic health. To GDP is mostly associated with words like growth, revenue, sales, competition, market share, profit, shareholder value. The current real estate system is all about one thing: creating as much financial economic value as possible with real estate in as short a time as possible. At the expense of everything and everyone. As a result, nature has invariably drawn the short straw for far too long. By now, we know that the economic system needs to be redesigned. Away from the one-sided financial profit definition and more inclusive definition, incorporating Return of Inspiration, Return of Social Capital, Return of Natural Capital, and Return of Financial Capital. By covid-19, people have become more aware of well-being, but GDP does not measure well-being. In addition, more and more investors are done with the focus on financial results only. They lack meaning and were faced with questions from and about the future generation(s).

2023 marks the 300th anniversary of Scottish economist Adam Smith, patriarch of laisser-faire capitalism. His birthday could ensure that the debate on laisser-faire capitalism is revived, and the future of capitalism is more emphatically questioned. In 2023, the paradigm "value" and "values" for investors converge. In 2023, we will hear globally the buzz words: responsibility, vitality, viability, resilience, circularity (donut economy), regeneration, evolutionary capacity, customer and community retention, and well-being and happiness contribution (Gross National Happiness - Bhutan) contributing to the redefinition of value and the makeover of GDP.

5. Acceleration of new construction methods and materials transition

By the end of 2022, the world population passed 8 billion. The floor area of buildings worldwide is expected to double by 2060. To accommodate the largest wave of urban growth in human history, 2.4 trillion ft2 (230 billion m2) of new floor space would be added to the global building stock (the equivalent of an entire New York City building every month, for 40 years). Achieving zero emissions in new construction requires energy-efficient buildings that use zero fossil fuels on site and are 100% powered by renewable energy on site and/or elsewhere. Looking at all new construction expected to take place between now and 2040, we can see the crucial role embedded carbon plays (did you know that electronic waste is the fastest growing waste stream in the world and less than 20% is recycled). In 2020, The New European Bauhaus (NEB) initiative was launched by the European Commission, linking the European Green Deal to living spaces and experiences and expressing the EU's ambition to create beautiful, sustainable, and inclusive places, products, and ways of life. Von der Leijen expressed Europe's ambition to become the ‘Home of CleanTech’ and industrial innovation on the road to Net-zero. Von der Leijen wants to enable the net-zero transition without creating new dependencies (as is currently the case with the raw material lithium because to achieve climate neutrality, the EU will need 18 times more lithium by 2030 than Europe uses today and almost 60 times more by 2050). Each city, country, region, and continent are taking its own approach to achieve societal goals, rethinking supply chains and trade relations. For example, Saudi Arabia has announced it is building a new sustainable city, The Line, and Tokyo announced it is expanding the city (Tokyo eSG) and will be built around the principles of environmental and social governance and incorporate the latest green technologies.

In 2023, the movement of more regionally oriented value chains continues and is further driven by the agenda of upfront carbon (upfront carbon', will be responsible for half of the total carbon footprint of new construction between now and 2050 and threatens to consume a large part of our remaining carbon budget), the growth of consumption especially in Asia, and international localism (by buying locally, consumers can protect themselves financially, ecologically and psychologically and feel they are giving something back). In 2023, there will be more discussion of stranded assets and the remaining material value with a view to harvesting this regional value. Modern Construction Methods are gaining popularity in 2023, although it is often traditional construction methods (such as Japanese Minka houses) that have been unearthed and heralded as innovative and progressive techniques. The EU's Carbon Border Adjustment Mechanism (CBAM) - will start in October 2023 and will have an impact on the global real estate sector as materials such as steel, cement, aluminum, and electricity are frequently used. In addition, CBAM is going to demand low-carbon design, products, and services.