The Evolution of Commercial Real Estate: From Tradition to Innovation
If I had to describe the commercial real estate market over the last ten years in one word, it would be: “transformation.” Let’s trace this market’s journey together—from traditional office spaces with fancy chairs to tech-driven data centers and hybrid spaces.
What Was the Commercial Real Estate Market Like 10 Years Ago?
In 2013, the commercial real estate market was like a classic business suit: solid, predictable, with set rules and standards. Key segments included:
-1-
Office Spaces
The largest market segment, covering about 60% of New York’s commercial space, 55% in London, and 50% in Tokyo. Monthly rent in central New York was around $85 per square meter, in London $75, and in Tokyo $65.
-2-
Retail Spaces and Hypermarkets
Accounted for 25-30% of commercial real estate. Hypermarkets and shopping malls were thriving, drawing millions of shoppers annually.
-3-
Hotels and Hospitality
Around 10% of the market, supporting tourism and business travel. In Paris and London, the average price per square meter in hotels reached $10,000.
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Warehousing
A small market segment (about 5%) as e-commerce wasn’t yet as developed.
What Does the Market Look Like Today?
Today, the commercial real estate market resembles a well-layered sandwich, with each layer representing a new trend or business model. Key changes include:
-1-
Office Spaces
Decreasing share to 40% due to hybrid and remote work. In major cities, rent has dropped by 15-20%. Classic offices are now replaced by coworking spaces.
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Retail Spaces
Down to 15% due to e-commerce growth, replaced by mini-stores, pop-up retail, and specialty showrooms.
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Warehousing and Logistics
Increased to 20%, fueled by e-commerce demand. Rent prices rose by 25% in New York and London.
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Data Centers
Now at 10%, reflecting digitalization’s demand for data storage. In cities like Chicago and Tokyo, rent can reach up to $12,000 per square meter.
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Mining Hotels and Crypto Farms
New niche in regions with cheap electricity, achieving profitability of up to 30-40%.
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Service-Oriented Self-Storage
These facilities have evolved to include convenient services like delivery, growing by 15% in cities like London and New York.
What Lies Ahead?
The commercial real estate market has entered a new era where technology, flexibility, and tailored needs form the foundation of success
The commercial real estate market will continue adapting to technological and societal needs. Emerging trends include:
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Metaverses and VR Spaces
Virtual offices and marketplaces could reduce the need for physical spaces.
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Green and “Smart” Buildings
Emphasis on sustainability and eco-friendly designs.
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Innovative Self-Storage and Automated Warehousing
Convenience and service will be key drivers, attracting more users.