Real estate trends to watch out for in 2019 and beyond
View(s):With 2019 fast approaching, it’s a good opportunity to see how the real estate market is likely to change in the coming years. While the primary functions of real estate remain the same – i.e. buying, leasing and selling, how it’s done and what people are transacting, is changing. Below are some of the global and local trends likely to materialise in the near future.
Co-working moving from fringes to mainstream
The office co-working or shared space or hot-desking has taken off in recent years and has mainly been associated with start-ups. The flexibility with short term contracts, no high upfront costs such as advances or buying furniture, not having to worry about cleaners or paying bills and generally having a lively and start-up friendly community environment has made it a popular choice with start-ups and small companies in recent years.
However mid and large companies are also seeing the benefits of co-working and embracing it for similar or different reasons. While large companies may prefer to lease an entire building and house their staff in one place and not have issues with upfront costs, co-working benefits them in certain other ways, such as ability to scale up rapidly for a short term or seasonal peaks if they are limited for space and also offer workers the ability to find a working place closer to home and cut back on travel time which then increases efficiency. More and more larger companies are also exploring flexible working hours and remote working and, in some cases, allowing staff to mix work and travel together where they can work from a co-working space while exploring a new destination.
Another benefit is to rapidly and cheaply expand the operations into new geographic locations either to set-up a base for sales and operations or get access to the talent in that area. WeWork, an American company which is one of the leading players in this sector has risen to become a US$20 billion company in the space of just eight years and continues the trend of being a billion-dollar company but not owning any tangible assets, like Uber and Airbnb. An added benefit this industry brings is that any vacant space can be effectively utilized, reducing the amount of empty spaces in commercial and mix use developments plus reducing the burden on the landlord. There are around half a dozen co-working companies currently operating in Sri Lanka and expect this to rise in the near future and also spaces to be opened in more cities around the country.
Informal accommodation to overtake hotel stays in the future?
Tourist arrivals in Sri Lanka have been on the increase. The country being recognized as the best place to visit by Lonely Planet will also help increase the visits and also put the country on the top list of destinations.
However, we’ve heard from recent press releases that the hotel stays have been on the decline and the hotels’ profits are dwindling. So, where do these additional tourists stay? The clue can be found in the number of informal accommodations that are on offer. An informal accommodation is non-graded and non-regulated accommodation like guest houses, villas and apartments. The biggest rise in recent times has been tourists staying in apartments (16 per cent rise between Q1 2018 and Q2 2018).
According to the Sri Lanka Tourism Development Authority (SLTDA), non-hotel stays (supplementary and unclassified establishments) account for 49 per cent of the foreign guest nights in 2017. This means nearly half the visitors are staying away from hotels and if the increase in trend continues soon hotels will be in the minority in terms of guest nights. This would also mean more property will be built and bought for the purpose of renting out for short term lets. This is a global trend and not only limited to Sri Lanka.
Rebirth of malls, but in a different format
While the super-mall is new to Sri Lanka and a few of them launched only as recently as a few months ago, countries which have had this culture are seeing a huge increase in mall closures. The US seems to be the most affected, followed by mature European markets and established brands like Macy’s, JC Penney and Debenhams have announced store closures, mostly inside malls. The obvious reason for this has been a shift towards online shopping while costs to maintain huge floor space in prime locations has been increasing.
According to Credit Suisse, up to a quarter of the existing malls in the US could be closed by 2022. This would leave a lot of empty retail space. In order to counter this, property owners and developers are looking at other options than retail to fill the void. Some developers are turning malls into experience centres where the family can enjoy with movies, activities and restaurants. Others are converting them into office spaces.
Then there are some overseas developers who are planning to build an entire community around the malls, which are in the suburbs and out of town. They are building residential blocks, office spaces and even schools and medical centres – all components of a small town built around the mall. Therefore, the future mall may not be a collection of department stores and shops but experience centres where shopping, eating, watching movies and activities all happen in equal measure and more of them being built as mixed-use developments with residential, commercial, retail and hospitality all included.
From paper to Blockchain
This could be the biggest change in how a real estate transaction is done. Currently all deeds and related documents are paper-based. Although there is an initiative to digitise these, it’s a long way to go to digitise all the land registries. However, while we’re struggling with that, other countries have taken a step further and included all the deeds into Blockchain systems. The Blockchain platform, built as the backbone for Cryptocurrencies like Bitcoins, has been adapted for other purposes, with managing real estate records being one of them.
It stores all historical data in a ‘chain of blocks’ so all historical ownership records can be viewed for a given plot of land. Since the platform doesn’t allow any historical data to be modified but adds a new ‘block’ to the chain when a change is made, any fraudulent modifications can be blocked. Plus, the decentralised nature and complex scrutiny of the data before its accepted makes Blockchain based systems ideal for an industry like real estate where tracking modifications and ensuring trust in data is vital. Already a few countries in the world like Dubai have adapted a Blockchain system where all property transactions can be carried out paperless from anywhere in the world. Such flexibility and added benefits make Blockchains one of the biggest disruptors in the industry and something that will change how property transactions are carried out in future.
(The writer is Managing Director of LankaPropertyWeb.com and can be reached at daham@lpw.lk)