Futureproofing for Commercial Real Estate

• Based on an Urban Land Research institute study, about 60% of commercial real estate industry experts believe that sustainability is a top priority for investors. Which leads us to futureproofing. 
• Futureproofing involves adopting strategies and ideas by anticipating future changes and coming up with possible solutions, so that investments don’t lose their profitability over time. 
• In this article, we’ll dive into why futureproofing is essential for a strong investment strategy, and how you can futureproof your commercial real estate portfolios. 

Futureproofing in Commercial Real Estate

• The commercial real estate industry has always faced challenges with sustainability. Builders and commercial property developers often cut corners, compromise on building materials, and adopt practices harmful for the environment and its people. 
• Sustainability is a big aspect of futureproofing commercial real estate. To ensure that commercial properties and buildings don’t end up unusable with time, taking up space, and increasing vacancies.
• Many commercial property builders and developers are prioritising forward thinking to design commercial real estate that can adapt and transition to new technologies, demographics, and contribute to a green environment. 
• For commercial real estate investors, futureproofing your properties ensures that they are well maintained over the years and can stand the test of time. Valuable commercial properties that are also sustainable will always stand to provide higher rental yields and returns even in the face of evolving market dynamics

Why Futureproofing Commercial Real Estate Matters

• The commercial real estate landscape in India is now more consumer focused than ever. Commercial property owners and portfolio managers have to be aware of what possible buyers (investors, tenants, owners) want. 
• As per JLl’s Futureproofing 3.0 report, India’s top cities in terms of grade A commercial property stock (Bengaluru, Hyderabad, Mumbai, Delhi NCR) are also the ones in most need of upgrading their aging office buildings. 
• These cities also make up the bulk of grade A commercial real estate in India, nearly 77%.
• Not only that, the report states that futureproofing and upgrades are required for about 61% of the total grade A office stock across these cities. 
• There was a time when picking out a prime high potential location and doing proper due diligence was enough before the acquisition process of a commercial property. 
• But that is not enough. Securing the long term value of commercial properties is beneficial for sellers and investors both. If the properties are maintained and future ready, then you can truly maximise the potential from your investment. 
• Keeping a keen eye towards risk management, complying with environmental and governance norms and criteria, and keeping your commercial property portfolio well maintained can make it all the more resilient against future shocks. This way, you can be assured of lower vacancy rates and higher rent, and sell your properties at the best possible value when the time comes. 

Futureproofing Commercial Properties: How it Works

There are many ways to make your properties future ready and sustainable. Some of them are:

• Adopting Sustainable Practices

Sustainability is key to futureproofing. 

As per McKinsey and Company data, real estate single handedly contributed to 39% of global carbon emissions. About 11% of that is from manufacturing materials, and the rest from the energy consumption of these buildings. This is something to consider seeing how climate change is impacting the world. 

Modern buyers and consumers are becoming conscious of our impact on the environment and our role in climate change. This makes choosing sustainable practices not only a moral imperative, but also the better choice from a financial point of view. 

Implementation of energy efficient technologies and green building designs works wonders in enhancing the appeal of commercial properties to potential buyers & also makes them future ready. 

These can be done through using flexible layouts that can be renovated or modified if needed, and also using high-quality, durable materials that can last for years. 

• Integrating Technology 

Today, technology is in the driver’s seat, and we’re all just along for the ride. Pardon the pun, but the integration of cutting edge technologies can go a long way in futureproofing commercial real estate. 

Examples of the role of technology in futureproofing commercial properties include:

Smart building systems, IoT devices, advanced security systems, and more. These measures not only just enhance operational and technological efficiency; they also increase the overall value of the property. 

As per Allied Research, the global market for smart buildings is projected to be valued at $42.6 billion by 2024.

Millenials are demanding tech driven spaces that fulfil their data needs. 

Investors and builders should definitely consider the scalability of technological solutions and look to accommodate any future advancements that can help with market expectations. 

• Optimising Space

Consumers and occupiers today are committed to having healthier and flexible workspaces, with optimum utilisation of space. Inefficient workspace designs and buildings that take up a lot of space can be redundant, and this also increases the overall carbon emissions of the property. 

As per GRI, developer costs have risen 10-12% over the last couple of years. But how much of that has gone towards optimising costs and space?

Co-working spaces and commercial office properties have taken the lead in this area. As per Anarock Group, coworking spaces are getting more and more popular in India, with demand having doubled in the last 4 years. Co-working spaces represented a 27% piece of the net absorption rate in Q1 2023, a huge increase from the 14% of Q1 2019. 

These spaces are a good example of commercial properties ensuring optimum utilization of spaces and incorporating elements of technology and sustainability. 

• Adapting to Market Changes

To expect the unexpected and adapt to market changes is a fundamental aspect of futureproofing. Investors should stay vigilant about emerging real estate and market trends, economic shifts, and changes in consumer behaviour. 

Having flexible property designs that can accommodate diverse uses & a proactive approach to maintenance and management of commercial properties can help solidify your commercial real estate investments. 

Sustainable Real Estate Investments with Assetmonk

In the ever-evolving landscape of commercial real estate, futureproofing is not just a strategy; it’s a necessity. By using sustainable practices, integrating technology, and Asset monk adapting to market changes, you can form a solid futureproofing strategy.

In the process of futureproofing your commercial assets, don’t forget to explore alternative investment options like fractional ownership to add real diversity to your portfolio. 

Fractional ownership of commercial properties enables investors to diversify their portfolios with high-potential real estate projects by leveraging technology and strategically scouting premium properties in key locations.

As you embark on your journey to futureproof your commercial real estate investments, consider the unique opportunities presented by Assetmonk. With a commitment to making commercial real estate accessible to all, Assetmonk empowers investors to participate in the futureproofing revolution, ensuring that your investments stand the test of time.

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