Updated: Jan 14, 2021
Was the year 2020 written by Stephen King and directed by Quentin Tarantino? Around the turn of the year, the word 'roaring' was frequently used. And a roaring year it was. YouTube has decided not to publish the annual compilation film 'Rewind' in 2020 'because it doesn't feel right...'. In 2020 things accelerated, slowed down, and turned upside down.
The COVID-19 outbreak has speeded up many trends and exposed things that were already under pressure. I do not rule out the possibility that, if we talk to each other in five years' time, we will see 2020 as a trend reversal in our history. Here are the 7 trends that will change the real estate industry in 2021.
1. Mental health: the 'new' dimension for companies
2020 has taught us what is really important: health, family & friends and a stable, high-speed internet connection. In 2020, the biggest mental challenge ever started. The greatest effects of this experiment have yet to be seen. Social and physical distance has a major impact on people's mental health. How do you adapt to this reality? How do you create a good balance at home? How do you collaborate digitally with colleagues? How do you allocate your time? How do you make sure you can work in a healthy and safe office? Health in the workplace was already on the map, partly facilitated by the WELL standard.
Health will remain a dominant issue in 2021 and mental health will become an additional dimension of concern for businesses. Managers will be extra challenged to (continue to) pay attention to mental health (loneliness, stress, homesickness to see colleagues of colleagues). Outdoor (just walking 15-30 minutes/day makes a big difference in your immune function, see also shinrin yoku) and yoga/ mindfulness activities are stimulated. Healthy, safe and green (purifies air) offices are even higher on the priority list. The People & Culture department (formerly HR) will have a more dominant role in the decision-making of the organization and will be tasked with answering the question 'what does health mean in the 21st century?' And we searching for ‘physical trust’ (like intimacy, shaking hands) in each other, as part of an mental evolution.
2. Deepening on ESG
For years, ESG issues received little attention from investors. Today, institutional investors and pension funds have become too big to diversify and are overlooking systemic and transition risks. They need to take into account the climate and social impact of their portfolios, because of their long-term financial importance (for example: paying out our pensions over the next 100 years).
The focus on E, S and G is evolving. Globally, the number of ESG indices - according to the annual benchmark study of the Index Industry Association in September 2020 - has increased by 40%. ESG factors are not only 'nice to have', but forces to perform better / lose less. Investing in social good is finally becoming profitable. The Oceania region has topped (with an average score of 77) the Global Real Estate Sustainability Benchmark (GRESB) global rankings – the international benchmark for ESG performance of real estate and infrastructure investments.
Despite ESG reporting, the biggest obstacle is the poor quality or availability of data in organizations for a deeper and broader implementation of SRI. Despite this, the obligation to report on ESG is increasing and so is the number of software solutions to facilitate reporting, allowing for deepening and broadening. 2020 was the year of Social. As a result of the Covid-19 outbreak, issues such as working conditions, appreciation, loneliness, health (see trend 1) and safety, value chain, data protection and privacy, customer satisfaction get more attention.
I expect that in 2021 it will become clear that sustainability raises much deeper questions about our socio-economic structure. The number of real estate companies that formulate a 'Statement of Purpose' will continue to grow. The efforts to increase the involvement of middle management and stakeholders will receive more attention. More investments are also being made in ESG software and 'Shareholder activism' will grow. In 2021, the AirScore will be included as accredited building certificates for the 2021 GRESB reporting cycle, a logical consequence in view of the debate on air quality.
3. Decoding of work continues
Once upon a time code was programmed to go to an office every day to work. Then came a virus with a big snout... The urgent advice to work from home creates a 'Sleep-Remote-Eat-Repeat rhythm'. Is the office dead? No, it isn't. Because there are plenty of reasons for people to come together. The question is 'what is the future of work and what roles will physical space and digital space play in it? Will the headquarters remain a physical location or will the head office become 100% virtual or will we have a Hub-and-Spoke model?
2020 has led to many questions for companies. Some made already a ‘WFH statement’. Twitter told employees they can work from home ‘forever’. Google will extend employee work-from-home until summer 2021. Pinterest cancels huge SF office lease in unbuilt 88 Bluxom project, citing work-from-home shift and payed a pay a one-time fee of $89.5 million.
Others are looking for answers. How do we ensure a flexible, healthy and safe working environment for our colleagues and partners? What does our organization of the future look like? How do we organize the office so that it is in line with our 'Statement of Purpose'? How do we facilitate innovation? This will be continued.
In 2021, we will work in a hybrid way. Rurbanization (Retreat to the countryside) will continue. We are searching and experimenting with answers to the above questions. The WorkTech and immersive technology will grow, emerge and acquired. The relationship between owners and tenants/ users will take a different turn, as many boards of management are looking at their office portfolio. We will continue to decode the work and AC/BC will rock on many stages next year.
4. PropTech is dead. Long live PropTech. For Good.
Last year I wrote that PropTech has no time to die. Is PropTech going to die in 2020? In recent years, 'What is PropTech' has been the most visited page on the website. If you look at Google Trends, you may get the impression that PropTech is going to die. Nothing could be further from the truth, PropTech is alive and kicking.
There is a lot of dynamism in the market. Fifth Wall launched the CO2 impact fund at the beginning of January and will become B.corp. Woven City was introduced by Toyota Corporation and BIG. Toyota in cooperation with BIG launched Woven City. Sidewalk Labs launched a Digital Twin and LEGO vision for a 25-story wooden building and also put an end to the Waterfront Toronto project (approx.). Spacemaker.AI is acquired by Autodesk. Intel started to invest in PropTech. Tencent is going to develop a city as big as Midtown Manhattan in China. And the number of national PropTech networks has grown to 45 and some new are under construction.
The European Union will be the first to enact a law that will prescribe what requirements an investment must meet in order to call itself 'sustainable'. The European Commission launches a €1.85 trillion recovery plan for the next few years which will have a huge impact on the future of the PropTech for Good movement. The number of Physical Distancing solutions has grown explosively.
The Amsterdam School of Real Estate launched the first training program 'Introduction PropTech & FinTech'. Developer EDGE launched EDGE Next. The first edition of the PropTech for Good map was published. Simaxx became part of the Tyrell UK Group. Hello Energy raised 1 million. Primalbase disappears from the Blockchain stage. Mapiq raised millions. VBO acquired software developer Wazzup. Some of the PropTech companies are growing fast, for others 2020 was an extra challenging year due to slower decision making and postponement of pilots and projects.
In 2021, the necessary acquisitions will take place and players will disappear from the (inter)national market. Data quality, Digital Twin and ethics will be discussed many times in the coming year and immersive technologies will be ‘back on the road’. After 5 years of PropTech in the Netherlands, PropTech (the combination of property and technology) is increasingly becoming a strategic organizational topic and directors are looking for new visions, stories and higher goals (for good) and implementation power. PropTech has found its purpose in 2020, and in 2021 to movement to contribute to the Sustainable Development Goals will grow.
5. Climate action and the race to zero
We live in the Anthropocene. It is an age in which the climate and atmosphere are affected by human activity. The film 'A Life on Our Planet' by Sir David Attenborough portrayed human activities on our planet in an impressive way and was watched by millions of people. 2020 was also the year that Larry Flint stated in his annual letter that climate risk is an investment risk. Europe expressed its ambition to be CO2 neutral by 2050 (expressed in the European Green Deal). Japan, UK, Denmark, South-Korea also said it wanted to be CO2 neutral by 2050 and China by 2060. Norway and Sweden strive to become net-zero carbon economy in 2030 and 2035.
Blackrock published the results of a global survey showing that more than half of global respondents - 54% - consider SRI to be fundamental to investment processes and outcomes. 86% of EMEA respondents have stated that sustainable investing is already – or will become – central to their investment strategies. Sustainability is here to stay. Amazon announced to invest $10 billion in the climate through The Earth Fund. IKEA and Microsoft said they wanted to be CO2 negative by 2030 and Interface formulated the regenerative mission Climate-Take-Back. The energy-focused PropTech companies Wondrwall (UK) and iWell (NL) became number 1 and 2 respectively during the PropTech Startup & Scale-up Europe Awards. The Dutch company Econic (former THE FCTR E/ ZON) raised an investment of 10 million euros for further expansion.
ClimateTech including eco-friendly is hot. Europe is emerging as a powerhouse of eco-friendly startups with the amount of money in “net zero” tech companies more than doubling in a year. In comparison, funding in US companies increased just 16% over the same time period and investment in net zero companies in China decreased 30%. Meanwhile, ClimateTech solutions like Waste-water electricity generator, Thorium based fission, Biomimicry, Energy-harvesting materials, Carbon capture, Molten salt energy storage are emerging.
By the end of 2021, investors offering funds in Europe as "ecologically sustainable" will have to explain how and to what extent they have used the taxonomy in determining the sustainability of the underlying investments. Regenerative, responsible and resilient (3R’s - for good) will become the new Sustainability (doing less bad). In 2021, 'scope 3 emissions' will get more attention. Embodies Carbon will be discussed more often, because now it’s a significant blind spot. Reducing carbon emissions is more than operational energy use in assets. Materials have a carbon footprint too. The race to zero is in full swing.
6. 15 minutes smart cities
By 2020, the Corona virus will have changed the atmosphere in the city and has the necessary challenges to ensure quality of life. Can the '15 minutes of cities' offer the solution? The idea of 15 minutes of cities is to regenerate cities and provide residents with everything they need within a 15-minute radius (walk or bike ride) from their homes. Paris is already renovating seven large squares to become more pedestrian and cycle-friendly, and Portland, Detroit, Barcelona, London, Melbourne and Milan have similar plans. In the face of extraordinary challenges, 36 pioneer cities chart a course towards a more ethical and responsible future. Building back better of cities has begun.
In 2021, the search for responsible, resilient and regenerative cities will continue, as the opposite is no longer viable. The Sustainable Development Goals will be used more emphatically as a framework to shape these 15-minute smart cities. Smart City concepts will be held to ransom because of the persistent critical notes about data use, identity and privacy.
7. New digital and sustainable leadership
For 10 years we have lived in a positively disposed market, where operational excellence ruled. Innovation was not really necessary. Rather, 'nice to have'. That is changing, because the demand for digital and sustainable is increasing rapidly. We are in the beginning of the great reset.
We are facing global challenges (SDGs) such as health & well-being, climate change, urbanisation, etc. People & customers expect smart and sustainable products/services and business models. New players entering the market and growing in market share. Green and digital new laws, regulations and budgets are adopted and prepared. And the current socio-economic system is creaking and squeaking on all sides.
International research shows that 86% of CEOs believe that there should be a 'refocus' on the economic system, only 32% of CEOs have set strategic goals in line with this. The only way to recover sustainably and digitally is by investing and innovating towards a digital and sustainable future. The changes are too complex and too big to deal with traditional tactics. New times call for new leaders.
In 2021, companies will emerge that put their money where their mouth is and invest in a digital and sustainable future. They are not looking for 'marketing' as in the past 10 years. They will look for thought leadership, learning new skills, getting new insights, and ways to achieve their objectives and how to build a futureproof strategic agenda to build back better.
One more thing...
2020 was 'uncomfortable'. 2020 may have been the catalyst for a renaissance towards regenerative, responsible and resilient urban planning and architecture. 2021 will not be a sweet juicy Disney film. What bothers me is the huge bubble of debt that could collapse in 2021. 2021 can rather be mirrored in the Matrix, where we have to make choices between red and blue pills. I wish you wisdom in making the right choices! And don’t forget, use PropTech for Good.