Major industry survey reveals extent to which technology is revolutionising real estate and driving the push towards net zero

• Over 4,000 global industry leaders, office occupiers, renters, retail decision makers and life sciences professionals consulted in biggest industry survey of its kind to unpack how, where and why technology is transforming real estate 
• COVID-19 has accelerated the adoption of new technologies across real estate by four years
• Optimism among industry leaders on the future of the UK real estate market at its highest for five years
• Investor appetite for Hotels and Leisure, Student Accommodation and Retirement Living has rebounded over last year, while Logistics and PRS remains very strong 
• The industry has had a dramatic conversion in the last year towards commitment to achieving net zero and has been galvanised into action by its investors and occupiers
• Technology is at the heart of this conversion, the mean year for when companies expect to achieve net zero emissions is 2035

Leading international law firm CMS has published its findings from an extensive piece of industry research in a report which examines the impact technology is having in shaping the future of the real estate industry, its response to ESG and its recovery from the pandemic.

“Real Estate Rebound -  A Tech-Accelerated Recovery” is the ninth year CMS has produced its annual real estate report, which acts as a barometer for the industry and an outlook for the market, while providing a deep dive into a key topic.  

In addition to gauging the latest perspective on the outlook for the real estate market from over 200 real estate industry leaders, occupiers and investors controlling assets in excess of £500bn, this year’s report focuses on Technology as the fundamental driver which is having a transformative effect throughout the real estate life cycle and the sector’s response to ESG.  The research homes in on four key sectors; Offices, Logistics, PRS and Life Sciences to understand how innovation and digitalisation is propelling these key areas of real estate. 

The quantitative survey took place in April-May 2021 and was conducted by FTI Consulting on behalf of CMS, gauged and weighted the opinions of over 1,500 Office occupiers and 1,500 renters from across the UK, Europe and Asia.  Across the retail industry, the poll garnered the opinions of circa 600 decision makers, while in the Life Sciences community, opinions were taken on board from over 250 global sector specialists. 

The report also incorporates a series of one-to-one interviews with the digital and technology pioneers from some of the leading companies in real estate, including PATRIZIA, SEGRO and AXA IM.

The key findings of the report according to subject have been highlighted below, and a full copy of the report can be made available on request:

Real estate market outlook

• 33% of industry leaders expect the property market to recover to the pre-COVID-19 level in 2023, with 30% expecting full recovery in 2022, and 16% in 2024.
• More than two thirds of industry leaders now describe themselves as optimistic about the UK property market, which is a steep rise on the previous year, and an increase on the previous three years when Brexit and the feeling that a long upswing was coming to an end weighed on sentiment. 
• The opinion of fair value in London property has dipped slightly on last year, with 36% believing the London real estate market to be fairly valued (41% in 2020), with 17% now believing it to be undervalued, a big jump on the previous two years recorded at 4% and 6%.
• The exponential growth in e-commerce continues to accelerate appetite for Distribution and Logistics as an asset class, with 85% of respondents acknowledging its appeal, slightly up on the previous year and continuing the growth trend of recent years.
• Sentiment towards hotels and leisure has seen a striking improvement over the last 12 months, with 32% of respondents stating they are an appealing investment prospect compared to 9% in the depths of lockdown, pre-vaccinations.
• Student accommodation has seen a near doubling of its appeal in the last year, rising to 46% from 24%.  The Retirement Living sector is another hot spot where appeal risen sharply among investors. 
• Regional cities are seen as a far more appealing investment prospect than a year before, with Manchester, Birmingham and Leeds witnessing the biggest surges of interest.

Technology

• The sweet spot for technology and innovation driven by COVID-19 is life sciences, which is contrast to retail which, according to polling, is lagging behind.  The Offices sector is seen as starting to become more innovative in adopting technologies, but in contrast BTR is not seen as progressive.
• After much speculation it is now clear that COVID-19 has accelerated the adoption of technology by four year (on average). 
• Artificial Intelligence and machine learning, 5G and robotics and IoT (Internet of Things) are considered among the innovative technologies having the most impact on real estate
• Technology is at the heart of the industry’s conversion to committing to tackling climate change, and the mean year for when companies expect to achieve net zero emissions is 2035

Ciaran Carvalho, Partner and Head of Real Estate at CMS, said:

“While there has been a lot speculation about the impact of technology on real estate, the acceleration caused by COVID-19 and its influence on the ESG agenda, this research captures real insight by engaging with those at the forefront of this transformation.

“Recovery of the real estate market is well under way, with optimism rising and a vaccine-prompted bounce propelled further by two powerful forces driving the sector’s future: technology and ESG.

“Underpinned by big data, technology is spearheading the drive to facilitate greater sustainability, enhancing ESG credentials and helping companies achieve ambitious targets.”