The 2020 Altus Group Global Property Development Trends Report was issued this week, examining the current challenges facing the global development industry and providing insight into the key business imperatives required to build resilience in the ‘new normal’.
A global survey of over 400 senior development executives formed the initial basis for the report along with in-depth interviews with top industry leaders as to how they are responding to the impacts of COVID-19 and their thoughts on the future implications of the pandemic on the development industry.
The key findings from the Report were:
While the market forces that significantly influence development planning (such as public infrastructure, tenant/occupier expectations and the global economic outlook) remain broadly the same as those prior to the pandemic, there is one new overriding force – a global health crisis – and this has amplified every market force impacting development planning and implementation
COVID-19 has intensified the top challenges facing development firms, including project cost escalation, environmental regulations, government policies/processes (such as physical distancing requirements on construction sites) and materials, trade and labour shortages. There are concerns about the various stimulus measures in place and uncertainty regarding what may happen when these measures end. Immigration and foreign investment are driving many development markets; if these are restricted or government policy doesn’t do enough to attract both of these post-pandemic, economic recovery will be impacted
There are shifting environmental concerns – the focus of what “environmental” means has changed with the top priority now being human health and customer well-being, with sustainable real estate development being seen as an opportunity
Recognition that adoption of digital transformation and data analytics technology must be fast-tracked - to mitigate business risks (albeit these come with drawbacks such as subscription costs, lack of standard data formats, time and effort involved)
There is a mix of risk and opportunity resulting from the downturn, but the development industry is generally taking a ‘wait and see’ approach – the majority of development executives now view distressed asset acquisitions or changes in asset/portfolio mix as a risk
The most important things governments can do to encourage and attract real estate development investment is to: reduce taxes or development charges, partner with private developer, expedite approvals/reduce regulations, support new or more innovative development, implement blanket rezoning, invest in new public infrastructure and release more land
The report also focuses more deeply on the impact the pandemic has had on the technology used by development firms relating to construction methods, and technologies that become part of (or a feature of) buildings themselves.
A significant percentage of major property developers have already adopted, or are considering adopting these technologies over the next few years and this may well be accelerated by ongoing pandemic considerations around labour shortages and efficiency, as well as end-product design and function. With continuing uncertainty in the global economy, technologies that help deliver site-level operational efficiencies, as well as those that generate data that can be used in operational decisions or to help address market demand for COVID-derived human environment needs, may be more widely considered for implementation.
The main technologies which firms have either already adopted (or are intending to adopt in the next three years) are 3-D printing, process automation, drones, Building Information Modeling (BIM), Pre-Fabrication, Connected Job Sites, Virtual Reality, Geospacial Technology (GIS), Smart Buildings (loT), construction site robotics and 5G wireless.
As 2020 has progressed, and the development industry continues to operate in a volatile, uncertain and complex global environment, the enthusiasm for acquisitions, asset repositioning and joint ventures has given way to caution, with large cash reserves now waiting on the sidelines. Significant distressed asset opportunities have not yet emerged. Developers are focusing on continuously evaluating conditions, being prepared – and waiting attentively for more opportunities to arise.
There is a strong feeling of the need to accelerate the transformation of the industry to build resilience - through adapting and responding to market forces, aligning data strategies with business goals and upscaling with technologies that have transformative power.
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