As the real estate market continues to evolve, 2024 introduces significant shifts that are set to redefine industry dynamics. Increasingly influenced by technological advancements, environmental considerations, and the AI boom, the landscape is transforming in unprecedented ways. These three core shifts are reshaping the industry, each factor impacting everything from property investment strategies to development planning.
"These three tectonic shifts that have happened at the same time have made Residential, CRE, Energy, Infrastructure, and AI Infrastructure collide. Now lines between Residential and CRE are more blurred. Energy, Infrastructure, and AI infrastructure got absorbed by CRE and Residential, making this New Real Estate." - Yoann Hispa, CEO & Co-Founder of LandGate
1) COVID & Remote Work
The transformation of the real estate industry began in 2020 with the arrival of the COVID-19 pandemic. During the first two full years of the pandemic, 2021 and 2022, an unprecedented wave of U.S. workers left their jobs, a trend known as the Great Resignation. This was followed by the Great Reshuffling, where some individuals exited the labor market entirely, others quit but eventually returned, and many switched employers with minimal disruption to their employment.
Consequently, residential and commercial real estate have intersected. Today, residential real estate professionals factor in green energy, electricity costs, proximity to fiber optic lines, and oil and gas contamination to conduct due diligence on properties.
2) The Age of Renewable Energy
The age of renewable energy has begun, transforming the real estate industry in unprecedented ways. Three centuries ago, wood served as our primary energy source, fueling homes and industries alike. This reliance on wood gradually shifted to coal two centuries ago, marking the onset of the Industrial Revolution and powering the growth of modern cities. As technology advanced, oil and gas emerged as dominant energy sources, driving further industrial growth and urban development.
Today, in the face of climate change and dwindling fossil fuel reserves, global climate initiatives and new government incentives have turned the spotlight on renewable energy. Solar panels, wind turbines, and other sustainable technologies are increasingly being integrated into buildings and infrastructures, revolutionizing how we power our homes and businesses while reducing our carbon footprint.
3) The Era of AI
The role of data centers has undergone significant transformation. With the rise of remote work and increased mobility, organizations are now accessing and utilizing data in new ways, presenting challenges for traditional data centers. As remote and hybrid work models become the norm following the COVID-19 pandemic, the demand for secure and reliable data access has surged. As a result, organizations must ensure that their data centers consistently provide secure remote access for employees. This requires a robust and adaptable infrastructure capable of addressing the challenges of remote work, including bandwidth limitations, connectivity issues, and cybersecurity threats.
Additionally, rapid technological advancements, such as AI, Internet of Things devices, and 5G, are propelling modern data centers to unprecedented energy consumption levels. According to McKinsey, the demand for data centers in the United States is expected to surge to 35 gigawatts by 2030, a significant rise from 17 gigawatts in 2022.
Unfortunately, today’s energy grid is ill-equipped to meet the future needs of these data centers, particularly in rural areas and many international locations. Consequently, we can expect to see a concerted effort toward grid modernization in 2024 to address this growing demand. This modernization will necessitate the construction of additional transmission lines, new substations, and fiber optic lines.
Why Commercial Real Estate Professionals Should Pay Attention
The impact of these shifts on the commercial real estate industry can not be understated. The integration of renewable energy into buildings, the need for improved data centers and energy grid infrastructure, and the blurred lines between residential and commercial real estate have significantly altered how CRE professionals operate. In addition to conducting traditional due diligence on properties, they must now consider factors such as green energy capabilities, internet connectivity, and potential contamination from previous oil and gas operations.
The rapid expansion of commercial real estate (CRE) into the realms of energy and infrastructure has created an urgent and precarious landscape for professionals in the industry. The traditional lines of demarcation have dissolved, and CRE professionals now face immense pressure to adapt quickly or risk being left behind. With the integration of renewable energy technologies, the modernization of data centers, and the necessary upgrades to the electrical grid, the stakes have never been higher. Navigating this complex terrain demands not only a keen understanding of these emerging trends but also access to the right data to assess them thoroughly. Without accurate data and insights, CRE professionals may find themselves making misinformed decisions that could jeopardize their investments and market positioning in this rapidly evolving sector.
The New Real Estate: LandGate's Solution
LandGate's comprehensive data solutions empower real estate professionals to perform thorough due diligence on both commercial and residential properties with ease. By offering detailed information on electrical offtake capacity, proximity to electrical grid infrastructure, and comprehensive risk indexes, LandGate enables a quick assessment of environmental and financial risks that may affect property value and appeal. Additionally, its value indexes provide insights into potential hidden revenue opportunities for renewable energy ventures, such as the implementation of rooftop solar panels. This enables users to identify properties with untapped potential for generating sustainable energy, making informed decisions that capitalize on renewable energy investments and collocation opportunities.
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