Real Estate

Changing economic conditions and different tenant preferences are having a considerable impact on the commercial real estate market. Transformational shifts are taking place in how buildings are used, valued and transacted.

Increasing financing costs have made it challenging for real estate companies to raise capital and move projects forward. Construction and labour costs also have been on the rise. These factors have contributed to project delays and, in some cases, cancellations. Both lenders and investors have become more cautious in this environment. Some owners have taken their property off the market, awaiting more favourable conditions.

While the industrial market has cooled somewhat, it remains a viable and stable asset class, as are data centres, storage, warehousing and fulfillment centres, multi-family residential, and life sciences buildings.

The focus of most tenants continues to be on flexible office space, including robust and versatile electronic and virtual connectivity to facilitate hybrid working arrangements. Space must be agile enough to accommodate a variety of working styles and needs. Landlords prioritize environmental, social and governance (ESG) to meet regulatory and stakeholder demands. While the environmental aspects of ESG continue to be the main focus, greater attention is being paid to social and governance issues. For example, measuring performance on inclusion and diversity is becoming more critical. Real estate companies must have good processes in place to produce reliable data in these areas.

The commercial real estate industry is also expected to make greater use of artificial intelligence (AI) building systems in the future. For example, some companies use AI to predict HVAC demand to lower utility costs.